German RWE, the largest power generating utility in the UK, has urged the new Labour government to speed up the expansion of offshore wind capacity if it is to meet its own net-zero targets.
“We would urge them to increase [the budget] significantly and ensure they’re getting all the advice of all the relevant experts to work out how to do that,” Tom Glover, UK head of RWE, told the Financial Times.
This is the second call on the new government in less than a week to do more about wind power capacity growth, after climate NGO Ember urged the Labour cabinet to start offering higher prices for the electricity generated from wind installations in order to motivate growth.
The UK incentivizes new wind and solar capacity by guaranteeing minimum long-term prices for the energy produced from such installations via contracts for difference. Yet the prices that the government has been ready to offer recently have fallen short of developers’ funding needs, reducing interest in new projects.
RWE and Ember appear to be in agreement on what needs to be done in order for the planned wind power capacity to get built: increase the subsidies. These subsidies are believed to be instrumental for motivating comparable private investment, which in RWE’s case is a planned budget of 8 billion euro until 2030, equal to about $8.7 billion.
However, governments do not have unlimited funds at their disposal, which makes responding to such calls tricky. Germany recently decided to change its subsidy mechanism for wind and solar, going from a guaranteed minimum prices over an extended period of time (the same as the UK’s CfDs) to a lump sum granted to wind and solar developers in advance. The move is evidence that the subsidy support cannot be a long-term approach to securing the profitability of wind and solar installations, which would in turn draw more private investors in.
By Irina Slav for Oilprice.com
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