Grid Connection Delays Threaten UK’s Offshore Wind Push
(Bloomberg) -- The majority of the UK’s recently announced offshore wind farms are stuck in a queue waiting for grid connections, despite a government push to speed up investment.
Most of the projects that won contracts in this year’s subsidy auction, known as AR7, have yet to be given a firm connection date, according to people familiar with the matter. RWE AG won five of the six contracts for fixed bottom offshore wind farms this year and SSE Plc was awarded one.
The hiatus in the UK comes despite Energy Secretary Ed Miliband taking steps to unclog bottlenecks in the grid. The absence of connection agreements can increase costs and potentially even derail a projects, creating uncertainty around £15 billion ($20 billion) of planned offshore wind investments, according to Bloomberg calculations based on government data.
It also threatens Miliband’s goal for 95% clean power generation by the end of the decade. In the UK, 25 gigawatts of offshore wind is still waiting for a grid connection, according to Energy Networks Association.
RWE could be forced to delay investment close on its two Vanguard wind farms if the issue isn’t resolved, one of the people said, asking not to be identified discussing commercially sensitive information. The company has previously said it’s expecting to reach an investment decision in summer.
RWE said it expects connection dates for all its projects to be confirmed in line with the new timetable published by the National Energy System Operator.
SSE said its Berwick Bank B project, which secured a CfD in AR7, has got a firm grid connection offer.
Britain has been celebrated by other countries in Europe for its apparent success in unblocking the grid. In December, NESO slashed the queue, kicking out so-called “zombie projects” and allowing the most advanced generation projects to move to the front of the line.
However, the National Energy System Operator has struggled to deliver on the promised reforms, and the process had been further frustrated by technical issues around the online portal for developers to track progress. NESO is about six months behind its original schedule, which means projects are still waiting for a connection date that they should have been given in February or March.
A spokesman for NESO said that despite earlier delays, it is now on track to deliver on a new timetable that was agreed with the industry in February. It has finished issuing offers for projects due to start this year and next and is now turning to those switching on from 2028 to the end of 2030. That includes AR7 winners.
Under the newly agreed timetable, AR7 winners due to come online by the end of the decade, have been told they can expect to have their grid connection confirmed in September.
“We have embarked on ambitious, once in a generation reforms to put a stop to zombie projects holding up grid connections – and we are actively working with NESO, Ofgem and network companies to prevent any further delays in new connections offers going out and ensure NESO’s revised timeline is met,” a spokeswoman for the Department for Energy Security and Net Zero said.
Painful Delays
Miliband’s department is trying to speed things up by reaching an agreement with NESO and National Grid Electricity Transmission to prioritize projects that already have so-called contracts for difference, which are favored by the government, according to the people familiar.
Some developers want an agreement to prioritize such projects before the next auction round, AR8, starts in July to reassure bidders they won’t get caught up in the same gridlock. It’s a critical round, with almost 16 gigawatts of offshore wind farm capacity eligible, according to BloombergNEF.
“This is the last round that BNEF expects could contribute towards the UK’s 2030 clean power targets,” said Kajsa Jernetz, an analyst at BNEF.
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