You would think that a cut to future subsidies for solar power in Spain would have minimal impact on northern European wind developers. But renewables execs at a planning meeting for the Power and Renewables Summit 2011 looked almost traumatised by the events of last year.
When asked about the biggest hurdle for investment in capex-intensive projects such as offshore wind farms, all agreed that it was uncertainty in government subsidy regimes. “Look what happened in Spain,” they murmured.
However, what happened in Spain purely affected future contracts. What renewables execs really worry about is retrospective cuts: ones which will damage profits on projects that are already up and running. Was even the mere suggestion that cuts could be applied retrospectively in Spain enough for investors to fret? That’s what these bosses claimed.
An alternative reading is that renewables operators know how dependent they are, at least in the short term, on government subsidies, and hope that by making as much noise as possible over the slightest change they will prevent more major ones taking place.
Either way, they should rest assured. Every time Chris Huhne speaks about renewables subsidies, he mentions the importance of not making retrospective cuts and grandfathering existing projects.
But are there other issues affecting investment? Planning is one. Even thought the UK brought in national policy statements to cut through some local red tape, there are plenty of barriers that local planning authorities can put up to stop, say, an onshore wind farm being built. Decc hopes that allowing local communities to share the economic benefit of such projects will help cut through such local concerns.
Energy companies, for their part, seem to think the package of measures will work. Michael Lewis from Eon told me that while companies are happy to deal with local concerns, it was the endless local debates the national need for renewable power that was unbearable – and this is what the national policy statements are designed to tackle.
So what other issues are there? Costs will come down and supply chains rationalise if there is sufficient clarity on investment returns, execs say. There are still, however, some issues to do with risk-sharing and ownership of assets – for more on this, see next week’s FT. But the general message was that we are set for a major boom in renewables investment.
One final note from the meeting – one of those present had a (relatively) reassuring message for western wind turbine manufacturers. Cost of shipping and technological expertise should keep companies like Siemens, Vestas and GE ahead of their Chinese competition until 2025, said Thierry Aelens, director for project construction and marine operations at RWE.
Actually, he clarified – perhaps best to make that 2020.