SSE scraps offshore wind schemes as it freezes prices

26 March 2014
By Edd Gent
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Demonstrator turbines for the Beatrice offshore wind project

Demonstrator turbines for the Beatrice offshore wind project

Utility firm SSE will shelve two offshore wind developments and reduce its stake in a third after revealing a price freeze for customers.

Today’s statement came part as of a wider plan to split its wholesale and retail divisions and freeze energy prices until 2016 – a move that will be funded by slashing costs by about £100m, partly through the loss of about 500 jobs across the SSE group via a voluntary early release programme.

In January SSE said it would review its offshore wind business after its two main projects failed to qualify for state guarantees, and the firm now says it will no longer develop the 690MW Islay wind farm off the west coast of Scotland or invest in the 340MW Galloper project off the coast of Suffolk.

It will also seek to reduce its 75 per cent stake in the 750MW Beatrice project off the east coast of Scotland to no more than 50 per cent. Spanish oil and gas firm Repsol owns the other 25 per cent.

Jim Smith, SSE’s managing director for Generation Development, said: “Having looked across our offshore portfolio, and across our capital and investment programme as a whole, we believe that we should focus our near term development activity on Beatrice.

“Taking it forward to subsequent stages of development and construction will be challenging, but achievable, and that is what we are working towards.”

The firm cited costs and a lower rate of return from Galloper, which is a 50:50 partnership with RWE Innogy, than from other investment projects. In response, German utility RWE said it was too early to make its decision on the future of the project.

SSE said it would probably make a final investment decision on the Beatrice project in early 2016.

The firm will continue to support two projects at the earlier application stage: SeaGreen, a 50:50 partnership with Fluor Limited to build two 525MW wind farm in the Firth of Forth, Scotland, and the Forewind project with a group of companies to build two wind farm projects of up to 1,200MW each off the east coast of England.

However it said it will not extend beyond securing the necessary consents for construction in the near term and will not “extend its commitment to the projects until it has achieved sufficient confidence in the viability of the wider offshore wind sector”.

Chief executive of industry body RenewableUK Maria McCaffery said: “This announcement demonstrates very clearly the need for the Government to provide greater confidence for investors in its long-term support for Britain’s offshore wind industry.

"If we could rely on more certainty and less risk, firm commitment to the huge financial investments involved would secure all the economic benefits of energy independence in a shorter timescale.

“Only yesterday we had the good news that Siemens and Associated British Ports will be creating at least 1,000 jobs in East Yorkshire, revitalising the Alexandra Dock at Green Port Hull and manufacturing offshore wind turbine blades. However, if we want to see more manufacturers basing themselves in the UK, they need to know that there will be a long-term market up to 2030 and beyond.”

But McCaffery was keen to emphasise that while the news was “disappointing” it did not leave the projects dead in the water.

“Changes to the investment partners in such huge projects is not uncommon, as we saw in December, when DONG Energy acquired Centrica’s stake in Race Bank offshore wind farm, and earlier when Masdar bought Shell’s share in the London Array, now operational and acclaimed as the world’s largest offshore wind farm,” she said.

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