Gone with the wind? Has £18 billion of offshore wind investment vanished forever?
While people were digesting the announcement of the latest strike prices for renewable energy, the Treasury was also releasing its latest update of the infrastructure pipeline. This reported substantially lower spending on investment in offshore wind energy up to 2020, partly compensated by higher expected investment in onshore wind. Seen against the background of the substantial cut in the pipeline of offshore wind projects, the decision to provide relatively more support for this form of renewable energy makes sense.
The Treasury pipeline is meant to provide a strategic overview of the large infrastructure investments planned by the private and public sectors. Earlier this year we conducted a thorough analysis of the previous pipeline and celebrated the fact that the majority of plans were in areas which should help with our transition to a low carbon economy. These included major investment plans for public transport and renewable energy, particularly offshore wind. Much of this was to be delivered by the private sector and the scale was sufficiently large to make an important contribution to economic growth.
A dramatic reduction in offshore wind in the pipeline
Following the release of the updated pipeline yesterday, we have made a preliminary analysis of what has changed. The most striking feature is that, although the overall size of the pipeline of projects has increased, there has been a significant shift in timing with less spending now and more after 2015.
Focusing on offshore wind power, the changes are particularly marked. The 2012-13 spending reported in the new pipeline is now thought to have been only £1.2 billion, compared with the £6.3 billion in the previous pipeline.
A similar pattern emerges for the next two years, where spending of £3 billion is now included compared with the previous pipeline plans of over £20 billion. This continues, with significantly lower spending planned for offshore wind up to 2020. Although there are now details of extra spending after 2020, it is not enough to compensate for these earlier shortfalls so, overall, the pipeline spending on offshore wind is down by around £18 billion compared with the previous pipeline.
Onshore wind fares better
The situation for investment in onshore wind is more positive. Although also down in the short term (by around £1 billion between 2012-13 and 2014-15), it is expected to be £9 billion higher between 2015-2020.
Interestingly, extra spending is also pencilled in for some other forms of low carbon energy projects between 2015-2020. These include carbon capture and storage, tidal and wave energy projects, the installation of smart meters and some unspecified capacity projects. Somewhat surprisingly, no solar-PV projects are included.
Nevertheless, there is no disguising the fact that the substantially lower pipeline figures shown for offshore wind, particularly in the short term, are very disappointing. This must give the government some food for thought if, as has been reported this week, it wants to move the focus on wind to offshore. These figures provide some backing for the decision to increase support for offshore wind.
See the graphs below for the difference in spending on offshore and onshore wind between the 2012 and 2013 Infrastructure Pipelines: