$3B pledge jump-starts massive offshore wind project

COPENHAGEN -- The world's largest offshore wind farm, the London Array, will begin construction this summer after the British government doubled the incentives for offshore wind energy, the project's main owner, Denmark's DONG Energy, said today.

The 1,000-megawatt Thames Estuary behemoth had been in doubt after Royal Dutch Shell PLC pulled out of the scheme last year because of rising costs, leaving DONG with a 50 percent stake, Germany's E.ON with 30 percent and Abu Dhabi's renewable energy fund, Masdar, with 20 percent.

Now the three partners have pledged to invest $3 billion for the 630-megawatt first phase of the project, which will be completed in time to deliver wind energy to the London Olympics in 2012.

DONG's CEO, Anders Eldrup, said the U.K. government's announcement last month of increased support for offshore wind power prompted the consortium to decide to build the wind park.

"The decision to build the London Array offshore wind farm is a cornerstone in DONG Energy's strategy to increase the proportion of electricity generated from renewable energy sources," Eldrup said. "DONG Energy has built approximately half of all offshore wind farms in operation in the world today."


The British government provided £525 million in the 2009 budget for offshore wind subsidies between 2011 and 2014 by increasing the number of renewables obligation certificates, or ROCs, available for offshore wind generation. The United Kingdom already has the most installed offshore wind power generation capacity in the world.

ROCs are the main support scheme for renewable electricity projects in the United Kingdom. It places an obligation on U.K. suppliers of electricity to get an increasing proportion of their electricity from renewable sources -- from 9.7 percent this year to 15.4 percent by 2016. Suppliers meet their obligations by presenting ROCs or by paying into a buyout fund.

Under the new rules, the government will issue two ROCs for every megawatt-hour of offshore wind power produced, doubling the original incentive. A further £405 million in the budget were earmarked for "the development of a world leading low-carbon energy and green manufacturing sector in the U.K.," something that analysts expect will benefit mainly wind and tidal power and should kick-start the 8,000 megawatts of various U.K. wind power projects that have secured approval but have not started construction. Without the increased incentives, the London Array would not have been economical, analysts said.

"The London Array is a flagship project in our drive to cut emissions by 80 percent by 2050 and meet future energy needs," said British Prime Minister Gordon Brown in a statement. "The U.K. is a world leader in offshore wind farms, creating jobs and prosperity for the economy. That's why we have increased our support for this technology as we move toward a low carbon future."

Masdar's CEO Sultan Al Jaber also praised the government's involvement. "The London Array represents Masdar's strategic approach to renewable energy, whereby real partnerships are formed between government and the private sector," he said in a statement. "This project is a great achievement for the U.K. government, E.ON, DONG Energy and Masdar, which exemplifies our commitment to build cooperation to take renewable energy further down the path to widespread global adoption."

The London Array wind farm will be built on a 90-square-mile area that will be 12 miles off the coasts of Kent and Essex.

The first phase will consist of 175 turbines built by Siemens AG. The second phase will take the farm to 1,000 megawatts, or enough power for 750,000 homes -- a quarter of Greater London homes -- and displace the emission of 1.9 million tons of carbon dioxide emissions every year, according to project planners. But the investment decision to build the second phase will be taken separately and depends on phase one performance and additional environmental studies.

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