Britain boosts subsidies for offshore wind

By Karolin Schaps, Estelle Shirbon and Nina Chestney

LONDON, Dec 4 (Reuters) - Britain boosted support for offshore wind farms on Wednesday to attract multi-billion pound investments and maintain its lead as the world's biggest offshore wind market, while it cut subsidies for wind parks built on land.

The move comes just one week after Germany's RWE (Xetra: RWE.DE - news) npower scrapped plans for a huge UK offshore wind project. The company said the new subsidy would not change its decision, because it was still seeking improvements in the technology.

Under the new provision, the government guarantees to pay offshore wind developers the difference between wholesale power prices and a fixed strike price of 140 pounds ($230) per megawatt-hour (MWh) for the 2018/19 fiscal year, 5 pounds more than its provisional subsidy figures in June.

The announcement gives clarity to investors, who can now calculate their guaranteed returns on renewable energy projects to the end of the decade.

"The strong commitment to offshore wind demonstrated by the government today gives us the confidence to move forward with our future pipeline of projects," said Brent Cheshire, UK chairman of Denmark's DONG Energy, in a statement. DONG is investing 4 billion pounds in British offshore wind farms.

Britain has ambitious plans to boost production of renewable power to help it meet legally binding targets to reduce carbon emissions and to replace ageing nuclear reactors and polluting coal-fired power plants, up to a fifth of which face retirement this decade.

The strike prices set for renewable projects were all significantly above current spot wholesale power prices of around 50 pounds per MWh to help them compete with more mature technologies.

The government estimates that around 40 billion pounds will be spent on building new renewable energy projects in Britain by 2020 to double its current installed green energy capacity of 20 gigawatts.

"Investors are queuing up to express their interest in these contracts. This shows that we are providing the certainty they need, our reforms are working and we are delivering ahead of schedule and to plan," said Britain's Secretary of State for Energy and Climate Change, Edward Davey, in a statement.

The strike prices for onshore wind parks, meanwhile, were cut by 5 pounds from the provisional figures to 2019. These wind farms have often come under fire by local residents for obstructing views and making too much noise and have struggled to get planning approval.

Strike prices for large-scale solar plants were reduced by 5 pounds for 2015-17 and lifted by 5 pounds in 2017/18 and by 10 pounds in 2018/19.

"Reducing strike prices for onshore wind and solar could reduce deployment of these technologies, even though they require lower subsidies than offshore wind," Matt Brown, director at energy consultancy Poyry, said.