Nicholas Newman Content Live August 2017
In one of a series of articles about the energy sector, we examine the prospects for business users who invest in on-site wind generation.
On-site wind turbines are providing a flexible source of power for businesses such as Ford’s Dagenham car plant, the port of Bristol, and Reading’s Green Park business park, all of which have reduced their dependency on grid power.
Nonetheless, declining subsidies for onshore wind power have hit market demand. Thomas McMillan, director of renewables at Savills’ rural, energy and projects division, admits: “The market has collapsed.”
Demand in the small-to-medium wind sector is very weak. Gerry Lalonde, CEO at Orenda Energy Solutions, attributes this to “changes in Feed-in Tariff (FiT) returns and payback periods no longer being so attractive unless you have a very high-wind-speed site of +7.5m/s and a sub-50kW turbine.”
Potential threats to the sector
Governments worldwide are pruning subsidies, so wind power developers must cut their own costs to compete with conventional generation sources. Even though the cost of wind power has fallen dramatically in the past 10 years, it requires a higher initial investment than comparable gas fossil-fuelled generators. In addition to this, the selection of a poorly located site with insufficient wind is a recipe for uncompetitiveness.
Apart from cost, the biggest threat to the industry is likely to be uncertainty about both the future subsidy regime and regulatory framework. Lalonde explains: “Since the current FIT scheme ends in March 2019, we don’t know what will come next, and this means fewer buyers will consider investing in wind.”