Total Installed capacity
Year	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009
MW	406	474	552	648	888	1,353	1,962	2,406	3,241	4,051

Despite being host to some of the best wind resources in Europe, the United Kingdom’s wind energy market has taken a long time to start realising this potential.

For the first time, in 2009, the UK wind energy sector delivered more than 1,000 MW of new wind power capacity in one year, spread over 39 wind farms. From January to December 2009 a total of 1,077 MW of capacity were installed on and offshore, taking the UK installed total to 4,051 MW.

The pipeline also looks very healthy, with 1,713 MW in construction and a further 7,599 MW with planning consent. Given that in the UK it takes 2–3 years from getting planning permission to commissioning a wind farm, BWEA expects a total of about 10 GW of new wind capacity coming forward by the end of 2012.

THE RENEWABLE ENERGY OBLIGATION

The main instrument to stimulate growth in renewable energy has been the "Renewables Obligation", which came into force in April 2002 as part of the UK’s Utilities Act (2000). It requires power suppliers to derive from renewables a specified proportion of the electricity they supply to their customers. This started at 3% in 2003, rising gradually to 10.4% by 2010, and 15.4% by 2015. The cost to consumers will be limited by a price cap and the Obligation is guaranteed in law until 2027.

Eligible renewable generators receive Renewables Obligation Certificates (ROCs) for each MWh of electricity generated. These certificates can then be sold to power suppliers, in order to fulfil their obligation.

The Renewables Obligation has often been criticised as too expensive, as it has resulted in an upwards trend in electricity prices in the UK. However, since it is a market based mechanism that is designed to reflect the supply and demand balance of renewable electricity, the shortage of projects in recent years resulted in a hike in prices. This was mainly due to delays in planning consents and a lack of grid connections, but this situation has improved steadily in recent months.Statistics from the national market regulator OFGEM (Office of Gas & Electricity Markets) show that in the period 2008/2009 the average price for 1 ROC was £54.37 (€ 60.74), on top of the electricity price paid for 1 MWh1). Like in previous years, the Obligation was fulfilled at a level of 65%, which, given the increase in the Renewables Obligation, means that generation is growing in line with the growth in the Obligation.

For the second year running, onshore wind generated the largest number of ROCs, around 33% of the total, while offshore wind contributed 7.9%. This proportion is predicted to increase further in the 2009/2010 period.

FEED-IN TARIFFS

January 2009 saw the introduction of feed-in tariffs (FIT) for renewable energy projects up to 5 MW, which will come into force in April 2010. As a result, the UK now has two support mechanisms, ROCs and FIT, which aim to stimulate two different markets. ROCs will remain a key support incentive for larger installations and FIT is supposed to stimulate domestic and smaller-scale deployment.

Electricity generators will receive the FIT for 20 years, and for wind energy, it ranges from 34.5 pence (38.5 € cents) for installations smaller than 1.5 kW to 4.5 pence (5 € cents) for wind installations of 1.5-5 MW. The UK government estimates that 2% of the country’s electricity demand could be met by small scale renewable installations eligible for the FIT in 2020.

THE 2009 BUDGET

The UK Budget, which was announced in April 2009, delivered a host of measures to ensure renewable energy projects were properly capitalised, particularly as project finance in 2008 and 2009 had dried up and many smaller and medium-sized developers were having problems raising capital. The Budget included a plan backed by the European Investment Bank (EIB) to inject much needed liquidity into the onshore wind market by making available a total of GBP 1.4 billion for wind farms with planning permission. This includes a GBP 700 million contribution from the EIB, matched with a further GBP 700 million from three commercial banks.

There were also concerns about costs and profitability of offshore wind projects, which the government sought to address by increasing the ROC multiple temporarily for projects reaching financial close in the financial years 2009/10 and 2010/11. This will result in a higher amount of ROCs received per MWh for these projects. Combined with a reconfirmed commitment to ROCs up until 2037, the hope is that the measures will create a stable investment climate.

The Renewable Energy Strategy (RES) was launched by the government in July 2009, a co-ordinated approach to bring into play a broad variety of low-carbon technologies, with a view to comprehensively cut transport, heat and electricity emissions.

The RES includes a target of reaching 15% of final energy consumption from renewable sources by 2020 (up from 2% in 2008), in line with the EU Renewables Directive. In order to meet this target, around 35% of the UK’s electricity demand would have to be generated by renewables. Given the limits on solar and other renewable resources, a combination of on- and offshore wind energy will have to deliver the major portion of this percentage. The UK government would like see onshore wind grow from around 3.4 GW today to at least 13-14 GW by 2020, and suitable sites for up to 50 GW of offshore wind power development have been identified for this timeframe.

The world’s leading offshore market

The UK continues to hold its position as the world’s leading market for offshore wind energy, with 883 MW installed at the end of 2009, 284 of which came on line in 2009.

The scale of the potential for offshore development in the UK is phenomenal, with average capacity factors of around 35%, according to the Digest of United Kingdom Energy Statistics (DUKES), published in 2009 by the Department of Energy and Climate Change. The Crown Estate, the agency that manages the seabed on behalf of the Government, has identified potential development sites adding up to close to 50 GW.

The British Wind Energy Association (BWEA) estimates that a substantial part of this could be delivered by the end of the next decade, during a time when a considerable number of old fashioned coal and gas generation plants would reach the end of their lifetime or would have to be decommissioned for environmental reasons.

An industrial base for wind energy?

Both the Renewable Energy Strategy and the 2009 Budget have sent robust signals for the UK Government’s commitment to renewable energy. As a result, towards the end of 2009, first signs were pointing towards increased investor confidence in the UK market. A series of announcements from companies such as JDR Cables, Clipper Windpower, Mitsubishi and Mabey Bridge heralded a fresh wave of investment in the country’s manufacturing base.

The potential size of the wind energy sector in terms of direct employment has been estimated at around 70,000 jobs, and the UK is trying to position itself as the hub of European offshore development. The small wind systems sector has also continued to perform well, with strong exports and signs of domestic growth following the announcement of the feed-in tariff.

Future Developments

Both the UK Government and the general public seem to have woken up to the potential of the domestic wind energy sector. There is a an expectation that wind energy could bridge the looming energy gap, and replace the diminishing North Sea oil and gas reserves, both in terms of fuel and industry and employment.

While public opposition continues to be a problem in the UK, the latest research conducted in 2009 shows that a significant majority (73%) of the UK’s population supports the EU’s 2020 targets, with 62% saying that they would not mind living within 5km of a wind farm. Unfortunately, these attitudes are often overshadowed by a minority of vociferous anti-wind campaigners.

The UK Government and large sections of the business community have moved away from judging the EU 2020 targets as a painful and costly obligation, and now see it as a valuable opportunity to create jobs and revitalize some of the country’s manufacturing and logistics sectors. Obstacles remain, chiefly planning, grid and radar objections, but there is a sense that the UK wind sector is on course not only to take its place amongst established forms of generation domestically, but to catch up with more developed national markets in Europe and around the world.