Governments have decided to pay the costs of reviving offshore wind farm projects after rising costs have endangered many initiatives that are essential for helping reduce greenhouse gas emissions and achieve climate goals.
Challenges Facing Offshore Wind Projects
Many countries rely heavily and quickly on building offshore wind farms, which require high upfront costs but can provide cheaper energy in the long term compared to fossil fuel power plants.
However, some countries have started to unrealistically achieve their wind power capacity targets this year after developers canceled projects in the U.S. and the U.K. due to rising costs that made them unprofitable.
Government Incentives to Support Offshore Wind Projects
Investors told Reuters that governments have shown a willingness to pay higher prices, helping restore confidence in the industry’s future.
Jonathan Cole, CEO of project development company Corio, said: “The reality is that governments have started to engage and accept that it’s important to pay more to keep their offshore wind projects on track – which is critical for the economy, energy security, achieving carbon emission reduction goals, and job creation.”
Experiences of the U.K. and the U.S.
In the U.K., developers can bid for government-backed price guarantees for the electricity produced, known as Contracts for Difference (CfDs).
If wholesale prices are lower than the agreed price in the CfD, the government compensates the difference, providing developers with guaranteed long-term revenues. If prices are higher, the developer makes up the difference to the U.K. government.
In the U.S., Corio, Total Energies, and Rise Light & Power successfully bid for their 1.4-gigawatt offshore wind project in an auction held in New York in October. This project is part of a larger supply process with a capacity of 6.4 gigawatts of renewable energy, enough to provide electricity for approximately 2.6 million homes.
Initial Project Costs and Project Returns
Offshore wind projects require high initial costs. For example, it is believed that…
Source: https://www.reuters.com/business/energy/governments-take-action-keep-offshore-wind-projects-track-2023-12-05/
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