This week's UK budget has revived hopes wind energy could become sufficiently cost effective to generate around a fifth of Britain's power and put the nation on course to meet its carbon reduction targets.
While the government is relying almost entirely on the growth of offshore wind farms to reduce emissions in near term, the combination of tight credit, a weaker pound and lower oil prices had jeopardized the first major projects.
Offshore wind projects are also seen key if Britain is to avert a looming power supply crunch, which could occur around 2015, as it will lose about a quarter of its 75 gigawatt (GW) generation capacity because of closures of aging nuclear, coal and gas plants.
"The extra support, particularly for offshore wind, is absolutely fundamental in the UK meeting the renewable target," said Richard Slark from Poyry Energy Consulting.
"If the support hadn't been forthcoming in the budget, there would have been a real danger of entire policy stumbling before it did go off the ground. It really can't be overstated how important that extra support is now."
In the 2009 budget, the government has promised 525 million pounds ($769.7 million) to support offshore wind projects under its Renewables Obligations Certificates (ROCs) scheme.
Britain needs to cut carbon emissions by 20 percent by 2020 compared with 1990 levels as part of European Union ambitions to combat global warming, which would mean 15 percent of all energy would have to come from renewable sources.
If wind can provide 20 percent of electricity by 2020 that will represent a huge contribution to meeting Britain's target.
Early this month, the British Wind Energy Association (BEWA) called for government help, saying major offshore projects could stall as the credit crunch and weak pound had nearly doubled costs, while oil prices slashed wholesale electricity prices.
"We've given the budgets a thumb's up," said Gordon Edge, BEWA's director of economics and markets. "We see it as a very good signal that the government is serious."
To meet the carbon target, Britain has embarked on a plan to build by 2020 wind generation capacity of 30-35 GW, including about 20 GW of offshore wind farms, or nearly half the country's current total generation capacity.
CCS, POWER GAP
The 2009 budget also has promised support for up to four carbon capture and storage (CCS) demonstration projects, rather than the one the government had previously backed.
Provided they can be prove to be capable of ensuring clean power generation from coal, that could pave the way to build Britain's first coal-fired generators in more than two decades.
The government has stipulated all new coal plants have to test the pioneering carbon cutting technology, which is still unproven on a commercial scale and not yet economically viable.
"It is helpful for renewables and unhelpful for fossil fuel on the whole," Andrew Nind, director from Poyry, said, referring to the most advanced new coal project developed by E.ON.
Government data shows 10.5 GW of power generators are under construction, or with planning consent, including 6.7 GW of gas generators, 2.5 GW of wind and no coal or nuclear.
"If you look at the investment signals for new coal and gas build…they are well below those required," said Andrew Horstead, a risk analyst at Utilyx.
Although the budget should help the offshore wind sector to overcome a short term glitch, the government still needs to do more to help speed up its development and there is still a risk of a generation gap.
"This is all about unlocking investment and getting the renewable sector to really begin to take off," said Duncan Coneybeare from Ernst and Young.
"But that is a medium-term play effectively… We may well have a looming energy gap before the renewables come through and are able to make that kind of positive contribution."
In a report for WWF and Greenpeace last September, Poyry said Britain did not necessarily need new fossil fuel build.
"If the government meets its energy efficiency and renewable targets, new baseload electricity generation capacity will not be needed until the period beyond 2020," the consultancy said.
The consortium for the 1,000 megawatt London Array project, one of the world's largest offshore wind projects — which is about to make an investment decision on the first phase — welcomed the budget, saying it improved the chances of commercial viability.
Last May, Royal Dutch Shell pulled out of the project, saying rising costs made it unclear whether the planned wind farm in the Thames Estuary would be profitable.
"We feel optimistic about the future of the offshore wind industry in the UK and the London Array scheme," said Wulf Bernotat, chief executive of E.ON AG.
