Germany’s RWE says outdated regulation is slowing investment in onshore electricity grid
RWE’s wind turbines in the North Sea. Photograph: Christian Charisius/Reuters
Britain’s bid to build enough offshore windfarms to power every home in the country by 2030 risks being derailed by outdated regulation which is slowing investment in the electricity grid, according to one of the industry’s biggest players.
Germany’s RWE has warned that work to connect the growing number of windfarms off the UK coast to the onshore electricity grid will not keep pace with the government’s goals unless decades-old regulation allows for faster investments.
“The one thing that is delaying our projects is the onshore connections,” said Tom Glover, RWE’s UK boss. “It’s getting quite serious. We are getting to the point of concern over whether that 40GW target can be met purely because of the onshore grid. It is only the onshore grid which could stop this happening.”
RWE is one of the world’s largest renewable energy developers and plans to spend just under one-third of its investment budget in the UK. However, many of its projects have been delayed because the company has not been able to secure a grid connection for their projects in time to compete in the government’s contract auction rounds.
“We would like to see some anticipatory investment in the onshore network so that we can get the offshore connected in time,” Glover said.
The cost of energy grid investments is ultimately paid through energy bills, which means they are carefully considered by the industry regulator, Ofgem, to avoid saddling households with the cost of projects which aren’t necessary.
“Ten years ago it was completely understandable that the energy system operator and Ofgem didn’t want to support these anticipatory investments because you could waste a lot of money preparing the grid for projects which didn’t come on line,” Glover said.
“That regime and thinking was suitable for the industry at that time. But today we know that offshore wind is coming, we have a clear government target for 40GW, and we know that it will connect into the north-west, the north-east and the south-east of the energy grid,” he added.
The warning from a major energy generator follows similar criticism from energy network companies, including Scottish Power and National Grid, which have argued that the regulator should allow more investment or risk putting the UK’s net zero climate targets in doubt.
A spokesman for the regulator said its new regulatory framework “aims to secure billions of pounds of new investment in the grid to enable the UK to hit net zero and help drive the green recovery”.
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“We are working with the government and the industry to develop proposals for a coordinated programme of anticipatory investments in the onshore and offshore networks to enable 40GW of offshore windfarms in the North Sea. All this must be delivered at the lowest cost to consumers, so we are challenging the industry to be much more efficient in how it runs and finances itself,” the spokesman added.
Energy companies have argued that the regulator’s focus on energy bills ignores the wider economic benefits of green energy upgrades which would lead to lower-cost electricity and investments which could power a green economic recovery from the coronavirus.
“The regulation needs to catch up with a different paradigm. It was perfect for where we were five to 10 years ago but it’s different now,” he said.