SSE to Review Offshore Wind Farms Amid U.K. Energy Policy Switch

Jan 23, 2014 6:23 am ET

Jan. 23 (Bloomberg) -- SSE Plc, the U.K.’s second-biggest energy supplier, will review its offshore wind developments after two of its ventures missed out on funding.

The utility said it will complete the “wide-ranging” study before the end of the financial year. The company based in Perth, Scotland, on Dec. 19 wasn’t shortlisted for low-carbon power funding for the Galloper and Beatrice offshore wind ventures in which it has stakes.

“This is one example of why there is greater uncertainty about the shape and extent of SSE’s capital and investment program in the five years from 2015,” SSE said today in a statement. Investment will likely be lower than the 1.5 billion- pound ($2.5 billion) to 1.7 billion-pound range invested in each of the years since 2010, SSE said.

The possibility SSE may withdraw investment is a setback for the U.K. government, which last year passed legislation to restructure the nation’s electricity market and draw in 110 billion pounds of spending by 2020 in upgrading power generation plants and distribution networks.

Already, Scottish Power Ltd. dropped plans for an offshore wind plant in December, saying it wasn’t financially viable, and RWE AG abandoned another venture a month before. SSE indicated it has concerns about the rules.

SSE said that while ministers have made progress finalizing low-carbon incentives, “important detail” is yet to be confirmed. “The prospects for investment in generation assets in Great Britain are, however, not encouraging,” it said.

SSE’s Galloper and Beatrice offshore wind projects were seeking to obtain contracts under the government’s Final Investment Decision Enabling program, a temporary measure to plug the gap until it’s ready to start awarding so-called contracts-for-difference. Those guarantee a price for power sold in the future.

Ten projects including three offshore wind ventures by Dong Energy A/S and a joint venture by Statoil ASA and Statkraft AS were told they were provisionally affordable under budget caps, the energy department said Dec. 19

--Editors: Reed Landberg, Alex Devine