Centrica Threatening To Pull Plug On £2bn Offshore Wind Farm
British Gas owner Centrica prepares to abandon £2bn offshore wind farm plan because subsidies offered by the government are too low.
Centrica is preparing to abandon a £2bn offshore wind farm project because subsidies offered by the government are too low.
The British Gas owner will not build the Race Bank wind farm, 17 miles off the north Norfolk coast, unless proposed subsidies are significantly increased, three sources told The Telegraph.
Ministers will not confirm final subsidy levels until December but are thought unlikely to increase draft prices enough for the project, which Centrica said could power 450,000 homes, to go ahead.
The move will raise fresh doubts over the future for the offshore wind industry, which ministers publicly insist they want to see developed.
They have privately indicated that they are happy to see some planned wind farms scrapped because they believe some companies, such as Centrica and its unnamed financial partner for Race Bank, are demanding too high returns.
Subsidies for wind farms will be paid for through levies on consumer energy bills, just as ministers are attempting to reduce such “green taxes” that companies, including Centrica, have blamed for pushing up household energy bills.
British Gas raised prices by 9.2pc last month and defended its right to make a 5pc post-tax profit, the highest of the Big Six suppliers, so as to fund investments.
“We believe these are fair profits, funding investments in UK energy infrastructure and securing future energy supplies for the UK, keeping homes warm and keeping the lights on,” the company said.
Its probable abandonment of Race Bank would, however, be its third high-profile withdrawal from planned UK investments on the grounds that subsidies footed by consumers were too low.
In February, it abandoned its 20pc stake in EDF’s planned Hinkley Point nuclear plant, writing off £231m, after complaining the returns were not attractive given the timescale and high cost. EDF last month agreed a subsidy deal for the project that analysts say could yield £1bn a year in pre-tax profits.
In September, Centrica wrote off £240m for planned gas storage facilities, which it had argued should be subsidised to avoid price spikes when supplies ran low.
Michael Fallon, the Energy Minister, rejected the claim, telling The Telegraph at the time: “I am not prepared to see fuel bills rise further just to give Centrica additional subsidy.”
Centrica had planned to invest up to £200m of the Race Bank project with partners funding the rest. It opened talks with the government about terms of a subsidy deal earlier this year.
In May, chairman Sir Roger Carr warned: “If the Government wish to have as part of their mix the renewable wind offshore, there is a price for that. We are happy to deliver the product provided we get the return that is reasonable. If we do not get the return it is not something, like nuclear, we can contemplate.”