Offshore wind can shed subsidy in 10-15 years: study

LONDON Thu May 12, 2011 12:32am BST

LONDON (Reuters) - Offshore wind power technology will become economic without state subsidies in 10-15 years' time, most government bodies said in a survey published on Thursday by consultancy PwC.

Offshore wind relies on government support to develop into a commercially viable technology and is in Britain seen as one of the main renewable energy sources to help meet emissions reduction targets.

"Subsidy policies, as well as being a means of delivering carbon reduction targets, are viewed by governments as a foundation on which offshore wind generation can grow to a point where it can develop without subsidy," PwC said in its offshore wind power survey.

Nearly half of the government bodies interviewed said they expected offshore wind to survive without subsidies within 10-15 years, while 17 percent of respondents counted on less than 10 years and an equal share thought 15-20 years were needed.

The major factor in determining whether a nascent technology can survive without state support is the cost.

The average construction cost per megawatt varied among questioned European offshore wind power developers, with 38 percent of survey respondents saying their average cost came to less than $3 million, while 31 percent quoted $4-5 million.

But most building contractors and manufacturers of wind farm components asked in the survey expected the cost for construction and turbines to drop in the next five years, making it cheaper to instal new wind farms.

Eighty percent of those who forecast a decrease said costs could drop 10-20 percent.

"Nearly all of the developers we surveyed said supply chain capacity constraints are a significant problem for offshore wind construction to such an extent that 82 percent said they create the risk of a seller's market," PwC found in its poll.

Installation vessel availability, port infrastructure and engineering presence have negatively affected offshore wind power projects in the past.

The survey also showed that the Fukushima nuclear accident in Japan dampened financial institutions' perception of nuclear power.

Before the event, more than half of respondents said offshore wind was less or much less attractive than nuclear power, while three quarters of those respondents said after the accident their sentiment had shifted negatively against nuclear.

"Whatever the exact outcome, the Fukushima emergency is likely to shift the energy policy balance toward renewables," PwC said.

"While it won't raise a red flag to investment in nuclear, it could spur further moves by nuclear companies into renewables."

(Reporting by Karolin Schaps; editing by William Hardy)

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