July 25, 2012 / 9:18 AM / 5 years ago

RWE delays 3 billion euro offshore wind project

FRANKFURT (Reuters) - German utility RWE has postponed an investment decision on a 3 billion euro ($3.6 billion) offshore wind farm in the North Sea until next year, blaming a lack of clarity over legal liabilities for such projects.

RWE had planned to start the project, dubbed “Innogy Nordsee 1”, in the second half of this year, but said on Wednesday the final decision would now take until at least early 2013.

German newspaper Handelsbatt earlier reported the delay, citing an interview with Hans Buenting, chief executive of RWE’s renewable unit Innogy.

Offshore parks -- requiring at least 1 billion euros of investments each -- offer a more efficient way of harnessing wind energy than similar installations on land, as winds are much stronger at sea. But experience with the long-term costs of such projects is limited.

Legal liability risks also pose a major problem in the expansion of offshore wind parks.

Grid operators must compensate wind park operators if power lines break down, which is discouraging them from building connections to offshore parks. So investors in wind parks to date have no guarantee they will be able to sell their power.

The German government is trying to solve the problem fast to accelerate the expansion of alternative energy sources following its decision to phase out nuclear by 2022 -- a development that has been dubbed Energiewende, or energy shift.

The country’s Economy and Environment Ministries have pledged to put regulation in place quickly.

“If the law is implemented quickly and practically, we assume that investors will gain more trust in the area of offshore as projects with solid returns,” RWE said.

Like peers E.ON and EnBW, RWE has been hit hard by the German government’s decision to phase out nuclear power generation, forcing it to reinvent itself by shedding assets and tapping new growth areas such as renewable power.

RWE plans to divest up to 7 billion euros worth of assets by the end of 2013 and said in January it aims to spend 5 billion euros expanding in renewables over the next 4 years.

($1 = 0.8275 euros)

Reporting by Christoph Steitz and Harro ten Wolde; Editing by David Holmes and Mark Potter

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