1. 1
School of Engineering and Mathematical Science
The Role of the Wind Industry Inside the UK Electricity
Market, Now and in the Future
by
Simone Quadri
Project for the Degree of MSc
in Energy and Environmental Technology and Economics
Supervisor: Prof. Martin Fry
Co-Supervisor: A. Pinelli
London
14 September 2015

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Project Title: The Role of the Wind Industry Inside the UK Electricity Market, Now and in the
Future
Student: Simone Quadri
Supervisor: Prof. Martin Fry 14 September 2015
Abstract
This project analyses the wind industry within the United Kingdom. By
looking at all the aspects of the sector it will aim to define whether the wind
generation sector can be a serious player in answer to the energy challenges
that the country is currently facing. The history of the energy sector in the
United Kingdom as well as the structure of the market will be examined and
analysed in order to set the scene for a deeper analysis of the wind sector.
The project covers both the past and present of the wind industry, with both
onshore and offshore equally considered. Particular emphasis will be given
to the legislative aspect of the question, especially to the output of the
different governmental policies throughout the years. The Renewable
Obligation, the Feed-in Tariff and the Contract for Difference will be analysed
in particular detail. The recent changes (in 2015) in the approach of the
government to the wind industry, especially to the onshore variant, will be
described and commented upon. All these elements are to be used to
support the thesis that the wind industry must have a key role within the
energy sector, and that the government is required to give it as much support
as is needed to fulfil this obligation.

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Table of Contents
Introduction 4
1. The Energy Sector in the United Kingdom 6
1.1 The History 6
1.2 The current structure 7
1.4 The current figures 9
1.4.1 Generation 9
1.4.2 Transmission and distribution 11
1.4.3 Demand 11
1.5 Policies and schemes 12
2. The Wind Industry 17
3. The Wind Industry in the United Kingdom 19
3.1 The history 19
3.2 People‟s opinions 20
3.3 The UK wind resources 21
3.4 The wind power industry and the energy policies 22
3.4.1 The Renewable Obligation 23
3.4.2 The Feed-In Tariff 25
3.4.3 Contract for Difference 27
3.5 Targets 30
3.6 Onshore actual situation 30
3.7 Offshore actual situation 33
3.8 The UK General Election and the consequences for
the energy sector 35
4. Discussion of Results and Conclusion 39
References 44

4. 4
Introduction
Over the last two centuries human beings have made a series of discoveries
that have raised modern lifestyles to a completely different level compared to
what had come before it from their first appearance on this planet. Of
course one of these discoveries was how to use fossil fuels to produce
energy. Thanks to this form of energy, a great deal of progress has been
made. Unfortunately, burning fossil fuels, when carried out on global scale,
has had dramatic and alarming consequences on the planet‟s climate and its
ecological balance. In order to limit the effect on the climate and its
subsequent impact on the species with whom we share the planet, in the last
two decades people have started to think about solutions to help reduce the
impact of human activities on the environment. One of these solutions has
been to adopt different types of energy sources, that in contrast to fossil fuels
do not emit greenhouse gas emissions, or at least to a much lesser degree,
that is to say, renewable energy.
Included in this change of direction was the United Kingdom, which from the
beginning of the new millennium, has started to think about the creation of a
renewable energy industry. And because of the widespread availability of
wind, the wind industry has been one of the key players within the renewable
resources sector that has been developing in the UK. For fifteen years the
wind industry has been growing, and especially in the past five years, has
started to play an important role, so much so that on a particular windy day in
August 2014, for the first time in history, it succeeded in supplying more than
20% of the UK‟s electricity demand [1].
In order to support its development successive governments have put into
place a series of policies and schemes to support and subsidise it. Thanks to
that and as well as significant scientific research activity, the costs have been
decreasing steadily ever since the construction of the first wind turbine. It is
likely that in the next few years, wind generation will start to be competitive
with the traditional sources of energy, like coal and gas.
2015 has been a particular intense year for the renewable energy industry, in
fact because of a series of events such as the re-election of a Conservative

5. 5
government, a great number of things are changing within the sector. The
wind industry has been greatly affected by these changes, for example the
Renewable Obligation, the main source of subsidies for many years, will end
one year earlier than planned (for onshore), following a decision from the
current government.
This and other changes are threatening the stability of the sector and, even
more crucially, the confidence of investors in the renewable energy industry.
In order to restore both of these, and guarantee a brighter future for the most
economical source of green energy, it is of utmost importance that the
government leads the way, so as to give the industry a positive signal and
carry it on the right path to becoming one of the most successful stories in
the country.

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1 The Energy Sector in the United Kingdom
1.1The history
The history of the electricity system in the United Kingdom (UK) started in
1882 with the introduction of electric lighting [2]. Between the end of the 19th
century and the first half of the 20th
, the country built the infrastructure
required to create a grid operating on a national scale. In 1904 the frequency
was standardised at 50 Hertz, followed by the building of the 132 KV national
grid between 1926 and 1937, and a series of coal plant was designed and
constructed, such as the Battersea and Bankside power stations [3].
After World War, II the government decided to address the problem of the
security of the supply by creating the Central Electricity Generator Board
(CEGB). For more than forty years CEGB was the body in charge of
electricity generation and transmission in England and Wales, while in
Scotland electricity generation was controlled by the South of Scotland
Electricity Board and the North of Scotland Hydro-Electric Board. During the
1950s and 1960s, demand for electricity had increased sharply, and in
response to that the CEGB started the first civil nuclear programme and in
1956 it opened the Calder Hall nuclear power station [4], [5]. It is fair to say
that at that time little concern was given to environmental issues, but in order
to address the growing problem of air pollution, that reached its peak during
„The Great Smog of 1952‟, new coal plants were built near mines and outside
urban areas [6]. During the next two decades, the 1970 and 1980s, growth
in electricity demand started to slow mainly because of the more austere
economic situation, which was a consequence of the oil crisis in 1973 and
then again in 1979 which caused a shortage in the oil supply within the major
industrial countries [7]. Other than the concerns over energy security, a
further element that characterised these years was a series of strikes within
the mining sector. Even though for a long time the mining industry had a
central role in the country during the 1970s, growing international competition
and a lack of investment had led to a loss in competitiveness [8]. The

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government, led by Margaret Thatcher, carried out a series of measures,
involving both salaries and job cuts, in an attempt to improve productivity in
the sector [9]. The 1990s were the years of privatisation and liberalisation.
However, while the government, as the owner, was reducing its activity within
the energy market, its role as a regulatory body became fundamental. In fact
it defined a series of frameworks within the industry that different agents
would have to play. In 1998/1999 the possibility to choose their energy
supplier was given to domestic customers [10]. In 2001 it created the
National Electricity Trading and Transmission Arrangements (NETTA), that in
2003 became the British Electricity Trading and Transmission Arrangements
(BETTA) after the inclusion of Scotland [11]. BETTA is the electricity market
where electricity generation is traded; it is essentially the wholesale market of
the industry. In the last fifteen years, following increasing concern for the
environmental consequences of human activity, the government has outlined
a series of regulations to address this problem, such as the Climate Change
Act and the Electricity Market Reform (EMR). The EMR aims to address both
the security of supply and the decarbonisation of the energy supply (the
different regulations will be discussed in greater detail later in the text).
1.2 The current structure
The current electricity market is based on the principles of liberalisation and
regulation. The regulations in place are designed in order to allow fair and
open competition among the various actors. There are five main actors within
the market: the customers, the suppliers, the generators, transmission and
distribution. In order to make the market work properly, there are a number of
others bodies and companies responsible for analysing and regulating the
market, the most important of which are:
 The Department of Energy & Climate Change (DECC) is the
ministerial department in charge of assuring an affordable, clean and
reliable energy supply [12].

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 The National Grid plc, as stated on their website, "... owns and
maintains the high-voltage electricity transmission network in England
and Wales (Scotland has its own networks), balancing supply with
demand on a minute-by-minute basis" [13].
 The Office of Gas and Electricity Markets (Ofgem) is the non-
ministerial department responsible for protecting the interests of
consumers [14].
 ELEXON is in charge of comparing the electricity that generators and
suppliers said they would produce and use and the real figures [15].
 The Competition &Market Authority (CMA) and the Financial Conduct
Authority (FCA) are the authorities in charge of ensuring fair
competition and that the fiscal rules are adhered to, both have a wider
remit and are not exclusively related to the electricity system [16],
[17].
1.3 How the market works
Electricity suppliers are the main players in the market. It is their
responsibility to buy electricity from the generators, sell it to customers and
pay the network chargers. On average the profit for the supplier is around 2-
3% of their revenues [18].
Most of the time suppliers and generators carry out transitions bilaterally
("over the counter" or OTC) and only a minority of the electricity is traded on
exchanges (in the wholesale market). This is mainly due to the structure of
the UK electricity market, where six suppliers known as the "Big Six" (E.ON,
NPOWER, edf ENERGY, British Gas, sse, and SCOTTISHPOWER) have
more than 90% of customer share and at the same time they own an
important part of the generation process [19]. Therefore most of the suppliers
buy the electricity that they produce. In 2013 more than 90% of the electricity
was traded OTC [20]. In order to address these issues Ofgem introduced a
new set of regulations, known as "Secure and Promote", that came into

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effect in March 2014 trying to increase liquidity in the wholesale market. The
wholesale market is regulated by the British Electricity Trading and
Transmission Arrangements (BETTA), that as mentioned before was
introduced in 2001, and defines the rules by which electricity is traded in the
market. Both in the case of a bilateral agreement of a transition OTC, the
suppliers have to inform the National Grid about the amount of electricity
involved in the transaction, which is called the "Final Physical Notification".
The National Grid compare the expected supply with the expected demand
and ask generators or suppliers to increase or decrease their production or
consumption, which is known as the "Balancing Mechanism". The electricity
is delivered in slots of thirty minutes. Due to the nature of the electricity
system, it can occur that the amount of electricity that a company has
contracted or generated is different to the amount of electricity that is actually
generated or bought. ELEXON compare these the two figures, electricity
contracted and electricity actually consumed, and after the delivery ELEXON
compare the Final Physical Notification with the actual figure and via a
mechanism called the "Imbalance Settlement", where generators and
suppliers have to pay a fine if they have not followed the Final Physical
Notification. The entire process is made possible because of a series of
regulations and schemes.
1.4 The current figures
1.4.1 Generation
The structure of electricity generation has change significantly during the last
90 years. Until the mid-fifties, all the electricity was produced by using coal,
and it was only after the activation of the first nuclear plant and the increased
use of oil that the situation started to change (fig.1). Despite nuclear power
and oil, coal accounted for more than 50% of electricity generation until the
early 1990s. Natural gas has been the game changer for the market, and it
has allowed the UK to achieve excellent performance in terms of GHG

10. 10
emission reductions. In fact for the same quantity of energy generated,
natural gas produces two time less CO2 than coal [21].
Until the 90s, oil had played an important part in the generation balance but
since then its importance has fallen quite considerably (fig. 1).
Nuclear power has become of increasing importance, and it still has today a
crucial role in the system. Because of its characteristics, its production is
constant and it emits no GHG emissions, the government is planning the
construction of a new nuclear plant, know as Hinkley Point C that, if realised,
will add 3.2 GW of capacity to the system [22]. The final decision is expected
to be taken in September 2015. The project is expected to cost between £20
and 25 billion [23]. Owing to a series of problems that EDF, the company
contracted to construct the infrastructure required for the project, is facing
with other projects and the concern that once the project is finished there will
be cheaper technologies available Hinkley Point C is facing a great deal
criticism.
Renewable energy started to have a significant role merely a decade ago
and, even if at the moment it still only accounts for a minor percentage, its
share is increasing rapidly.
Figure 1. Source DECC
In 2014 generation was 6% lower than 2013 and it reached its lowest point
since 1995, which was 336,043 GWh [24]. A particularly warm winter and the

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energy efficiency measures were the two main reasons to explain this result
[25]. Gas and coal were the two major fuels used, which both accounted for
30% of the total generation (fig. 2). Compared with the previous year, gas
generation increased by 5.1% whereas coal decreased by 23% [26].
In second position came renewables and nuclear power, both with 19% (fig
2). Nuclear generation declined by almost 10% and at the same time
renewables rose by 21% and they gained 4.2 percentage points [27]. And in
the first quarter of 2015 renewable energy was up to 22.3% [28].
Figure 2. Electricity generation at the end of 2014. Source: DECC
1.4.2 Transmission and distribution
The transmission of electricity from the generators to the distribution network
is managed by the National Grid, that owns and operates the system [29].
The distribution network is owned by the Distribution Network Operators
(DNOs), there are fourteen of them and each of them is in charge of one
specific region [30].
1.4.3 Demand
Electricity demand has decreased steadily during the last few years (fig. 3).
There are different causes of this trend. The economics crisis, that in 2007

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had brought down both production and demand, and the consequent debt
crisis could be part of the explanation but the two main reasons are the
energy efficiency measures that in the last twenty years both the domestic
and non-domestic sectors have installed and the change in the economic
structure; while the industrial sector is shrinking the services sector is
continuing to gain strength [31].
Figure 3. UK primary and final energy consumption, temperature corrected.
Source: DECC.
The total consumption for electricity for 2014 was 303 TWh down by 4.3%
compared with 2013 [32]. The main consumer was the domestic sector
(30%), followed by industry at 26% and the commercial sector making up
21% [33]. Losses accounted for 8%, most of them occurring in the
distribution network, 74%, while transmission represented just 23% of the
total losses [34].
1.5 Policies and schemes
Since the beginning of the 21st
century, the UK government has put into
place several white papers, energy reviews and policies to regulate the
energy market and help it face the challenges that the energy sector has
been dealing with.

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In November 2000 the government launched the Climate Change
Programme that formed the basis for all the subsequent energy related
policies [35]. It was the first time that the country had set a target for the
reduction of its greenhouse gas (GHG) emissions, in fact it decided that it
would cut its emissions by 20% by 2010 (from the 1990 figure) [36].
Following this first document a series of actions has been taken to put this
programme into place.
The first of these was the introduction, in 2002, of the Renewable Obligation
(RO) a scheme that set an obligatory target for energy supplier companies to
purchase a certain amount of electricity from renewable generators [37]. In
exchange, they would receive a certificate (the Renewables Obligation
Certificate (ROC). And at the end of each period they would have to submit a
sufficient number of ROCs to the competent authority, and if they failed to do
so they would have to pay into a buy-out fund. Later in the text the RO will be
analysed more deeply, especially in relation of the wind power sector.
In 2003 the government published the first white paper, the White Paper on
Energy. This first attempt at facing the various issues was more a review of
the situation than a real plan on how changes the situation. In any case, a
carbon emission reduction target was made with the government committed
to reduce emissions by 60% by 2050 [38]. The White Paper focussed its
attention on four main points: the environment, energy reliability, affordable
energy and the competitiveness of the market. In the following three years, a
series of documents started to clarify certain points; in April 2004 the
Government published the Energy Efficiency Implementation Plan, followed
two years later by the DTI Microgeneration Strategy "Our Energy Challenge".
However, in both cases the document was more of a continuation of the
policy in place than a real change.
The real turning point arrived with the 2006 Energy Review, where the
government proposed a series of measures such as the proposal for the
construction of new power plant, with special regard to nuclear power, and
the improvement of the existing infrastructure (like the transmission and
distribution network) [39]. The document showed the vision that the
government had concerning the energy sector, setting out the following aims:

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 to give the instrument to the country in order to achieve a 60% carbon
dioxide emissions reduction by 2050. Furthermore, it wanted to start
seeing positive signs by 2020 (the document set a target of 20% of
total energy consumption sourced from renewable sources)
 to promote the reliability of the energy system
 to promote the competition in the market
 to maintain an affordable energy price, especially for the poorest
In order to achieve these goals, the document outlined a series of measures:
the promotion of renewable energy and the increase of energy saving
measures (in this context the UK entered the EU ETS, and introduced the
Climate Change Levy), and in order to deal with the challenges regarding the
security of supply, the document also raised the urgency of improving
international relations with other countries and suppliers as well as creating
an open and international market. Due to the strong opposition of
Greenpeace, an environmentalist ONG, the plan to promote nuclear power
was postponed [40].
In 2007 the Government released the 2007 Energy White Paper: Meeting the
Energy Challenge [41]. The document focussed its attention on two issues:
GHG emission reductions and the security of supply following the decline of
oil and gas production in the North Sea. Further to the previous documents
and the 2007 Energy White Paper, it was also announced that in order to
eliminate the risk of blackout, the construction of new capacity would be
necessary so as to add between 30 and 35 GW of electricity generation. The
document also stressed that without any changes in the policy in place at the
time the county would fail to reach its goal of sourcing 20% of energy
demand through renewable sources, and it predicted a 5% contribution
coming from renewable energy in a business as in a wider environment.
More than any other previous document, the 2007 Energy White Paper
introduced a long series of new measures. Some of the most important of
which are: the enhancement of the EU Emission Trading Scheme (EU ETS),
the introduction of the Carbon Reduction Commitment (CRC) - a mandatory
cap and trade scheme for companies with a consumption in excess of 6,000

15. 15
MWh of electricity a year, the introduction of the Energy Performance
Certificate and the Display Energy Certificate (two reports on the energy
consumption within business and public organisation buildings), the
requirement for all new houses to be built to zero carbon emissions
standards (the scheme was supposed to come into force in April 2016 but
the Conservative government decided, in July 2015, to scrap it [42]), the
elimination of barriers to energy infrastructure construction and a series of
measures to promote biomass as an energy source as well as the promotion
of district heating solutions.
Other than these measures the 2007 Energy White Paper proposed the
implementation of the Climate Change Act, promulgated in 2008. With this
act the UK became the first county to set, into a law, a series of goals
concerning GHG emission reduction. In fact, according to the Climate
Change Act the UK had to reduce its emissions by 80% by 2050, compared
to those of 1990 [43]. More than that the country would have to cut its
emissions by a percentage between 26% and 32% before 2020 (in 2009 the
government decided that the target for 2020 would be a 34% reduction) [44].
2008 is also the year of the introduction of the Feed-in Tariff, entered into law
by the Energy Act of 2008, which guaranteed subsidies for small scale
generation of less than 5 MW of electricity from renewable sources. The FIT
will be analysed in greater depth subsequently in the text, especially in
relation to the wind power industry.
In 2009 the UK Low Carbon Transition Plan was published, with this
document outlining a plan on how to reach the 34% carbon emission
reduction target by 2020 [45]. Its stated aim was the implementation of a plan
that would deliver 40% of electricity generated from renewable sources
(including nuclear power and clean coal), cars would emit 40% less carbon
and the economy would benefit from an increase of 1.2 millions jobs in the
green sector [46].
In 2013 the government published the Energy Bill, which was focussed on six
main areas: decarbonisation, the Electricity Market Reform (EMR), nuclear
power regulation, the government pipeline and storage system, the strategy
and policy statement and finally consumer protection.

16. 16
Regarding the electricity market, the most important part was the EMR,
which was an act designed to answer the rising concerns over the security of
supply and the decarbonisation of the electricity sector [47]. It is mainly
composed of two key, and then two supporting mechanisms. The two main
schemes are the Contract for Difference (CfD) and the Capacity Market (CM)
[48], [49]. The CfD is supposed to take the place of the RO. The CfD will
provide a fixed amount of money that the generator will receive for the
electricity it produces. This fixed price is defined as the "strike price". If the
electricity price is lower than the strike price generators receive, the
difference, if it is higher, will have to be paid to the authority. This will
guarantee a reduction in exposure to the volatility of the market, and by doing
so, is intended to increase the confidence of investors. In order to participate
in the scheme, generators have to take part into an auction (the lowest bid
tended being the winner). Later in the text the CfD will be analysed in more
detail (and the result of the first auction commented upon) especially in
relation to the wind power sector.
The CM is a scheme that will guarantee that the country will not face a
complete electricity blackout. Generators, (only some types of technologies
are accepted - mainly all the technologies that do not face problems related
to interference with the energy supply, such as gas, coal and nuclear power),
take part into an auction where they offer their capacity. The auction is to
take place four years before the due delivery date. At the moment of delivery
the authority may ask generators to generate the electricity that they had
promised. If they fail to generate the amount stated in the auction they would
face a fine.
The two supporting mechanisms are: the Carbon Price Floor (CPF) and the
Emission Performance Standard.
Amongst all the schemes and policies just named, the most important for the
wind power industry are the RO, FIT and CfD.

17. 17
2 The Wind Industry
Wind energy, in one form or other, has been used by humans for centuries.
According to the most common theory, the first windmill was built in around
3000 BC in Persia [50]. In Europe windmills started to take on a key role
during the Middle Ages, when they was used to produce flour and to pump
water [51]. For more than eight hundred years windmills played a significant
part in the lives of the people living in the same region and it is just with the
introduction of the steam engine that they began to lose importance. Since
the 17th century and especially during the 18th and 19th centuries, electricity
has been one of the most discussed and studied topics in the world of
science. In the second half of the 19th century scientists started to created
machines capable of generating electricity, and also thanks to the
introduction of incandescent electric light by Thomas Edison, electricity
started to play an important role in wider society. It was in July 1887 when
Professor James Blyth built the first windmill able to produce electricity [52].
At that time he used it to light his holiday cottage, the first house ever lit by
electricity [53], [54]. During the first half of the 20th century many remote
places, especially farms in the United States of America started using this
technology, but it is with the energy crises in the 1970s that the wind industry
really took off. In fact the American government was looking at solutions that
would help the country solve the problem of its dependence on fossil fuels,
and with that aim in mind launched a NASA research programme. The idea
behind that programme was to identify new energy sources that were
suitable for utility scale development [55]. The programme led to a series of
installations, like the 100KW wind turbine housed at NASA's Plum Brook
Ohio facility in 1975 and, six years later, the 3.2 MW MOD 5B of behemoth
proportions occupying more than 100 metres. Unfortunately, mainly because
of political reasons, the programme failed to deliver the expected results [56].
Since that moment technology has seen enormous improvements, and today
wind turbines can have a diameter of more than 150 metres and a capacity in
excess of 8MV. In fact in 2014 Vestas, a Danish manufacturer, seller,

18. 18
installer and servicer of wind turbines started the commercialisation of the
V164-8.0MW wind turbine. With its 220 metre height and three 80 metre
blades the V164-8.0MW has established a 192 MW/h 24-hour production
record, enough to supply the electricity for about 13,500 households [57].
Since the moment when greenhouse gases (GHS) emission reductions
started to be a major issue, humans have tried to find the best solution to
address this problem. Because of the natural abundance of the resource,
wind power has always been one of the most popular sources of renewable
electricity. According to Jacobson and Archer (NOTA), a mere 20% of the
total global wind power would be enough to generate electricity, with a
network of 1.5MW wind turbine in regions with annual average wind speeds
in excess of 6.9 m/s at an elevation of 80 metres, to supply seven times over
the current global consumption of electricity [58].

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3 Wind Industry in the United Kingdom
3.1 The history
As stated previously, the history of electricity generation through wind power
in the UK started in 1887 with Professor James Blyth, but until the late
1980s, the number of installations in operation had been negligible. Then in
1989 the government passed the Electricity Act, one of whose key parts was
the Non-Fossil Fuel Obligation, a series of orders requiring distribution
network operators to buy electricity from nuclear and renewable energy
sources. Thanks to this act, in the 1990s the wind industry gained a new
lease of life. However, it was with the advent of the new millennium that the
industry really started to grow exponentially. A combination of the progress in
technology and the introduction of the Renewable Obligation (RO) gave a
tremendous boost to the industry. In 2000 less than one GW of capacity was
installed in the country and within this capacity there were no offshore
installations. In the last fifteen years the progression has been stunning;
between 2006 and 2014 the total capacity increased from 2 GW to 11 GW
and offshore wind power generation grew more than tenfold [59]. At the end
of the first quarter of 2015 wind capacity in the UK represented 50% of the
overall renewable capacity installed in the country, with 13.3 GW, up from 11
GW at the end of 2014 [60]. The others renewable sources are: solar
photovoltaic, producing 6.8 GW (26%), bioenergy, supplying 4.6 GW (17%)
and hydro-electric power, generating 1.7 GW (6.5%) [61].
In the 2013-2014 period 1.4 GW of capacity coming from the wind power
industry had been added to the total energy capacity [62]. In the same
period, with a total capacity of 11.18 GW, wind energy represented 9% of the
UK‟s power requirements [63]. And finally with £1.1 billion of investments in
the UK wind power industry and with 15,000 workers directly employed in
164 manufacturing companies in the supply chain, the UK ranked 6th in
global comparison charts [64].

20. 20
It is interesting to note that among the different nations in the UK there are
important differences regarding the type of installations used. The two main
players, England & Wales and Scotland, face two entirely opposite situations:
in England offshore installations account for more than double that of
onshore generation facilities, whereas in Scotland onshore represents the
vast majority of the capacity installed (fig. 4).
Figure 4. Annual Deployment by Country. Source: Renewable UK
3.2 People‟s opinions
On of the most important factors regarding wind farms, though also true to a
lesser extent for other types of power generation, is its popularity among the
general public. According to a survey conducted by the government in 2013,
68% of the population was favourable to the idea of wind farms [65]. More
recently, in 2014, the Guardian newspaper published a survey where they
asked people if the were in favour of the idea of having an onshore wind farm

21. 21
within five miles from their home [66]. Nearly half of the participants, 48%,
said "Yes". Moreover, in the same survey wind power turned out to be as
most popular source of electricity among UK citizens, in fact only 25% say
"yes" to the idea of a coal plant within five miles of their home, 27% for a
nuclear power station and only 19% were supportive of fracking. If onshore
wind installations proved popular among citizens, offshore wind did even
better; in fact 55% of the participants said that the would welcome the
decision to build a new offshore wind farm, regardless of its position.
3.3 The UK wind resource
One of the most important aspects concerning a strategy to implement wind
energy as a national source of energy is the possibility of diversification. In
fact because of the nature of the resource, wind does not always blow and
when it does, it does not do so with the same intensity, it is absolutely
essential to have the opportunity to build wind farms in locations with
characteristics that vary considerably. By doing this, it is possible to reduce
the risk of an energy supply failure. As a consequence, a strategy that gives
a lot of importance to diversification is vital to improve the reliability of the
system and decrease the variability within electricity generation [67]. When
considering the UK at a national level, it is interesting to note that the peak in
resource availability coincides with peak energy demand, both in terms of
daily and annual consumption [69]. In fact, on an annual basis wind
resources are higher during the winter period, when electricity consumption
is at its maximum. This pattern is reflected in wind power output; during
December and January it is more than double what it is in July and August
[70]. In the same way during the day, electricity consumption is considerably
higher than it is at night and wind power output is at its highest point between
9 a.m. and 6 p.m. [71]. When analysing the wind conditions of a country it is
also important to define the amount of time when the wind speed is either too
low or too high for wind turbines to work. In fact, it is widely accepted that a

22. 22
large wind turbine cannot generate electricity with a wind speed under 4 m/s
and it is shut down for safety reasons when wind speeds are above 25 m/s
[72]. Considering the UK, these conditions are unlikely to happen on a
national level right across the country, in other words it is highly improbable
that there will be a moment when the wind speed is too low or too high
everywhere at the same time [73]. On average there are one hundred hours
each year when the wind speed is under 4 m/s in more than 90% of the UK,
and the speed is too high in only 0.1% of the hours each year [74]. In the
case of a single site the situation is slightly different; the chance of not having
enough wind to generate electricity is between 15% and 20% of all hours and
the chance to have too high a wind speed is less than 2% of all hours [75].
Another aspect of wind characteristics in the UK is the low variability in the
wind speed from hour to hour [76]. This is particular important because a
difference in the wind speed can heavily affect the output of the turbine. Last
but not least, the long-term average of the capacity factor (the percentage of
energy actually produced over a certain period of time divided by the energy
production if the plant had run at full capacity) for onshore and offshore
combined is 28.42% [77]. Combining all these different elements, it is clear
that the UK has a great potential to exploit, and it is not a coincidence that it
is one of the most advanced countries in the word in the wind energy field.
3.4 The wind power industry and energy policies
As previously mentioned in the text, during the last fifteen years successive
governments have published a series of schemes and policies. There are
three main schemes that involves the wind energy sector directly, and they
are: the Renewable Obligation, the Feed-In Tariff and the Contract for
Difference.

23. 23
3.4.1 The Renewable Obligation
The RO scheme was introduced by the Government in 2002, with the aim of
supporting the renewable energy industry and it was the first scheme in the
post privatisation era to deal with the issue of encouraging the development
of the renewable energy industry. In fact at that at time renewable energies
were not advanced enough to compete with traditional energy sources, like
coal, gas and nuclear power. The scheme set an mandatory minimum for the
energy suppliers to buy a certain proportion of their energy from renewable
sources, the technologies accepted under the RO are wind power,
photovoltaic (PV), anaerobic digestion (AD), hydro-electric generation
stations, energy from waste with CHP, geothermal, biomass, landfill gas,
sewage gas and wave power [79]. In principle all new installations can take
part in the scheme. Every year the amount of electricity that has to come
from renewable sources that generators sell to their customers will increase.
The scheme is managed by Ofgem, which is in charge of issuing ROCs to
generators, verifying that suppliers have submitted the right amount of
certificates by the end of each year and, if needs be, ensuring that the
suppliers that have not submitted the required amount of ROCs pay into a
fund. To all intents and purposes, during the year accredited generators
receive, for the electricity they produce, a Renewable Obligation Certificate
(ROC). Each technology is awarded a different number of ROCs for each
MWh of production, this proportion changes from year to year so as to stay in
line with the actual costs of the different technologies. Because of the
different costs involved in onshore and offshore production, the two are
issued with a different number of ROCs per MWh of electricity produced. In
2014-2015 Onshore wind had a MWh/ROC ratio of 0.9, whereas for offshore
wind the ratio was 0.5. This means that offshore wind received nearly double
the number of ROCs for the same amount of electricity produced [80]. In
2015-2016 the situation will be quite similar to the preceding year, with
onshore on the same figure as last year and offshore seeing just a small
change. Now the MWh/ROC ratio is 10:19 [81]. When suppliers buy
electricity coming from renewable sources, the generators transfer them the

24. 24
equivalent number of ROCs, in 2015-2016 for each MWh they sell to
customers they will have to submit 0.290 ROC [82]. If the supplier is not able
to submit enough certificates to the authority, Ofgem, it has to pay into the
buy-out fund. The buy-out price rises every year, for 2015-2016 it is set at
£44.33 per ROC, up from £43.30 in 2014-2015 [83]. The money collected
into this fund is used to pay for the costs pertaining to the administrative
expenses of running the system. The balance is then given back to suppliers
that submit the right number of credits.
Analysis of the scheme: During the past fifteen years the RO has been one
of the key instruments that successive UK governments have been using to
incentivise the renewable industry. In 2002-2003, the first year of the
scheme, it was worth £250 million, after ten years it was close to £2 billion
and in 2013-2014 it had reached £2.6 billion, with an increase of more than
£600 million in just one year [84]. It is also interesting to see how suppliers
have met their obligation throughout the years: in the initial stage of the
scheme the majority of the obligations were made by payments into the buy-
out fund, then over time that proportion had shifted and in 2013-2014 just
under 2% of the total obligation was made via payment and more than 98%
was made by using ROCs [85]. This is due to the increasing availability of
renewable energy, and especially in 2013-2014 because of an especially
windy year, and as a consequence a high wind energy production ensued.
In the first ten years of the scheme growth had followed a similar year-on-
year path, then in the last three years the capacity installed has been seen a
remarkable rise. To explain this situation it is essential to look at the dynamic
of each individual technology. Looking closely at the data it is true to say that
up to now, most of the capacity awarded under the RO has come from just
three technologies: solar, onshore and offshore wind power. In fact until
2011-2012 the vast majority of the capacity installed had come from the wind
power industry. Then, from 2012-2013, and because of the dramatic
reduction in the cost of solar technology, the PV industry has been growing
at an exponential rate. In 2011-2012 just 6 MW of capacity came from the PV
industry, in 2014-2015 they were 1,973 MW [86]. Because of these results
the government decided that any new PV installation with a capacity in

25. 25
excess of 5 MW would not be eligible under the RO scheme after April 2015
[87].
Turning now to the wind power industry, onshore accounted for until 2008-
2009, the majority of the new capacity installed, and the offshore/onshore
capacity ratio fluctuated between 1:6 and 2:6 MW [88]. Then from 2009-2010
the offshore industry took off and as early as 2010-2011 it had peaked at
1,069 MW of new capacity [89]. If in terms of capacity installed and awarded
under the RO scheme onshore wind power exceeded its offshore
counterpart, when it comes to the ROCs issued the situation is entirely
different. Because of the different wind conditions and a different ratio used,
as outlined before, on the number of ROC/MWh that the different
technologies receive, the number of ROCs that are issued to the offshore
industry are higher than the ones issued to the onshore installations [90]. In
fact in 2014-2015 the offshore variant was issued with 25.37 million ROCs,
while the same year the onshore was issued with just 17.73 [91].
According to the plan the RO scheme is due to end in 2037 with the last
capacity awarded in 2017. However, because of the introduction of new
policies and the progress of technology for some of them the ROs will finish
before 2017. These measures concern in particular the solar and wind power
industries, and this point will be discussed subsequently in the text.
3.4.2 The Feed-in Tariff
As previously mentioned the Feed-in Tariff (FIT) were announced in 2008
and took effect in 2010. The scope of the scheme is to incentivise the
generation of renewable energy in small scale installations of less than 5
MW. It is designed to take the place of the ROs when they come to an end.
Until that moment owners can choose which of the two schemes they want to
take part in. Once they have chosen one of the two they cannot change over
to the other. In order to receive an FIT payment, householders, businesses

26. 26
and communities have to install an eligible installation and have a contract
with an FIT Licensee. An FIT Licensee is an energy supplier company that
take parts in the scheme, it is important to underline that not all the suppliers
are FIT Licensees, in fact just the so-called „big six‟ (Centrica, EDF Energy,
E.On, RWE Npower, Scottish Power and SSE) plus Utility Warehouse (it was
part of RWE until 2013 when they split and because of that Utility Warehouse
became a mandatory licensee) are mandatory licensees, the others suppliers
have the possibility to choose whether they offer the scheme or not [80].
Suppliers that take part in the scheme, whether as a regulatory requirement
or out of their own choice, have to pay the customer for the electricity the
customer generates using an eligible installation. In year four (2013-2014) of
the scheme suppliers paid generators £686 million for the electricity that they
had produced, and overall the scheme cost £691 million. The £686 million
that suppliers paid in year four is an incredible figure if it is borne in mind that
in year one suppliers paid generators just £12.49 million [92]. These costs
are added to the bill of all the customer base of the suppliers.
Technologies that are eligible to receive FIT payments are: Solar
photovoltaic, wind, anaerobic digestion and micro combined heat and power
installations [93].
All the electricity generated with an eligible installation receives a payment,
which is called the generation rate. This varies according to the particular
kind of technology, can change in accordance with the size of the installation,
and of course with time. For example, for a PV installation with a capacity
under 4KW the rate varies from 13.39 p/KWh (higher rate) to 6.16 p/KWh
(lower rate). At the same time for a stand-alone installation that is not
designed to provide electricity to a building the rate is always 6.16 p/KWh
[94]. For wind generation the tariff ranges from 14.45 p/KWh for the entire
installation put in place between 1 April 2015 and 31 March 2016 and with a
capacity lower than 1.5 KW to 2.77 p/KWh for all installations installed
between 1 April 2015 and 31 March 2016 and with a capacity greater than
1.5 MW [95]. Other than the generation tariff, the scheme also provides a
payment should the owner of the installation decide to sell (export) the
electricity to the grid. It is fair to say that in most cases it is cheaper for them

27. 27
to consume the electricity themselves, this is due to the fact that the export
tariff is usually lower than the price of the electricity that the supplier tends to
set. For the electricity generated with wind installations the export tariff is
4.85 p/KWh [96].
The scheme has been a success story especially for the PV sector; in five
years 2.73 GW of solar capacity has been installed. For the wind sector the
capacity installed by the beginning of 2015 had reached 374 MW [97]. And
this capacity was split over 6,374 installations, compared to the 591,600 PV
installations [98]. The gap between solar and wind power, but also to other
technologies, can be explained by a number of reasons. First of all, there is
the nature of the different technologies involved; in general terms, solar
power is much more flexible when it comes to small and medium sized
installations compared to wind and hydro-electric installations. In fact when
looking at the statistics for the end of 2013-2014, 97% of the installations
were classified as domestic [99]. Another figure that supports this theory is
the average size for a single installation: if for PV installation it was just below
5 KW of capacity, for wind the average was just under 40 KW [100]. Other
than that, there is the fact that costs in the PV industries have seen a rapid
drop in the past five years (the costs of the wind power industry are going to
be analysed later in the text). A further factor that can explain this massive
difference is that at the end of 2013-2014 98.6% of the installations were PV
installations as rent-a-roof schemes gained in popularity [101]. Under this
scheme, roof owners do not pay towards the cost of the installation and they
receive free electricity, meanwhile installers receive FIT payments [102]. Due
to the success of the scheme in August 2015 the government announced
that it wanted to make some further changes [103].. As for the RO this
announcement will be analysed later in the text.
3.4.3 Contract for Difference
As seen earlier, CfD is one of the main mechanisms of the Electricity Market
Reform (EMR). Its goal is to replace the RO once this scheme ends in 2017.

28. 28
In addition it is, according to the government, an essential instrument to give
the investor the confidence they need in order to attract the funds that are
required to transform the UK energy network into a low-carbon system [104].
The scheme is supposed reach this goal by reducing the risk for the
investors of volatility in the wholesale electricity market. The system works as
follows: to be chosen as a participant in the scheme, investors have to
compete in an auction. The auction works according to the pay-as-clear
principle: the winner is the one that tenders the lowest bid. For each auction
the government sets the level of funds to be allocated. Due to the fact that
different technologies require different levels of investment, the scheme sets
two different categories, called pots. The most advanced technologies
compete in the "Established technologies pot", comprising onshore wind,
solar PV, landfill gas, sewage gas, hydro-electric and Energy from West
(EfW) with combined heat power [105]. The other pot is composed of
technologies that are considered less developed and it is known as the "Less
established technologies pot", which is made up of: offshore wind power,
biomass combined heat power, AD, wave & tidal stream and geothermal
[106]. For each technology the authority, which is represented by the EMR
Delivery Body (a National Grid company), sets an "administrative strike
price". These prices are supposed to decrease year on year as long as the
technologies make progress. The renewable power developers are
guaranteed to receive the strike price for a 15 year-period. More precisely
generators will receive the difference between the "strike price" and the
"reference price", a measure of the average wholesale price over a period of
time. Auctions are to be held every six months, and the first one took place
in December 2014.
If the FIT scheme seems to be more conducive to solar PV technology the
CfD looks much more suitable for the wind power sector. At the first auction
27 projects were selected to share £315 million [107]. The combined power
capacity of these 27 projects is 2.1 GW [108]. By looking at the results, it is
clear that the real winners are the onshore and offshore wind industries, 15
of the 27 projects (56%) were onshore [109]. Solar power came in second
place, with five projects, and offshore wind third, with two. And yet, it is by

29. 29
looking at the capacity allocated to each sector that wind power made the
difference. In fact, offshore and onshore combined accounted for 89.3% of
the total capacity [110]. Onshore wind, with an average capacity per project
of 49.9 MW, took 35% (749 MW) of the total capacity [111]. Meanwhile
offshore wind, with just two projects, is responsible for 54.3% (1,162 MW) of
the total capacity [112]. The two projects are: EA1 with a capacity of 714
MW, (developed by Scottish Power) and Neart na Gaoithe with a capacity of
448 MW (developed by Neart na Gaoithe Offshore Wind) [113]. At this point
it is fair to say that in order to ensure greater participation in the scheme, it is
very likely that some developers tended to underestimate the cost of their
projects, consequently it does not come as a great surprise that as early as
March 2015, just four months after the auction, two projects had already
been shelved [114]. Nevertheless, assuming that the others projects will be
developed, what is clear is the fact that the authority overestimated the cost
of renewable energy sources. If we take as an example the offshore
administrative strike price was between £140-150 per MWh, but if we
consider the average price of the two projects awarded it was just £117 per
MWh. The same can also be said for onshore: the administrative strike price
was £120 per MWh, but two of the projects set a price of £50 per MWh,
meanwhile three others ended up at £79 per MWh. This is good news for the
industry, and it is the result of the efforts that it had made in the past decade
to cut costs. Nonetheless, at the same time there are also concerned voices,
like that of Esbjorn Wilmar, CEO at Infinergy, a company which had secured
two projects, that pointed out that only from one side, the result of the auction
could be seen as a positive step in the right direction [115]. On the other
hand, it was also the case that the vast majority of the projects that were
eligible did not secure any participation at all in the scheme [116].
Additionally, the industry has asked for greater clarity on the application
process and its criteria, in order to simplify the process, it has also asked for
more rounds as a key point to maintaining the vitality of the industry [117]. Of
course a lot of criticism has come from other industries, especially the solar
PV industry, that claim that it is extremely difficult for them to compete in this
scheme, especially for projects with a capacity lower than 12 MW, and this

30. 30
could be an issue for small and medium sized companies that, once the RO
is over, will not be able to compete in the CfD [118].
3.5 Targets
The UK, as a member of the European Union, has committed itself to reduce
its carbon footprint, and as a consequence has fixed a series of targets that
have to be reached. By 2020 it has to source 15% of its energy demand from
renewable sources, and this percentage has to rise to 80% by 2050 [119]. In
the meantime, electricity coming from renewable sources from has to reach
30% by 2020 [120]. In order to do that all renewable technologies have to be
developed with producers incentivised, and the wind power industry can be
no exception.
3.6 Onshore actual situation
Onshore wind power still represents the most popular source of wind energy
in the UK. At the end of the first quarter of 2015 onshore wind installed
capacity reached 8.85 GW, an increase of 12.1% compared to the end of
2014 [121]. Looking closely at the UK, it is possible to identify large
difference between its composite nations. On 30th of June 2014, Scotland
was the nation with the greatest capacity installed, with 4.57 GW(+15%
compared to one year before),England 1.84 GW (+28%), Northern Ireland
564 MW (+16%) and Wales 555 MW (+15%) [122].
In addition, on 30th June2014 there was 1.6 GW of capacity under
construction, and at the same time the capacity awaiting construction was
5.06 GW [123]. Nonetheless, as the "Wind Energy in the UK- State of the
Industry Report 2014" reported in October 2014 it is likely that not all this
potential will be exploited [124]. This is due to a lack of certainty in the

31. 31
market, a regulatory system that is more and more unpredictable and a
failure to deliver what is required [125].
There are several factors that can explain this success story, but without
doubt the most important is the economic aspect. In fact, at the moment,
onshore wind power is still the cheapest source of renewable energy, and
more importantly, it is on course to compete successfully with Combined
Cycle Gas Turbines (CCGT) by 2020 [126]. According to RenewableUK, if
the industry, in collaboration with the national and regional governments and
the other stakeholders, puts into place the best practices and adopts the
most up-to-date technologies, it will be possible to compete with CCGT in
2020 [127]. CCGT is expected to have an average cost of energy (LCOE) of
about £65-75 MWh by 2020 [128]. In April 2015, RenewableUK published the
"Onshore Wind Cost Reduction Taskforce Report", according to which in five
years a large installation, situated in a windy area (defined as Type 1, Type2
is a medium sized wind farm with medium wind intensity, and Type 3 is a
small sized installation with a low wind intensity) and with all the
recommendations about cost reduction put in place, could have a LCOE of
£64 MWh (fig. 5).
Figure 5. Opportunities for cost reduction shown against estimated CCGT LCOE in
2020 (£/MWh). Source RenewableUK.

32. 32
The association has identified five areas where it is possible to make
improvements, which are: the planning process, grid connections, technical
innovation, site optimisation and turbine optimisation. Depending on the type
of situation analysed these five elements account for varying amounts of
money, with the less favourable the situation is, the bigger the opportunity for
improvement. In fact in a Type one situation the difference between the
minimum and the maximum LCOE varies from £64 MWh to £75 MWh (a total
maximum variation of £11), so it is within the CCGT range that
RenewableUK predict for 2020 (fig. 5). On the other hand, there are the type
3 situations, in this case the variation between the minimum LOCE expected
and the maximum is up to £20, from £69 MWh to £90 MWh (fig. 5). What is
interesting to see is that also in the worst case scenario (small installation,
low wind intensity) onshore wind power still remains within the CCGT range.
This means that even in the worst situation, if the industry works in the right
direction it will be able to compete with fossil fuel generation.
It is clear that from an economic point of view onshore wind generation is the
best option currently available for UK energy transition. However, as
mentioned before in the text, there is a part of the population that has a
different point of view on this subject. And, more importantly, the government
has shown that it will not support this technology in the future. From an
economic point of view, and by assuming that the required amount of money
will flow into the FIT and the CfD schemes, there are not to many concerns
over the future of the sector, there are other aspects that could be a greater
obstacle to the development of such technology; namely, the changes in the
application process [127]. In fact, as highlighted earlier, from June 2015 the
last word on the application process is now in the hands of local
communities. In a statement from the government, it said that the only way
for a onshore project to gain consensus is if, "the site is in an area identified
as suitable for wind energy as part of a Local Neighbourhood Plan and
following consultation, the planning impacts identified by affected local
communities have been fully addressed" [128]. Predictably, the industry has
disagreed and pointed out, via RenewableUK, the fact that onshore projects
are now the only technologies that are subject to this process. In fact, other

33. 33
projects that use different technology and have a capacity of over 50 MW are
decided at the national level [129]. Moreover, many have pointed out that
while the government is making the application process harder for onshore
wind power it is also trying to make the application process for fracking as
smooth as possible. This is a time when the national approval rating for
onshore wind power is three time higher than that of fracking.
In general it would be fair to say that more than anything what is really in
danger of hitting the sector hard is the lack of confidence from investors.
Because of that the industry is calling on the government to take a clear
position on the future of subsidies, policies and schemes that will concern the
sector.
3.7 Offshore actual situation
The UK is the leading country in the world for installed capacity and the
industry provides 6,830 jobs (13,000 if indirect jobs are also take into
account) for the UK economy [130]. This figure is expected to grow to 30,000
by 2020, and also in 2020 the UK offshore wind sector could potentially bring
£7 billion of Gross Value Added (GVA) to the economy [131]. In order to
achieve this goal and the UK target regarding how much energy should come
from renewable sources by 2020 (in accordance with the UK Renewable
Energy Roadmap released in 2011, by 2020 15% of UK energy consumption
has to come from renewable energy), it is estimated that 1 GW a year of
capacity has to be connected to the grid [132]. According to the data in the
last few years and taking into account fluctuations caused by the different
number of projects launched each year, the 1 GW per year seems
achievable [133].
As late as June 2015 the capacity assured by operating wind farms had
reached 5.05 GW, at the same time a further 50 MW was under construction,
all coming from the same project, the Kentish Flat Extension, expected to be
completed by the beginning of 2016 [134]. By using an approximation it is
reasonable to say that each GW of capacity installed will represent 1% of

34. 34
demand, so at the moment (August 2015) the offshore industry represents
5% of the UK electricity supply, this figure is confirmed by the data [135].
More interestingly is the fact that a further 11.01 GW of capacity has already
received planning permission and it is expected that the 16 projects will be
completed no later than 2023, with at least 4.7 GW expected to start work by
2020, in fact it is expected that offshore wind will represent 10% of the UK
electricity supply [136]. The 4.7 GW is supplied by eight projects, which are:
the Beatice, Dudgeon, the Burbo Bank Extension, Hornsea 1 and Walney
Extension are already at the stage of Final Investment Decsion (FID), plus
the two projects already mentioned under the CfD scheme and the Ramption
project that has also reached the FID stage under the RO [137].
Last but not least, there is an additional 20.9 GW capacity, split over 14
projects, that are either in the planning process or in the development stage
[138].
From a financial point of view, the offshore projects are still more expensive
than the onshore. This is due to the technical challenge involved in the
installation process of the required infrastructure. However, in the last five
years the cost of offshore has dropped by 11% [139]. According to the target
agreed between the industry and the government, costs are expected to drop
to £100/MWh [140]. By looking at the results of the first CfD auction, it is
clear that a lot still needs to be done in order to close the £17 gap between
the average strike price of the two projects awarded [141].
In addition to the economic reasons, offshore wind has also a key supporter
in the form of the government. In fact, in order to achieve its renewable
energy targets the government's plans give a lot of importance to the
offshore industry. It still not clear if and how this support will be followed by
concrete action, especially after the recent moves and declarations on the
amount of money flowing into the renewable industry and especially under
the Levy Control Framework, but it is clear that the situation looks much
more relaxed than the one for the onshore sector [142]. In order to seek
clarification on what the future will be, RenewableUk has been asking for

35. 35
more information on what the plans of the government are regarding the
renewable sector and especially the offshore industry [143]. In particular, it
has asked the government to maintain and support, with adequate funding,
both the CfD and the Levy Control Framework, it has also called on the
government to clarify its vision on the offshore industry after 2020, and to do
so in the context of the Fifth Carbon Budget. It has also requested that the
government brings in the measures required to release the full potential of
the offshore industry, such as improvements in grid interconnections and in
the management system. Finally, it has called for the extension of the
guarantees scheme for infrastructure, a scheme that guarantees that
infrastructure projects in various areas are not cancelled because of adverse
credit conditions.
3.8 The UK General Election and the consequences for the
energy sector
On 7 May 2015, the citizens of the United Kingdom voted in a general
election to choose their government. Running for the Conservatives was
David Cameron, the incumbent Prime Minister seeking re-election for a
second term of office against the Labour party leader, Ed Miliband. Even
though on the eve of the election, the polls showed the two main parties as
neck and neck, the result was a shock to UK politics. The Conservatives won
enough seats to gain overall control of parliament, and as a consequence
they formed a majority single-party government [144].
During their previous mandate, the Conservatives had been obliged to form a
coalition with the Liberal Democrats, and this had led to a series of
concessions and compromises, some of which related to energy policy. Wind
energy, and especially onshore wind farms, was one of these. During the
campaign in the run up to the election, Cameron's party had pointed out that
in case of re-election, they would change the policies and regulations
regarding onshore wind power, and in particular they said that they would
end any new subsidies for onshore wind and change the law in order to give

36. 36
the local community the possibility to have the final say on any wind farm
applications. It did not take long after the election for the government to put
into practice its pledges concerning onshore wind power. In fact, between
June and July 2015 the government announced in a series of public
statements that the RO for onshore wind farms will no longer be available
after 1st April 2016, one year before when was stated in the white paper of
12 July 2011. At the same time it announced that from July 2015, local
communities would have the last say on wind farm applications.
Apart from these measure for the wind power industry, the government has
also announced important changes in the solar sector, where it will put an
end to subsidies for Photovoltaic between 50 KW and 5 MW under the RO
from the 1st April 2016, in the building sector, by scrapping the requirement
for new homes to have zero carbon emissions, a measure that should have
been required from April 2016, as well as reviewing the Feed-in Tariff. For
this last measure it is not yet clear (at the moment when this text is written)
what the final decision will be, but on 27th August 2015, the government
published a document, entitled "Consultation on a review of the Feed-in
Tariffs scheme" where it proposed a series of measures, with this
consultation period ending on 23 October 2015.
The government justifies these actions concerning onshore wind power as
measures to keep the cost to the taxpayer as low as possible. In fact, as was
mention before, it is these very same taxpayers that pay the subsidies via the
bill. In 2011 the government decided to set a limit on the amount of money
taxpayers had to pay to subsidise renewables energy, it is called the Levy
Control Framework. The idea was to set a limit on the amount of money that
renewable technologies were to receive. According to the initial plan, the
government was to set a limit of £7.6 billion in 2020-2021. However, owing to
a faster than expected development of renewable technologies, now the
forecasts from the government predict that taxpayers will have to pay an
additional £1.5 billion [145].
Unsurprisingly, reactions from a number of different quarters have been
strong. After the first major speech on climate change that the Energy
Secretary Amber Rudd had given, Dr Gordon Edge, Director of

37. 37
RenewableUK described the recent movement of the government as follows,
"It's like saying you want to win the Tour de France on a bike without wheels.
That basic mismatch between rhetoric and action will make investors very
nervous. Until this is sorted out, the essential ramp-up of investment in the
low carbon economy will flat-line" [146].
Caroline Lucas, Green Party MP for Brighton Pavilion said: "This proposed
cut to support for solar is utterly short sighted. While the Government
continues to subsidise fossil fuels and nuclear it's undermining investor
confidence in clean, renewable energy generation" [147].
RenewableUK's chief executive, Maria McCaffery also commented: "We
need the industry and government to agree on a long term strategy with
financial support being reduced gradually and appropriately over a clearly set
out timescale - not short-term changes coming out of thin air" [148].
From a practical point of view it is likely that the new measures will have a
major impact on the industry, especially on small projects and the onshore
sector.
For larger projects, both onshore and offshore, (the RO for offshore will end,
as planned, on 31 March 2017), the situation is not as bleak. In fact, outlined
previously in the text, they both have the opportunity to take part to the CfD
scheme. Additionally, as also referred to before, large onshore and offshore
projects are competitive within the CfD, so it is unlikely that large project will
be affected too seriously by the regulatory changes. Even if, in order to
sustain the industry, the government has to allocate the right amount of
money into the CfD scheme, it seems that inside the industry there are
several people who are afraid there will be a reduction in the amount of
money going into the scheme.
On the other hand, those who will be most affected are medium sized
projects, and this is bad news for the industry as a whole. In fact, in the last
few years the size of new projects, especially for onshore sector of the
industry, has decreased steadily, meaning that the single turbine market has
been growing faster than any other [150]. This was due to the success of the
Feed-in Tariff scheme form project under 5MW and the reduction in the
number of sites available [151]. However, as already mentioned, the RO will

38. 38
end in 2016 and it is highly likely that the current level of generation rates
within the FIT will be lowered. As pointed out by many in the industry this
highly unpredictable environment is a danger for the stability of the sector, in
fact the more instable the sector is, the more likely it is that investors will look
for investment opportunities elsewhere.

39. 39
4 Discussion of Results and Conclusions
At this point it is clear that the wind industry has a tremendous potential in
the UK. Not only are the wind conditions extremely favourable, but also the
economic and infrastructure conditions are rather positive. However, in other
to exploit this potential, the country needs to move forward from the current
situation. Both capital investment and human resources are required in order
to develop further an industry that is already a key player in the energy
sector. It is therefore absolutely essential that the government supports the
industry, both in economic terms and with regard to its policies. The
government, but also the rest of the country, has to ask itself, "Why we
should support the wind power industry? What is the aim of the funding we
give them?" And the answer ought to be, "to reduce the impact that human
activity has on the planet, which is without any doubt affecting us all and the
rest of life on earth, and that will likely lead to changes that could potentially
cost us billions of pounds." In fact, the effects of these changes are already
impacting adversely on the planet and the human race; according to the
State of the Word report, between 2008 and 2014 140 million people were
displaced because of climate-based disasters, and this is without considering
all those who had to move due to rising sea levels, drought or desertification
[151]. The President of the United States, Barack Obama, said that climate
change is not something that will affect our children but it is something that is
already affecting us, and he said that he will spend the last two years of his
mandate leading the US and the international community in the right way to
address this problem. Understanding why changes in the energy sector are
needed is a fundamental step to finding the will to bring about the changes
that are required.
Now that the scale of the challenge has been defined and most people agree
that there is no other solution than to move to a less carbon intense
economy, each country has to analyse, according to its own situation and
resources, what is the best way to achieve this change. The UK has different
solutions to address these issues at hand, and to some extent it is moving in
the right direction. Over the last 20 years the economy has become much

40. 40
more energy efficient, and it now occupies one of the top positions amongst
the so-called „developed countries‟. In the last two decades it has also
reduced greenhouse gas (GHG) emissions per unit of GDP, this is mainly
due to the switch from coal to gas, other than the aforementioned energy
efficiency improvements. And, as already mention in the text, the renewable
industry is growing stately. Turning to the renewable energy sector, it is clear
that the solution cannot come from just one form of technology, this would be
a danger both in terms of security of the supply and also for the affordability
for the customer, but it has to be a mix between the various technical
possibilities that there are currently in the market. In order to define the best
mix for a certain country it is essential to understand and assess what the
resources are. If we look at the situation among the EU members, many of
them have a high percentage of their renewable mix that comes from the
hydro-electric energy (fig. 6).
Figure 6. Shares of renewable electricity generation by EU member state,
2012. Source: Eurostat.
In the case of the UK, however, this is not a viable solution, the hydro
potential in the UK is relatively low, but in direct contrast, the UK has an
enormous potential within the wind sector. This is, therefore, exactly why the
government has to offer more material and political support the wind sector.
It is thanks to this renewable form of energy that the UK has the chance to
move in the right direction and meet the energy targets that it has fixed for
itself.

41. 41
It is true to say that over the last fifteen years the wind industry, both onshore
and offshore, has been supported by the government, and this support has
led to the current situation. A situation where wind generation has the largest
share of renewable generation (55%, 33% from onshore and 22% from
offshore)32
and has created 2600033
jobs in the UK [152]. Moreover, the UK
is the 6th country in the world in terms of wind generation and the first one in
terms of offshore generation [153], [154]. Thus by looking at the results it is
entirely evident that the policies in place in the last fifteen years have been
working, and have been the main reason for the current success of the
industry. The Renewable Obligation scheme has allowed the onshore sector
to grow at a time when the technology available was far from competitive
with traditional electricity sources, and has been doing the same in the last
five years with offshore as well. The Feed-in Tariff, albeit on a much smaller
scale, has allowed small scale wind to grow at a rapid rate. In addition, the
Contract for Difference seems to have the potential to take the place of the
RO in the next few decades.
However, the latest moves from the government, especially concerning the
onshore sector (such as the decision to end the RO one year earlier than had
been previously envisioned and the change in the application process), are a
negative signal for the industry. Investors need to have a stable environment
in order to feel confident about investing their money, and an environment
where subsidies and regulations are changing far too often is not the most
reassuring signal for an investor.
The government has justified these decisions by stating its aim to reduce as
much as possible the cost for the customers, and there are nothing wrong
with that in itself. Nonetheless, when looking at the fact that onshore wind is
the cheapest renewable technology available today, it is extremely difficult to
concur with this argument. If, on the contrary, the decisions are upon a
political motive, it would be useful to remember that the vast majority of the
people in the UK have a positive opinion about the onshore industry. The
government wold do well to remember that when occupying a position of
power, its primary role is to represent the country as a whole, not just a small
minority. What is more, it has an obligation to take the best decisions for all

42. 42
of the country, and with a view to the overall picture. By penalising the
onshore sector the government is merely limiting the ability of the UK to meet
its targets in terms of renewable generation and GHG emissions reduction.
Now it is fair to say that the costs in the wind sector have been going down
steadily and it is likely that if a series of measures are taken, they will
decrease even more, so it is only right to adjust the level of subsidies, but
with the introduction of the CFD this problem may well disappear, in fact with
the CfD only the less expensive technologies are rewarded.
As it is now far too late to go back on the decisions that the government has
already taken, it is imperative that the industry receives a strong signal of
support. In order to do that, it is essential that the right amount of money
flows into the CfD, and this has to be developed as a long-term plan. For that
to happen, the Levy Control Framework has to maintain an adequate level of
funding. Other than that, it is important that the network is developed in
order to allow the industry to grow, and this is true for all of the renewable
industry, not just the wind sector. The UK network requires greater flexibility
in order to secure its supply in an environment where renewable energy is
going to play an ever increasing role.
If the problem for the current government is the effect that onshore has on
local communities then, by looking at other countries, it is possible to see that
with the right policies in place the wind industry can be developed in a
sustainable manner, and in a way in which local communities can also reap
benefits from wind projects.
If we take Denmark as an example, where on 10th July 2015, 140% of the
demand was met by wind power generation, and where onshore represents
72% of the capacity (28% offshore), it is clear that with the right will in place,
it is possible to achieve quite remarkable results, without damaging local
communities at all [155], [156]. In fact, in 2008 the Danish government
decided to commit the country to producing, by 2020, 30% of its energy
demand with renewable energy, in order to reach this goal on 1 January
2009, The Promotion of Renewable Energy Act became law [157]. This law
contains a number of schemes whereby, first of all, every house owner has
the right to receive full compensation if the house loses some or all of its

43. 43
value because of a new wind turbine. Secondly, all citizens have the option
to buy shares in the new project, within their community. The third scheme is
a financing programme under which a developer is paid an additional amount
of money for the first 22,000 full-load hours of production. And the final one is
a fund that developers can use to assess the impact of the wind farm on the
local environment and community. Between 2005 and 2009 wind energy
accounted for between 17% and 20%, since the introduction of the Act, the
wind industry has growth consistently and in 2014 the Danish wind sector
generated 39% of the electricity demand [158].
In conclusion what the UK really needs is a serious plan for the future, a plan
that considers the energy dilemma in his totality, and not just one of the
issues because of a particular political position based on expediency. The
wind power sector, both onshore and offshore, represents a great opportunity
for this country, and it has the potential to become a key player in the energy
sector in the coming decades. It also represents the chance to transform
certain problems, such as climate change and the decarbonisation of the
economy, into a real opportunity; to create thousands of new jobs and add
value to the economy. In order to do that it is vital for the government to think
about the long term and, more importantly, to approach the problem with a
vision for the future based on what will happen, and not on the past. It is not
possible to expect to solve the issue of climate change by using the same
approach that had caused it in the first place.

44. 44
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[34] Ibid.

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[45] UK Low Carbon Transition Plan, July 2009.
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[60] Section 6 – Renewables, Department of Energy & Climate Change,
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[61] Ibid.
[62] Wind Energy in the UK, State of the Industry Report 2014,
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[63] Ibid.
[64] Ibid.
[65] Public attitudes tracking survey: wave 5, Department of Energy &
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[66] H. Fearn, Wind power most popular source of energy in UK, The
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[68] Ibid.

48. 48
[69] Ibid.
[70] Ibid.
[71] Ibid.
[72] Ibid.
[73] Ibid.
[74] Ibid.
[75] Ibid.
[76] Ibid.
[77] UKWED Figures explained [Online]. Available:
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[81] The Renewables Obligation (RO) buy-out price (£44.33) and
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[82] Ibid.
[83] Renewables Obligation: Data and statistics [Online]. Available:
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[84] Ibid.
[85] Ibid.
[86] C. Adams & J. Pickard, UK wind operators hit at plans to end
subsidies early, Financial Time, London, 18 June 2015.

49. 49
[87] Renewables Obligation: Data and statistics [Online]. Available:
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[88] Ibid.
[89] Ibid.
[90] Ibid.
[91] Feed-in Tariff: Annual Report 2013-2014, Ofgem, December 2014.
[92] Ibid.
[93] Ibid.
[94] Feed-in Tariff Generation & Export Payment Rate Table for
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[95] Feed-in Tariff Generation & Export Payment Rate Table for Non-
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[97] Feed-in Tariff (FIT): Quarterly statistics [Online]. Available:
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[98] Ibid.
[99] Ibid.
[100] Feed-in Tariff: Annual Report 2013-2014, Ofgem, December 2014.
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[102] Ibid.
[103] BusinessGreen staff, Feed-in Tariff cuts: the reaction, BusinessGreen,
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[104] Electricity Market Reform: Contracts for Difference [Online]. Available:
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contracts-for-difference.
[105] Ibid.

50. 50
[106] Ibid.
[107] DECC releases results of UK’s first Auction for Contracts for
Difference, renewableenergyfocus.com, February 2015.
[108] Contracts for Difference (CFD) Allocation Round One Outcome,
Department of Energy and Climate Change, February 2015.
[109] Ibid.
[110] Ibid.
[111] Ibid.
[112] Ibid.
[113] Ibid.
[114] S. Evans, UK renewables auction pushes down costs, The Carbon
Brief, 27 February 2015.
[115] DECC releases results of UK’s first Auction for Contracts for
Difference, renewableenergyfocus.com, February 2015.
[116] Ibid.
[117] Ibid.
[118] Ibid.
[119] UK Renewable Energy Roadmap, Department of Energy and Climate
Change, July 2011.
[120] F. Harvey, UK on track to meet its renewable energy targets, The
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[121] Energy Trends section 5: electricity, Department of Energy and
Climate Change, August 2015.
[122] Wind Energy in the UK: State of the Industry Report 2014, Department
of Energy and Climate Change, October 2014
[123] Ibid.
[124] Ibid.
[125] Ibid.
[126] Onshore Wind: Cost Reduction Taskforce Report, Department of
Energy and Climate Change, April 2015.
[127] W. Nichols, New onshore wind planning hurdles concern developers,
businessgreeen, 19 June 2015.
[128] Ibid.

51. 51
[129] Ibid.
[130] OWPB Annual Report 2014, Offshore Wind Programme Board, March
2015.
[131] Ibid.
[132] Wind Energy in the UK: State of the Industry Report 2014,
RenewableUK, October 2014.
[133] Ibid.
[134] Offshore Wind Project Timelines 2015, RenewableUK, June 2015.
[135] Our Offshore Energy Future – Actions for Growth, RenewableUK,
June 2015.
[136] Offshore Wind Project Timelines 2015, RenewableUK, June 2015.
[137] Our Offshore Energy Future – Actions for Growth, RenewableUK,
June 2015.
[138] Offshore Wind Project Timelines 2015, RenewableUK, June 2015.
[139] Our Offshore Energy Future – Actions for Growth, RenewableUK,
June 2015.
[140] Ibid.
[141] Contracts for Difference (CFD) Allocation Round One Outcome,
Department of Energy and Climate Change, February 2015.
[142] P. Clark, Renewable power subsidies to be cut back, Financial Times,
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[143] Our Offshore Energy Future – Actions for Growth, RenewableUK,
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[144] G. Parker, Conservatives secure stunning victory, Financial Times,
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[146] RenewableUK comment on climate change speech by Energy
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[147] P. Bennett, Industry condemns ‘short sighted’ changes to solar
subsidies, Solar Power Portal, 22 July 2015.
[148] Ibid.

52. 52
[149] Wind Energy in the UK: State of the Industry Report 2014,
RenewableUK, October 2014.
[150] Ibid.
[151] State of the World 2015: Confronting Hidden Threats to Sustainability,
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[152] Energy Trends section 6: renewables, Department of Energy and
Climate Change, June 2015.
[153] Wind Energy in the UK: State of the Industry Report 2014,
RenewableUK, October 2014.
[154] OWPB Annual Report 2014, Offshore Wind Programme Board, March
2015.
[155] A. Neslen, Wind power generates 140% of Denmark's electricity
demand, The Guardian, London, 10 July 2015.
[156] Energy Statistics 2012, Danish Energy Agency, 2012.
[157] Promotion of Renewable Energy Act, 2009.
[158] The Danish Market [Online]. Available:
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html.