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BP plans to build two offshore wind farms in the Irish Sea without entering government schemes for support, The Times reported on Monday, in what could be the first subsidy-free offshore wind projects ever.
The energy supermajor, which has recently doubled down on oil and gas as the world needs all forms of energy, doesn’t plan to submit bids for the so-called contracts for difference (CfD) process of the UK government for the two projects, which could power 3.4 million UK homes. Under those contracts, the power generators are paid a predetermined fixed price for the duration of the CfD to guarantee revenues.
“We may not enter any [contracts for difference] auction actually, because our strategy is to use the electrons [electricity] for our own use where we can. There’s a lot of green electricity demand for us in the UK,” BP’s chief executive Bernard Looney told The Times.
Construction of the farms could begin as soon as late next year, Looney added.
BP’s plan for potentially subsidy-free offshore wind farms looks very ambitious at a time of many challenges for the industry.
Offshore wind project costs have soared in recent months, to the point of prompting some developers to reconsider their offshore wind investments despite having CfD contracts.
Last month, Swedish utility Vattenfall said it was halting the development of a major offshore wind power project in the UK due to surging costs and challenging market conditions pressuring new developments.
Vattenfall will not proceed with the development of the 1.4-gigawatt (GW) Norfolk Boreas offshore wind project as the offshore wind industry has seen cost increases by up to 40%, the company said in its Q2 results release on July 20.
“Although demand for fossil-free electricity is greater than ever, the market for offshore wind power is challenging. Higher inflation and capital costs are affecting the entire energy sector, but the geopolitical situation has made offshore wind and its supply chain particularly vulnerable,” President and CEO Anna Borg said.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.