Statoil seals £1bn deal for windfarm off Norfolk

Construction to start this summer of 88 turbines at Sheringham Shoal

The construction of a £1bn windfarm off the Norfolk coast will go ahead this summer after Statoil Hydro, the Norwegian oil and gas group, signed a joint venture with Statkraft, the country's state-owned utility.

Once fully up and running, the 315 megawatt (MW) 88-turbine installation at Sheringham Shoal, 13 miles out into the North Sea, is expected to produce 1.1 terawatt hours of power, enough for about 220,000 homes. The first electricity will be produced in 2011.

The investment decision was due last autumn, but was delayed by ructions in the world economy as Statoil Hydro searched for a partner to share the costs. Statkraft signed a £514m deal for a 50 per cent stake in the project yesterday, paving the way for building work to begin.

For the two companies, the project is a chance to showcase their credentials. For the UK wind sector, the decision is a much-needed counterpoint to the growing list of suppliers baulking at the cost of offshore infrastructure.

Installations out at sea are vital to meeting the Government's commitment to source 15 per cent of all Britain's energy from renewables by 2020. But extreme environmental conditions – added to the scarcity of everything from turbine blades to cabling to the barges used for installation – multiply the costs.

The focus is on the Renewables Obligation Certificate (Roc) regime. The law requires power companies to derive a growing proportion of their electricity from renewable sources. By issuing certificates to generators – to be sold on to utilities to prove the obligation has been fulfilled – the system is designed to provide an extra revenue stream to help justify renewable infrastructure investments. Government plans to give an extra boost to more costly offshore installations by designating 1.5 Rocs per MW hour – compared with 1 Roc per MWh for onshore – came into effect yesterday, to help address operators' concerns.

Statoil Hydro is cagey about how much the extra allocation counted in its decision to go ahead with Sheringham Shoal, but stressed the centrality of the incentive scheme as a whole.

"The project was sanctioned on pure commercial terms," a spokeswoman said. "We won't go into the details of the business plan, but having incentives is crucial and is a very important signal from the Government."

But not all are convinced. Although Iberdrola, the Spanish energy giant, has denied press reports it is cutting 40 per cent, or more than £300m-worth, of wind-power investments in the UK, there are several outspoken examples of projects on hold for want of commercial logic.

Centrica's 250MW Lincs scheme, given the go-ahead by the planners in October, is still hanging in the balance and the company says the allowance for offshore developments will need to go up again – to 2 Rocs per MWh – to have a discernible impact. "We are still going through the costs of Lincs, but the economics just aren't stacking up at the moment," a spokesman for the company said. "Two Rocs rather than 1.5 would make a big difference."

Meanwhile, the London Array – the plan for 341 turbines covering 90 sq miles and producing enough power for 750,000 homes – is also still in jeopardy, despite the involvement of Masdar, the Abu Dhabi sovereign wealth fund, after Shell backed out last summer. Construction tenders are being evaluated, but whether the sums add up is not yet clear.

E.ON, a partner in the London Array, also backs calls for a 2-Roc allowance for offshore. Not only are the UK plans competing for resources in an increasingly global market – made even more competitive by US President Barack Obama's commitments to renewables, but bidding is starting for the UK's third round of offshore concessions. These are even further out to sea and will be even more expensive to build.

"There is a lot riding on decisions being made in the near future," a spokesman for E.ON said. "It is significantly easier to build in a Texan or Spanish desert than in the North Sea. And if the London Array can't be made to work then it is difficult to see how 'round three' will work either."

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable