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London Array set for start-up in 2012

The UK's London Array wind farm could be producing electricity in time for the London Olympics, in 2012, following the introduction of new subsidies for offshore wind power, writes Tom Nicholls

Last month, the venture's partners – Denmark's Dong Energy, Germany's E.On and the UAE's Masdar – said they would proceed with the DKK16.4bn ($3bn) first phase of the project; this will involve the construction of 175 turbines in the Thames Estuary, with a combined capacity of 630 megawatts (MW). It will be the world's biggest offshore wind farm and not much smaller than the largest onshore wind farm – a 780 MW facility in Texas.

The decision followed the government's budget announcement in April that it will increase financial support for offshore wind power – to £525m, it claims. Projects on which an investment decision is made in 2009/10 will receive 2 Renewable Obligation Certificates (ROCs) – the main financial support scheme for renewable power projects in the UK – for every MW hour (MWh) of electricity they produce when operations begin, compared with 1.5 ROCs previously. Ventures placing orders in 2010/11 will be entitled to issue 1.75 ROCs/MWh. Offshore wind's ROC banding would then return to 1.5 from 1 April 2011.

Power retailers are required by law to procure a growing proportion of their electricity from renewable sources. ROCs are issued to generators, which are then entitled to sell them onto utilities, generating an additional revenue stream. Ultimately, costs are passed on to consumers in the form of higher energy bills.

London Array's investors said they were "satisfied that the project is now financially viable and are keen to push ahead with construction and to produce the first renewable power in 2012". Onshore work is due to start in the summer and offshore work in early 2011.

The decision represents a reversal for the project, which nearly folded when Shell left the consortium last year, citing rising costs. The lack of credit – especially for high-cost renewable-energy schemes that are often paid for using project finance – during the recession has added a further barrier to progress. The decline in the value of sterling had also threatened the project's economics by forcing up the cost of imported turbine blades and equipment, according to Paul Golby, chief executive of E.On UK.

The government claimed the venture would consolidate the UK's position as the world's "leading offshore-wind power" and would be a "flagship project" in the country's drive to cut its greenhouse gas emissions by 80% by 2050. If it reaches its 1 gigawatt capacity target, London Array will be the world's largest wind farm – capable of supplying around a quarter of the homes in London.

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