The lengthy court case pitting a U.K. bird charity against an offshore wind developer has had the unintended consequence of lifting asset values at the Irish company behind the project.
The value of subsidies won by Mainstream Renewable Power Ltd. in 2014 to build the 2 billion pound ($2.6 billion) Neart na Gaoithe offshore wind farm have soared since the Royal Society for the Protection of Birds challenged the project in court, according to Andy Kinsella, the new Chief Executive Officer of the Dublin-based company.
“Bizarrely this has worked in our favor,” said Kinsella in a phone interview. “We have what is certainly the highest revenue stream for any offshore wind farm on the planet.”
Mainstream won the U.K. government contract to deliver wind power for 114 pounds a megawatt-hour. Since then, the cost of installing wind turbines at sea has crashed. North Sea developers earlier this year offered to build subsidy-free offshore parks. Turbine manufacturers are making more power machines that will allow operators to recoup costs more quickly.
Mainstream is currently awaiting the outcome of the latest stage of the court battle, after RSPB appealed the case to the U.K. the Supreme Court. It says Scottish Ministers didn’t properly assess the impact that offshore wind farms would have on the puffin and other migratory sea birds.
While the U.K. is unlikely to see a repeat of the zero-subsidy contracts awarded in Germany in April, developers could secure deals for about 75 pounds a megawatt-hour when the government announces the winners of its latest auction next week, Kinsella said. In the meantime, Mainstream’s inflation-adjusted payments under the original contract have appreciated to about 124 pounds a megawatt-hour.
Judges are expected to rule if an appeal can be made by the end of October, said Kinsella, who took over as CEO from Mainstream co-founder Eddie O’Connor on Tuesday. If the court reject the RSPB’s appeal, financial close on the project could be reached within six to eight months, he said.
When plans for Neart na Gaoithe started being developed in 2008, Siemens AG’s 3.6 megawatt turbine was the most popular among developers. Now manufacturers are working on machines that could be four times bigger, helping companies like Dong Energy A/S build projects cheaply enough to make money at market prices. The collapse in oil prices has also helped lower offshore wind costs, by making the sea vessels needed to install projects cheaper to hire.
“Costs for CAPEX, OPEX and the time to build have just gone down significantly,” Kinsella said.