Renewing the UK's renewables

4 minute read

Matteo Quatraro

Director, Head of Portfolio

In the great energy revolution, renewables not only produce clean energy, but, by their very definition, are “natural resources that are not depleted by use”.

The same, unfortunately, cannot be said about renewable infrastructure. The assets required to generate renewable energy are not only subject to depreciating leases, but also have a limited life span.

Windfarms, in particular, have hit the headlines recently, as much of Britain’s stock is reaching a point where ‘lifetime extensions’ or repowering will soon be necessary.

A brief history of windfarms

Wind energy is not new: people have harnessed its power for centuries. And, believe or not, the first electricity generating wind turbine was built in Scotland back in 1887. Professor James Blyth experimented with three different types of turbine, the last of which is said to have powered his holiday home for more than a quarter of a century.

One hundred years later, the first commercial onshore windfarm, consisting of ten turbines was built in the UK – this time in Cornwall. It produced enough energy for 2,700 homes.

Wind power really took off in the 2000s and today there are more than 1,500 onshore windfarms across the UK, meeting the annual needs of more than 7.25 million homes, as well as supporting jobs and local economic growth.

One of the factors driving the growth of this segment of the energy market is that, thanks to technological advancements and economies of scale, windfarms are now more competitive in terms of costs when compared with oil and gas.

However, much like Professor Blyth’s original turbine, 25 years later, our windfarms are now getting older and need replacing.

Life extensions vs repowering

As a wind turbine approaches the end of its life, there are generally two options.

The first is full repowering – where the wind turbines are dismantled and replaced by new ones. This can be costly and time consuming, but far more efficient in the long term because newer turbines are taller, have longer blades, they can generate more electricity and be more efficient, and their lifespan is almost twice as long.

The second option is a lifetime extension of an existing windfarm, which is when some of the components of the existing wind turbines are upgraded or replaced to extend the life of the asset beyond the design life. How well the asset has been maintained is a key factor, as is the speed of wind in the area it is located. The stronger the wind, the more the impact and the fatigue load level on major structural components, and therefore the shorter the potential lifespan of the asset.

With each option there are also other considerations. In the UK, the first challenge is the state of the national grid infrastructure. In fact, while newer turbines can produce more energy, the national grid is currently ill-equipped to cope with the increased demand and unable to provide connections to accommodate more capacity.

Another challenge is planning permissions. Logically, you might assume that if an asset is already built on a piece of land, you wouldn’t need to go through the full process to replace it, as is required for greenfield projects. That’s not the case, however, and the process is still costly and time consuming. It does not provide any incentive to investors to perform a repowering.

The final challenge I would highlight today is the cost of materials which has increased substantially in recent years. The implications on the sector where highlighted last year, when offshore wind assets couldn’t bid for CfD tenders, as the prices offered by the UK government were too low to compensate for the higher costs. The supply chain in general has been affected by several factors, including post COVID-19 effects and the Ukraine war, and this should be considered when reviewing the revenue mechanisms in place to facilitate and support the increase of renewable energy in a country.

In combination, these factors are, in our view, currently quashing the opportunity for repowering.

The next generation of windfarms

To overcome these challenges and meet the UK’s net zero 2050 targets, we believe the UK government needs to put in place at least two key measures: the planning process needs to speed up and the national grid needs to be improved. Only then will asset owners and investors be able to think about the long-term and be able to contribute to the carbon-free future of the country. The recent Spring Budget from the Chancellor of the Exchequer was encouraging. It included the announcement of the “largest ever budget” for a new CfD auction of around £1.025 billion, which will open at the end of March 2024 and included both onshore and offshore wind, as well as other renewables. It also included measures to avoid previous mistakes and actually encourage the growth of the UK’s wind sector.

The UK is a windy place, and this source of renewable energy is key to the UK’s energy security plan, as well as its net zero goals. The plain truth is that the government can’t afford not to take action.

Important Information 

This article has been prepared by Gravis Capital Management Ltd (“Gravis”) and is for information purposes only. ​ 

This article is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Any recipients of this article outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction and are treated as having represented that they are able to receive this article without contravention of any law or regulation in the jurisdiction in which they reside or conduct business.​ 

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Gravis Capital Management Ltd is authorised and regulated by the Financial Conduct Authority; registered in England and Wales No: 10471852 and its principal place of business is at 24 Savile Row, London W1S 2ES.​ 


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