Shell backs out of UK offshore wind scheme

Royal Dutch Shell yesterday angered its partners in the massive London Array wind power project by announcing its intention to sell its 33% stake, in a blow to the UK government's wind power ambitions.

The government wants 33GW of offshore wind power capacity to be built around the UK by 2020, enough to power every home in the country. The London Array would contribute a significant 1,000MW to this.

The project, the world's largest offshore wind power scheme, includes building up to 341 turbines off the coast of Kent and Sussex at a cost of around £2bn.

If built, the London Array could generate enough electricity to sustainably power a quarter of London's homes, reducing carbon emissions by millions of tonnes.

Shell, which retains it investment in the booming US wind power industry, said that it decided to pull out of the scheme following a reappraisal of its European assets. It is believed to have approached utilities firms including Centrica about a possible sale.

The Department for Business, Enterprise and Regulatory Reform is optimistic that the project will still go ahead.

However, one of Shell's partners in the scheme, German utilities giant E.ON, suggested that the decision by Shell to pull out has increased the level of risk and that the project will be at least delayed.

Paul Golby, chief executive of E.ON UK, said that he was disappointed at the oil giant's decision. “I believe that at the very least, some delay to the project is now inevitable. While we remain committed to the scheme, Shell has introduced a new element of risk into the project which will need to be assessed,” he told the Times.

Golby said that the project's economics were at best marginal because of rising steel prices, bottlenecks in turbine supply and competition for key equipment.

The third partner in the scheme is Dong Energy, a wind power specialist majority-owned by the Danish government.