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Budget for Xlinks UK-Morocco energy project rises

UK Secretary of State for Energy Security and Net Zero Claire Coutinho Reuters
UK energy secretary Claire Coutinho has granted the Xlinks project Nationally Significant Infrastructure Project status, allowing it to bypass local planning reglulations
  • Xlinks to provide renewable energy to UK
  • Exceeding budget by £4bn
  • Seeking higher guaranteed unit prices

The Xlinks Morocco-UK renewables project has run over budget by £4 billion ($4.8 billion) but the company is continuing to push ahead with the project, saying that it remains good value for money.

“The rising cost is no different to what’s happening everywhere else,” Xlinks’ CEO Simon Morrish told AGBI, highlighting changes in supply chain costs, inflation and the exchange rate.

Chaired by former Tesco boss Sir Dave Lewis, Xlinks had been hoping to deliver the project for £18 billion but Lewis told The Times last week that the budget would now increase to between £20 billion and £22 billion.

Morrish, however, said that the Xlinks budget increase does not pose any risk to the project.

“Hopefully we’re about to get another investor on board very shortly,” he said.

“Between them and our two existing investors, we have £8 billion of the equity lined up, which is almost all we need for this stage of the project.”

Taqa, the UAE’s largest power producer, in April gave a substantial vote of confidence to the Xlinks project with the announcement of AED113 million ($31 million) in funding.

However, timescales for the project are at risk of extending as talks drag on over finalising a contract.

Xlinks is seeking a 25-year contract for differences (CFD) from the UK government to guarantee that British consumers would pay a set price for the electricity it produces, regardless of market prices.

Price agreements

Widely used to support renewable energy projects in the UK, the CFD mechanism functions on the basis that if market prices fall below an agreed headline price then consumers will pay subsidies to a project, but, if market prices are higher, the project will pay the difference back to consumers.

Xlinks had originally been seeking a CFD with a headline price set at £47 per MW hour for solar and £52 per MW hour for onshore wind relative to 2012 prices –- the year in which the UK government’s last auction round for contracts was held.

However, it is now requesting a CFD of £56 and £64 per MW hour in 2012 prices, which is equivalent to about £77 and £87 MW today.

“The reason we’re asking for a higher headline price than a wind or solar project is because we’re a combined wind-plus-solar-plus-battery project that will provide a much, much higher capacity factor than is available in the UK,” Morrish said.

The site of the Xlinks project experiences 3,500 hours of sunshine a year, compared with 1,500 annual hours in the UK.

The project will be capable of supplying energy for 20 hours a day – including, crucially, when the wind is not blowing in the UK.

“The energy that Xlinks can provide is base-load equivalent to a nuclear project such as Hinkley, but we’re two-thirds the cost of a typical nuclear project and we can build it in half the time.”

The headline price for the power supplied by the UK’s Hinkley Point C nuclear power plant is £92.50 in 2012 prices.

The Xlinks project was given a shot in the arm last week when it was granted the status of a Nationally Significant Infrastructure Project (NSIP) by the UK’s new energy secretary, Claire Coutinho.

NSIPs bypass normal local planning requirements, with approvals sitting with central government instead of the county council.

The government said the designation would provide “certainty of a single, unified consenting process and a fixed timetable”, which is set at 18 months. 

Morrish noted that 99 percent of Development Consent Orders – the means of obtaining permission for developments designated as NSIPs – are approved.

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