Utility Comment by Nigel Hawkins
The UK’s Crown Estate has announced the successful bidders for Round 3 of the offshore wind development programme. No less than nine zones were on offer.
Astonishingly, and assuming that the planned investment takes place, it will enable the development of up to 32GW of new capacity. Given that the capacity of Drax, the UK’s iconic coal-fired plant, is just under 4GW, it is self-evident that the amount of generation capacity involved is vast.
Encouragingly for the Government, which has placed considerable faith in offshore wind generation, most of the leading energy players participated in the bidding.
Of the designated 32GW capacity, the largest zone is the 9GW Dogger Bank site, located some 100 miles off the East Yorkshire coast. The successful bidder was the Forewind Consortium, whose four members are Scottish and Southern Energy, RWE Npower Renewables, Statoil and Statkraft.
The consortium's General Manager, Frank-Are Steinbakk, welcomed the award, but also conceded that there are “many technical and logistical challenges to be addressed so Forewind will need both to draw fully on the experience of each of its partners and also look for innovative suppliers and contractors…”.
The second largest zone on offer was off the Norfolk coast, with a capacity of 7.2GW. The East Anglia Offshore Wind bid prevailed: its two owners are Iberdrola’s ScottishPower Renewables and the state-owned Swedish-based Vattenfall. The latter has moved quickly and has already advertised in the national press for staff to realise this project.
The next largest zone, at 4.2 GW, is in the Irish Sea, and was won by a grouping led by Centrica Renewables.
A similarly-sized zone off the Lincolnshire coast will be developed by a Siemens-led consortium – another well-known German company, Hochtief, will be involved in the offshore construction works. For the UK generally, this project will be very important, given Siemens' undoubted expertise in offshore turbine construction.
North of the border, the Firth of Forth zone, with a capacity of 3.5GW, will be developed by Scotland-based Scottish and Southern Energy and its partner, Fluor.
The remaining four zones are rather smaller and amount in total to 4.3GW. Importantly, though, the developers of these zones include E.On Climate and Renewables UK and Portugal’s EDP Renovaveis.
As a result, all six of the UK’s integrated energy companies were successful bidders in this Round.
However, there is real doubt as to how many of these projects will actually be completed and, if so, will the electricity generated be competitively priced?
The delays and problems faced by the London Array project are hardly encouraging. Nevertheless, the fact that all the major energy players are involved in this Round can only be seen as positive. After all, whilst some do have very high net debt, such as E.On’s near £40 billion, they are able to raise funds for such large scale investment.
Significantly, too, very attractive ROC payments will be on offer, which will help the finances to stack up. But searching questions will be asked about the expected level of generated output throughout the year, and the cost of the turbines (offshore turbines are far larger than their onshore counterparts).
Grid connections and maintenance arrangements – especially challenging in deep sea environments – will also be key issues that will need to be addressed if substantial investment is to proceed.
Whilst many commentators argue that comparing Round 3 with the North Sea oil field awards of the 1960s and 1970s is unduly optimistic, there is a real chance that some of this planned capacity will see the light of day – thereby reducing the risk of the UK running short of generation capacity.
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