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UK Offshore Wind Changes Seen Attracting Oil and Gas Majors

UK Offshore Wind Changes Seen Attracting Oil and Gas Majors

 

The U.K.'s first offshore wind leasing round in a decade is expected to draw greater participation from oil and gas majors, thanks in part to changes to the leasing system.

The Crown Estate, which manages the royal property portfolio including the seabed, will initiate a tender next month that could support 7 gigawatts of new capacity. The country has nearly 8.5 gigawatts of offshore wind capacity in operation currently, according to trade group RenewableUK, making it the world's leading market, ahead of Germany and China.

The upcoming tender will come with significant changes to the terms and conditions, including lease terms from 50 to 60 years, discounted lease fees for “innovative” or hybrid projects, and —  critically for oil and gas companies — a green light for joint bids.

“Previous rounds were only for individual bidders, but now they will allow consortia to bid,” said Shimeng Yang, offshore wind senior research analyst at Wood Mackenzie. “That will encourage oil and gas companies that have been very interested in offshore wind and trying to secure project pipelines."

"Their experience does not compare with those established [offshore wind] developers, but now they could partner up with them and bid together," Yang said. "That means we could see some really big companies taking part in the U.K. offshore market for the first time.”

Those really big companies come with really deep pockets, and the extra competition could drive down prices, says Yang, who expects the projects built under this round to be developed subsidy-free. 

Yang expects planning consents for projects won in the latest round to come three years down the road.

The prospect of floating projects

The latest tender will grant 50 percent discounts on leases (up to 10 percent of a project’s capacity) if developers provide a testing ground for innovative technology. Yang suggests floating turbines could be one technology to benefit.

Other innovations could include an interconnector feeding power into a second European grid network. While Europe is already crisscrossed with interconnectors, plans have been proposed for a “hub and spoke” concept that would see offshore wind generators sending power to multiple jurisdictions.

To help the U.K. continue to build out its offshore wind expertise, developers participating in the latest round will be obliged to share project surveys and data. They will also be required to participate in industry benchmarking schemes such as the System Performance, Availability and Reliability Trend Analysis project.

RenewableUK’s Chief Executive Hugh McNeal said: “It’s great to see the U.K. stepping up its ambition with a new round of offshore wind development now underway. This will engender further momentum in our world-leading offshore wind sector, securing billions of pounds in investment in new infrastructure.”

“These powerhouses of the future will create thousands of highly skilled jobs, continuing the rapid regeneration of our coastal communities, as well as benefiting our U.K.-wide supply chain. The healthy pipeline of projects to come will also make a significant contribution to the U.K. reaching net zero emissions as fast and as cheaply as possible.”

On Friday morning, the U.K. government will publish the results of its latest contracts for difference scheme, which essentially guarantees a power price for 15 years.

Source: greentechmedia.com

Published: 20-09-2019
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