Crown Estate Scotland has announced the outcome of its review of the option structure for ScotWind Leasing, the leasing round for offshore windfarms in Scottish waters
The review was announced in February 2021 in response to what Crown Estate Scotland described as “the new market dynamics of the offshore wind sector” following the result of The Crown Estate’s recent auction for sites in waters around England and Wales.
Crown Estate Scotland’s updated option structure has now been finalised. ScotWind Leasing will keep the same basic pricing structure for option agreements, but the previous maximum fee that might be paid, which was £10,000 (US$13,700) per km2 of seabed has been increased to a maximum of £100,000 per km2.
The threshold of Supply Chain Development Statement commitments that applicants must meet to request a lease has been increased from 10% to 25%. Further change of control provisions will apply to resale of options awarded.
Additional technical information will be published by the end of April to allow registered applicants to progress their interest in ScotWind Leasing. The closing date for applications will now be 16 July 2021.
Option fees are paid by successful applicants to Crown Estate Scotland in exchange for securing the rights to areas of seabed that have been identified as suitable for development in Marine Scotland’s Sectoral Marine Plan.
A total of 8,600 km2 of Scottish seabed is potentially available for development. Funds will be returned to the Scottish Government for public spending to drive the green recovery and help deliver government priorities.
Crown Estate Scotland chair Amanda Bryan said, “This rapid review was undertaken to reflect the recent changes we have seen in the UK offshore wind market so that we could arrive at a pricing structure which properly reflects those changes.
“Throughout the development of ScotWind Leasing we have sought to secure best value for communities and help place Scotland as a competitive destination for the investment needed to turn potential projects into reality. This review achieves both of these goals.
“We look forward to working with the offshore wind sector to realise the benefits of offshore wind for Scotland’s communities and for the environment.”
Cabinet Secretary for Environment, Climate Change and Land Reform, Roseanna Cunningham said, “The Scottish Government’s climate change plan requires a zero-carbon electricity system by 2030 – maximising offshore wind’s contribution will be vital to achieving this and therefore is a key priority for this government.
“ScotWind will support the continuing growth and expansion of this technology, harnessing this huge resource for our energy system and helping to unlock significant investment in the supply chain to create more green jobs across the sector, while seeking to achieve a fair value for Scotland’s assets.
“We know how keen the industry is to start developing and delivering projects, which is why I thank Crown Estate Scotland for undertaking this rapid review of pricing options and setting out their next steps in a timely manner which enables the developers to move forward.”
Minister for Energy, Connectivity and the Islands, Paul Wheelhouse said, “The ScotWind leasing round is critical to the delivery of a strong and vibrant offshore wind sector in Scotland that can be world-leading, particularly in the delivery of floating offshore wind technology. Scotland is uniquely placed to capitalise on this technology and grow an industry that not only provides electricity but facilitates the growth of a hydrogen economy as well.
“Crown Estate Scotland’s announcement balances the increasing value and demand for Scottish seabed with the need to secure a strong offshore wind supply chain which can power our green recovery from Covid-19 and help us meet our net-zero target.”
Responding to the announcement, RenewableUK head of policy and regulation Rebecca Williams said, “Clarity over the timing of the new leasing round is welcome. It offers multi-billion-pound investment opportunities which can revitalise coastal communities in Scotland and expand the offshore wind supply chain throughout the UK, supporting thousands of jobs.
“Now that we have more details about how the leasing round will work, developers and investors will now be able to plan the next steps in bidding for these sites. It’s vital that new leasing supports development of new offshore wind at the cost and scale needed to reach Scotland and the UK’s net zero emissions target.
“ScotWind unlocks the potential for the UK to ramp up the deployment of more floating offshore projects. We are world leaders in this innovative technology and we can export it around the world.”
Pinsent Masons partner Alan Cook highlighted the fact that the review potentially increases by tenfold the amount which could be paid by developers for seabed areas.
Mr Cook said it was “unsurprising” that Crown Estate Scotland has done this, given the significantly higher than expected valuations put on seabed areas by bidders in England’s Round 4.
However, he said industry will be cautious of the potential impact on the cost competitiveness of Scottish offshore wind when to comes to bidding for CfDs.
“Crown Estate Scotland has been required to re-align its duty to maximise value from the use of the seabed with the broader goal of facilitating a sustainable renewables sector which offers supply chain opportunities to local industries. The adjusted approach announced by Crown Estate Scotland will be closely scrutinised by prospective bidders for seabed areas, who now require to revisit their previous assessments of bid strategy and seabed valuation,” he concluded.
Riviera Maritime Media’s Offshore Wind Journal Conference will be held on 25 March 2021 – use this link for more details and to register for this virtual conference