David Foxwell reflects on Scottish plans for offshore wind leases, and how the process might play out alongside upcoming lease rounds and extensions in England and Wales
Crown Estate Scotland, which was expected to launch its first leasing round for offshore windfarms in Scottish waters – known as ScotWind – in April 2019, confirmed this week that the date for the leasing round has been pushed back to July 2019. It also said that in April 2019 it will set out further information which may be helpful to developers considering applying for ScotWind leasing.
Although the process of awarding a contract for difference (CfD) for an offshore windfarm in Scotland remains a UK-level process, Scottish control over leasing offshore wind sites should help position projects in the country for participation in CfD auctions from 2023 onwards. It will hopefully also have beneficial knock-on effects on the supply chain and the Scottish economy.
The leasing process is similar to that run for offshore wind projects to-date by Crown Estate England but the Scottish programme differs in a number of respects that might affect how it plays out as Round 4 projects in English waters also get under way.
Originally, the first Scottish leasing round was due to be launched in advance of work that Marine Scotland is doing on a sector marine plan (SMP) for offshore wind. There is a draft of the sectoral plan, but the two processes aren’t aligned, which will mean there is a chance that some developers bid for projects in areas that are not included in the final plan. If that happens, they will go into a clearing process that could see projects go ahead anyway. It is possible that the changes to timings announced this week might see that change, although it looks as if Crown Estate Scotland anticipates that bids will still be submitted – probably in January 2020 – on the back of the draft SMP, and options granted when the final SMP is published sometime around April 2020.
What is interesting about the areas so far identified for Scottish leases is that a number of them, if not all, are in deep water. When Marine Scotland started consulting on its draft plan, Scottish Renewables was quick to point out that this risks concentrating Scotland’s future offshore wind potential on developing technology which is currently at a pre-commercial stage of development.
The Scottish Government has stated that the SMP for offshore wind will include areas for conventional and deepwater wind technology and that the plan will be technology neutral with technology preferences determined by the market, so we can anticipate that the plan will identify some shallow and deeper water sites.
However, as Scottish Renewables said at the time that consultation began, although floating offshore wind may provide a significant opportunity for Scotland – and the UK as a whole – in future, there continues to be a lack of clarity in Westminster regarding government policy and support mechanisms to develop projects. Clarity would be required if developers are to prepare a viable business case for floaters.
As highlighted above, another potential issue is that Crown Estate England is running a parallel leasing process in England and Wales, where, said Scottish Renewables, it appeared that commercial considerations had played a larger role in shaping the early search process than in Scotland. Crown Estate England is expecting to lease a further raft of extensions and new sites in the same timescale as the Scottish leasing process. Together, new projects and extensions there could release up to 10 GW of commercially attractive capacity in shallow water.
What Scottish Renewables was getting at is that this could encourage the offshore wind industry to focus on shallower locations outside Scotland for the next round of development opportunities. That being the case, it said, “it is critical that Crown Estate Scotland’s leasing process makes developing in Scotland attractive, and that it engages with the UK and Scottish Governments to ensure the necessary policy supporting floating offshore wind is developed in connection with the leasing process.”
As anyone who attended Scottish Renewables' excellent floating offshore wind conference late last year will know, floaters have absolutely tremendous potential but there is an awful lot to do before commercialisation. Whether the upcoming UK Sector Deal for offshore wind includes support for floating wind is not clear.
Last but by no mean least, there is the supply chain. Crown Estate Scotland has said it expects the leasing process to support the supply chain in the country. It said there is “huge appetite” for the leasing to succeed in bringing forward strong projects. That is good to hear, but for the ScotWind process to bring significant supply chain benefits Scottish projects need above all to be competitive. It is not clear yet whether the balance of shallow and deep water sites in the SMP might change, but with Wales also hoping to win more projects and develop its own supply chain, Scottish projects face stiff competition, particularly from shallow water projects in England.
It has already been suggested that Crown Estate England’s Round 4 could attract a significant number of developers who are new to projects in the UK. That would increase competition for sites throughout the union. Scottish sites – including those in the second ScotWind leasing round in 2021, when more floating wind technology will hopefully have matured – might attract a new breed of developer with a focus on floaters. Given the different water depths in the draft SMP and the seeming emphasis on floating wind, that would be beneficial for Scottish industry, which wants to take advantage of opportunities in floating wind in the longer term, but shallow water sites are surely more likely to be the focus of developers’ interest in ScotWind Round 1.