Crown Estate verdict
Offshore wind plans back on track after pricing review
Claire Mack: pleased with outcome of review (pic: Terry Murden)
Offshore wind farm developers have been given assurances on pricing that will allow them to proceed with planned projects in coastal waters, though there has been some caution over potentially higher costs.
An auction for the next generation of turbines off the Scottish coast was put on pause while Crown Estate Scotland reviewed the pricing process.
An English and Welsh auction running at the same time has resulted in higher prices than expected.
Crown Estate Scotland, which leases the Scottish seabed, was concerned it could lose millions in potential revenue if it stuck to its auction price guidelines.
The ScotWind Leasing process is for 15 seabed areas that could be developed for offshore wind.
Crown Estate Scotland has today announced that ScotWind Leasing will keep the same basic pricing structure for option agreements.
However, the previous maximum fee that might be paid was £10,000 per km2 of seabed. This will now be increased to a maximum of £100,000 per km2.
Amanda Bryan, chairman of Crown Estate Scotland, 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 in to reality. This review achieves both of these goals.”
Alan Cook, Pinsent Masons partner and specialist in renewable energy, said: “The review potentially increases by tenfold the amount which could be paid by developers for seabed areas under ScotWind.
“It is unsurprising that Crown Estate Scotland has undertaken a move like this, in response to the significantly higher than expected valuations put on seabed areas by bidders in Round 4 but 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 have been required to re-align their duty to maximise value from the use of the seabed with their broader goal of facilitating a sustainable renewables sector which offers supply chain opportunities to local industries.
“The adjusted approach announced today will be closely scrutinised by prospective bidders for seabed areas, who now require to revisit their previous assessments of bid strategy and seabed valuation.”
Scottish Renewables CEO Claire Mack said: “The importance of the ScotWind Leasing process to the delivery of an offshore wind industry which can support thousands of jobs and our net-zero target should not be underestimated.
“Industry always understood the reasons for this delay and we are pleased that Crown Estate Scotland has delivered these changes within a matter of weeks, keeping the process on track for the majority of Scottish Renewables members who have already spent thousands of hours and millions of pounds getting ready to bid for the seabed leases they need to build their projects.
“It is now for those individual developers to decide if the new price of these leases reflects their assessment of the value of the contracts which they will need to secure from the UK Government.
“Scottish Renewables and its members are already working to increase the competitiveness of supply chain businesses.”