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SHEPHERD AND WEDDERBURN
Exploiting the full potential of our offshore wind generation will be critical not just for our net-zero ambitions but also for the UK’s energy security in an increasingly volatile world, says Colin Innes of Shepherd and Wedderburn
The past year has illustrated how important energy costs are both to consumers and businesses. The current crisis has raised concerns about the future cost of energy and also the security of energy supplies.
Offshore wind was identified back in 2020 by the UK Government as being the critical technology to assist in meeting the country’s net zero targets and set an ambition of achieving 40GW of installed offshore wind by 2030.
The response to the market turmoil created by the tragedy in Ukraine has been that the UK Government has increased the ambition to 50GW. Is this achievable?
The Crown Estate and Crown Estate Scotland have recently awarded capacity which in theory could achieve the ambition.
The delivery of offshore wind farms requires consents to construct both the offshore and onshore elements, a grid connection, a route to market and a supply chain that can deliver a complex infrastructure project.
Consenting
The consenting of projects policy requires a framework that is strong, clear and supportive. The UK Government set the ambition of 50GW by 2030 and has committed to streamline the consenting process.
It is also seeking to overcome some of the environmental hurdles by changing the rules relating to designated sites and how impacts can be compensated for.
This is a major issue in relation to the further deployment of offshore wind in the east of England and Scotland. In Scotland, NPF4 has been adopted earlier this year which provides a very strong policy framework in respect of the onshore elements, but the offshore policy lags behind.
Scotland has chosen to adopt a plan-led approach and the policy does not reflect the leasing rounds.
It had been anticipated that the draft Scottish Energy Strategy and Just Transition Plan would provide the policy framework, however it has deferred the policy to a review of a specific Sectoral Marine Plan for offshore wind.
Colin Innes, above, will be hosting a session on offshore wind at All-Energy in Glasgow this month
The Scottish Government has recently changed leadership in respect of energy and the newly appointed Neil Gray, Cabinet Secretary and Gillian Martin, Minister for Energy will have responsibility for driving forward the development of the policy framework.
It is notable that both the Cabinet Secretary and Minister come from the north of Scotland and from areas that are already playing a very important part in meeting our current energy needs.
They will therefore be well placed to understand the importance of the Just Transition and the role offshore wind can play.
Grid connection
Grid connection continues to be a key constraint. Offshore wind developers need certainty as to the date when the grid connection will become available to construct the project.
The current grid is not suitable for both the generation and demand needs and as such, massive investment will be required. Grid will need to innovate and the development of high voltage HVDC technology will create the more effective and efficient transfer of power over longer distances.
This provides opportunities for the transfers of power from Scotland to centres of greater demand and also interconnection to other grid systems in Europe.
Route to market
In addition to those factors, the offshore wind market also requires a route to market. To date, the UK Government backed Contracts for Difference (CfD) process has been critical to the deployment of the larger scale offshore wind projects.
Projects bid competitively to obtain contracts which provide for a 15-year contract. This arrangement has provided the certainty of funding to enable the offshore projects to be financeable and has been effective in driving down costs from £120 per MWh to just over £40.
In the last auction, CfDs are applied for at a late stage in the process and questions have been raised whether this will create the right financial framework for floating technologies which will require much larger levels of capital deployment earlier in the process in order to facilitate manufacturing, ports and other related delivery aspects.
The system works, but may need to be refined to reflect the newer technologies and circumstances that emerge.
Supply chain
Finally, to deliver a project there needs to be a supply chain capable of manufacturing and constructing all elements of the project. The UK is anticipating a massive increase in the deployment of offshore wind.
Other countries are now following the UK lead and also instigating offshore auction rounds. There will be competition for resources and manufacturing capacity.
The UK will have to improve its supply chain to ensure the future delivery of this critical infrastructure. The UK Government already has a sector to deal with the industry which seeks to increase the UK content of the projects.
Floating offshore technologies offer the UK and in particular, Scotland, the opportunity to become global leaders in the field. This will however only happen provided the necessary investment is made in the infrastructure and the supply chain.
This is perhaps the greatest challenge for the offshore industry and it will require both the UK and devolved governments to work effectively together to overcome the barriers.
The UK has established a world leading expertise in the deployment of offshore wind.
Tim Pick, the UK offshore wind champion, has conducted an extensive review of the key barriers and opportunities for the sector and his March 2023 report has suggested a raft of measures which could improve deployment.
The All-Energy Conference is taking place in Glasgow on 10 and 11 May this year and this will afford an opportunity for politicians, regulators, developers and agencies to meet together and discuss the challenges and how they can be overcome.
It is clear, given the scale of challenge, that collaboration will be key to securing our collective net zero ambition whilst at the same time offering a real opportunity for economic growth and employment across the UK.
For more details on the All-Energy Conference and to register for Colin Innes’ session, Offshore Wind: Are we still on track to 2030? visit www.swallenergy2023.com
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