RWE and a BP/EnBW consortium were the two biggest winners in the latest round of auctions to lease the rights to develop offshore wind farms off the U.K. coast.
The results, announced Monday morning, revealed the “preferred bidder” status for enough seabed to support 8 gigawatts of offshore wind capacity. The rights are managed by the Crown Estate, which controls access to the seabed up to 200 miles from shore.
Notable in its absence was Danish developer and global market leader Ørsted. Other active U.K. offshore wind players SSE, Vattenfall and E.On were also missing.
German utility giant RWE secured 3 GW of capacity in two 1,500-megawatt chunks in the Dogger Bank area off the east coast of England. BP and another German utility, EnBW, saw their consortium awarded space in two 1,500 MW blocks of England’s northwest coast.
A joint venture comprising the Green Investment Group and French oil major Total took 1,500 MW in a space south of the site awarded to BP and EnBW. The final 480 MW was awarded to Spanish construction giant Grupo Cobra and Flotation Energy. The pair are behind the Kincardine floating offshore wind project off the coast of Scotland, which will be the world’s largest once complete.
A Flotation Energy spokesperson confirmed that this project will be fixed-bottom, not floating.
“We are convinced this Irish Sea project has huge potential with unique strengths and advantages, based on a high wind resource, low water depths of 20 to 30 [meters], short distance to shore (less than 20 miles), and good ground conditions,” the spokesperson added.
BP makes domestic offshore wind debut
The leases mark BP’s first foray into offshore wind in the U.K. BP and Equinor officially embarked on their offshore wind partnership in the U.S. last month.
Writing on LinkedIn on Monday, BP CEO Bernard Looney said the company expects its projects to be completed within seven years.
“We love these leases as they’re close to shore and right next to each other, so we can use the same equipment. That means we can get them operational faster — we expect within seven years,” he wrote.
BP/EnBW bid almost double the rate of its competitors at £154,000 per megawatt. One of RWE’s blocks was secured for £76,203 per MW. Looney insisted the projects will deliver the 8 to 10 percent returns the firm is requiring for projects to pass muster in its low-carbon portfolio. Nearshore siting and adjacent blocks will help with that process.
RWE Renewables’ new sites are close to its 1.4 GW Sofia project, which is scheduled to begin construction this year.
Concern over scale of the auction
Despite the auction firing the starting gun on another 8 gigawatts of projects, trade body RenewableUK warned that too few sites had been made available for bidding, which had the effect of driving up prices. The third round in 2010 yielded 32 GW of leases, the group pointed out.
The auction was run differently this time around. Winners in this fourth round of seabed leases bid per megawatt of supported capacity. The fees are paid annually until developers reach financial close.
“The result of this leasing round shows that while demand for new offshore wind projects has never been higher, too few sites were made available to meet this demand,” said RenewableUK’s Deputy CEO Melanie Onn. “Any auction run on that basis will inevitably lead to high fees like these, and our concern is that this could ultimately mean higher costs for developers and consumers.”
“Going forward, we need more clarity from the Crown Estate on the timing, size and speed of future leasing rounds. Sustainable competition and prices are vital for consumers, industry and the supply chain,” she added.
RenewableUK figures suggest that these leases will average £111 million per year per 1 gigawatt. Projects could take four years to complete permitting and financing hurdles, for a total cost of nearly £450 million.
The U.K. currently has around 10 GW of offshore wind capacity and is targeting 40 GW by 2030.