Scotland’s first leasing round for offshore wind projects will not now take place until July 2019, possibly later, a delay that may be helpful for developers who want to know more about the sites Marine Scotland has identified
In November 2018, Crown Estate Scotland published an update on leasing design and potential timescales in which it indicated that the earliest timeline for it to be launched was in April 2019. However, in a statement issued on 29 January 2019, Crown Estate Scotland said the final timings for leasing will be linked to Marine Scotland’s preparation of a Sectoral Marine Plan (SMP) and it had decided it will not launch leasing prior to July 2019, even if information on the draft SMP has been published before then.
On the assumption that the first leasing round is launched in July 2019, it will allow six months for preparing applications. Assuming the adopted SMP is available around nine months after that, the deadline for applications to Crown Estate Scotland would be January 2020. Crown Estate Scotland would then offer option agreements to successful applicants in April 2020, when clearing would also start. It would aim to offer option agreements through clearing in September 2020, and the earliest commencement of a second cycle of leasing would be July 2021.
“This is the earliest timeline for our leasing, with the actual timeline possibly being later,” Crown Estate Scotland said, noting that it will give a further update on intended timings in April 2019, and as appropriate thereafter.
In the April 2019 update it will set out further information which may be helpful to those considering applying to ScotWind leasing, indicating the type and level of information it might expect in applications, and setting out further detail in any other areas where it can add clarity in advance of launching the leasing.
Pinsent Masons partner Alan Cook said he thought it likely that the timing of the first ScotWind leasing round will be linked to the publication by Marine Scotland of the SMP, so may yet be later than July. He noted that it has stated it will not begin the programme before July, “even if the information on the draft SMP has been published by then.
“The feeling is that this adjustment to the timescales is to allow more time for Marine Scotland to issue its SMP, or at the very least the consultation draft of it. Developers are keen to see the proposals for the SMP, which will be of critical importance to the success of the leasing round,” Mr Cook said.
Crown Estate Scotland manages public land, property and property rights on behalf of the Scottish ministers, including rights to offshore renewable energy out to 200 nautical miles. Any money made from seabed leasing will be returned to the Scottish Government for public spending.
“Once the ScotWind leasing programme is up and running, developers will be invited to bid for potential sites located in areas identified by Marine Scotland in the draft SMP,” Mr Cook said. “The Scottish Government is hoping that projects will be ready to deploy from the late 2020s onwards, based on a 10-year development and construction cycle.”
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.
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.
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 it is expected 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 concerned Scottish Renewables 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.” Floating offshore wind has tremendous potential but there is a 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.
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 from other parts of the UK, not just 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.