Too few offshore wind sites have been made available in the UK and this could lead to higher costs for developers and consumers, RenewableUK has said.
Responding to the results of The Crown Estate’s Invitation to Tender Stage 2 (ITT 2) process for the Offshore Wind Leasing Round 4, RenewableUK said despite high demand for new offshore wind projects, not enough sites were offered.
Melanie Onn, deputy chief executive of RenewableUK, said: “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. 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.”
Six new areas
The Crown Estate is making available six new areas of seabed to develop nearly 8 gigawatts (GW) of new offshore wind projects in the UK and the IIT 2 process has used an auction system to determine which companies will be allocated the option to develop these new sites. Companies were invited to submit bids for an ‘option fee’ for each of the available sites which will be paid annually until companies finalise their plans to build the new wind farms, up to a maximum of 10 years.
This is the first time a bidding process to set ‘option fees’ has been used in the leasing process for offshore wind farms. Previously The Crown Estate had set fixed annual option fees. The industry had warned that the limited number of sites available and high demand risked an auction that resulted in very high bids. The nearly 8GW awarded in this 4th Leasing Round is significantly lower than the 32GW secured in the 3rd leasing round held in 2010, said RenewableUK.
The option fees totalling £879m per year, or £111m per GW per year, represent a very significant sum for developers. In comparison, developing and constructing a 1GW offshore wind farm currently requires investment of c.£2.5bn.
By Rebecca Jeffrey
