The crown estate has opened the first leasing round for offshore windfarms in a decade to usher in a new generation of wind projects expected to eventually generate an investment of £20bn.
The business intends to auction off new seabed rights in the waters around England and Wales to wind power developers. The leasing scheme allows up to 7GW of electricity generation capacity – enough to meet the needs of more than 6m homes.
The leasing round is expected to hand a record windfall to the crown estate, potentially generating hundreds of millions of pounds. The business passes surplus revenues to the Treasury.
The auction is expected to be hard fought by energy companies eager to profit from the UK’s growing offshore wind sector.
The UK has got 8.5GW of offshore wind generation capacity, which provides more than 8% of the UK’s annual electricity needs. The government has agreed to support the industry to expand the UK’s offshore wind capacity to 30GW by 2030.
The industry’s trade body, RenewableUK, has estimated that the next generation of offshore wind development would bring almost £21bn of investment in today’s prices, and support about 9,000 full-time jobs.
Hugh McNeal, chief executive of RenewableUK, said of the auction: “These powerhouses of the future will create thousands of highly skilled jobs, continuing the rapid regeneration of our coastal communities, as well as benefiting our UK-wide supply chain.”
The crown estate leasing round will require, for the first time, an “option fee”, which will be used as the basis for a rent agreement over 10 years while the windfarm is developed. In the past the crown’s chief revenue stream from offshore wind was received as a percentage of the windfarm’s income once it began selling the electricity it generated.
The plans triggered a lengthy period of negotiation with the industry which lasted almost two years. Due to the talks the crown scrapped plans for closed-envelope bids to determine the winning option fee in favour of daily bidding cycles, to increase transparency and reduce the risk of a runaway auction.
Huub den Rooijen, a director at the crown estate, said the new leasing round plans had been agreed “through extensive engagement with the market and stakeholders, to deliver an attractive, fair, objective process, which helps to balance a range of interests in the marine environment”. He said the competition would open the next chapter in the UK energy industry’s “remarkable transition”.