Marine estate

We own and manage the mineral rights to the seabed across an area extending to the edge of the UK continental shelf. Consents are issued for non-exclusive sampling and licences for commercial aggregate extraction as well as leases for major pipeline and cable projects. This business remains of central importance to the marine estate.

Aquaculture is a key industry on the estate, particularly in Scotland, where it is an important source of work and income for many communities. We continued to support and promote this valuable industry throughout the year, investing around £250,000 in research and development. In June 2008, the top performers in the aquaculture sector were honoured at The Crown Estate Marine Aquaculture Awards. The Awards reward innovation and best practice while recognising operators who employ the highest standards of husbandry, offer innovative training programmes, support local communities and manage their businesses with a high level of environmental awareness.

During the year, we published a report into the contribution of marine businesses to the UK economy. The report found that this totals almost £50 billion annually, or over 6% of the overall economy, and provides 890,000 jobs. Many of these are dependent on tourism and in the last 12 months we have again pursued investment opportunities to support the coastal leisure sector while also further diversifying our portfolio.

Complementing last year's purchase of Rhu Marina in Scotland and of Deganwy Marina in Wales, we have acquired Burnham Yacht Harbour in England. This 350-berth marina, located on the north bank of the River Crouch outside the town of Burnham-on-Crouch, is home to the famous Burnham Week, the longest running annual yachting regatta on the UK mainland. The marina is an important resource for the sailing community on the east coast and is a valuable addition to our growing marina portfolio.

At Wick in Scotland we are working with the local harbour authority to jointly finance a £576,000 scheme to install a marina development. Wick harbour is the largest such facility on the east coast of Caithness, and in the face of declining fish landings the harbour authority has a vision to rejuvenate its fortunes with a diverse portfolio of activities for its long-term future. It is expected that pontoons will be in place in time for the 2009 summer sailing season.

Also in Scotland, we completed the construction of new pontoons at Tarbert which have provided 88 additional berths in this increasingly important sailing area.

The Crown Estate's ability to invest depends on capital raised from capital activity across the Estate, and as markets declined so too did the ready availability of funds.

Natural resources such as wind and wave are set to become a vital component of the UK's energy capability, both in terms of CO₂ mitigation and energy security supply. The Government's commitment to renewable energy has created an outstanding opportunity for the marine estate and this was underlined by the Energy Bill, which received Royal Assent in November.

We are actively working to realise the marine estate's potential in three distinct areas.

Firstly, one of the world's most significant infrastructure projects is now evident around the UK coastline, as offshore wind farms become reality. The Government's challenge is for 25GW of power to be generated by wind farms by 2020. Round 1 projects will be largely completed by the summer of 2009, while the last 12 months have also seen three Round 2 projects commence their construction phase, at Thanet, Gunfleet Sands and Greater Gabbard. By the end of 2009, we expect the capability of offshore wind farms to reach the 1GW mark.

In March 2009, we achieved our most important renewable milestone to date, with the completion of the competitive tender process for the licensing of Round 3 wind farms. We received a total of 40 bids from 18 different organisations in nine countries. Many additional companies are committed to bids as alliance partners and supply chain participants. We have a crucial part to play in Round 3 projects. For the first time, we are co-investing alongside developers to facilitate the development process. By 2020, we anticipate investing some £80 million, with return on capital provided through an income stream based on seabed leases. Our role is to provide a strategic overview of the development process across the entire UK and to act as enablers. We will work closely with all stakeholders, including the UK and devolved governments, providing seed capital to help reduce risk and, ultimately, ensure that the renewables sector quickly fulfils its huge potential.

The second aspect of renewables in which we are involved is wave and tidal power, where we are again co-investing in order to minimise the risk process for developers. Option fees are charged to developers to secure sites for commercial scale developments. These fees are then matchfunded by The Crown Estate to accelerate the timetable for successful development. The first stage, which involves allocating sites for wave and tidal power in the Pentland Firth area, is now complete. The intention is to build a programme that will deliver 700MW of power by 2020.

Although clearly capable of helping the Government meet or even exceed its target for renewable energy, all of these projects require an efficient transmission system. This is the third area that has seen significant input from the marine estate during the year.

In December, we published the findings of a study into offshore grid connections for Round 3 wind farms. The study, which was funded by The Crown Estate and carried out by Senergy Econnect and National Grid, identifies the extent and cost of work necessary to provide optimised transmission connections. This study followed hard on the heels of our East Coast Interconnector feasibility study which evaluated the practicality of a high capacity offshore transmission line running down the east coast, from Shetland to Norfolk.

Renewables are key components of the UK's move towards carbon reduction and cleaner energy. While we are investing significant resources in these areas, we are also working on a legal framework that will enable the storage of carbon dioxide generated by, for example, existing and planned coal-fired power stations. The 2008 Energy Act saw The Crown Estate granted the rights to store CO₂ and natural gas in the seabed up to 200 nautical miles from the shore, in appropriate subterranean geological structures.

Significant investment is required in transmission infrastructure and carbon capture technology, but we are keen to commercialise CO₂ storage and are working with the UK and devolved governments to explore the opportunities. This will be an important focus for 2009/10: the objective is to issue leases for storage during the last quarter of the financial year.

In the meantime, we have already agreed a lease with Gateway Storage Company for a 1.5 billion m³ gas storage facility in the Irish Sea, 15 miles south-west of Barrow-in-Furness. This project will increase the UK's current gas storage capability by around 30%.

We have invested £1.7 million to date, with a further £1.5 million to follow, in a strategic, proactive management approach that will ensure the fair and sustainable use of the marine environment.

Our marine spatial planning system (MaRS) now forms the cornerstone of our work and informs everything that we do on the marine estate. It draws on complex sustainability indexing to help us identify the correct decisions where there is a competing requirement for resource. MaRS was key to the identification of the 11 indicative areas for offshore wind farm development under the Round 3 process and a number of outside bodies have shown an interest in its capabilities. For the future, it will improve decision-making, ensuring that we always apply our core values of integrity, commercialism and stewardship in the face of increasing demands on the sensitive natural resources under our care.

First established in 1999, the Marine Stewardship Programme now has real momentum and is consistently over-subscribed with good quality projects.

The Programme promotes good stewardship of the marine estate and during 2008/09 we invested £800,000 in 60 projects throughout the UK. These included a boulder bed to protect dunes at Llandanwg in Wales from wave attack, support for the National Trust's information booklet and a DVD about Strangford Lough in Northern Ireland, and a fourth year of funding for the Fishing for Litter project in Scotland.