26 September 2015
How offshore wind is one of the UK’s best infrastructure stories of the last decade
This year it has felt like energy – and especially its cost – has rarely been out of the headlines, fuelled by a General Election and change of Government, fluctuations in oil prices, and the need to set out a vision for a secure, affordable and low carbon energy mix for the UK.
At the same time, much emphasis has been put on the importance of supporting the UK’s broader infrastructure future – from stimulating economic growth and jobs as well as ensuring the UK remains one of the most successful economies in the world.
I may be biased, but this seems a good moment to reflect on what might be one of the UK’s lesser known infrastructure success stories: offshore wind.
A sector which has gone from zero a little over a decade ago, to meeting around 5 per cent of the UK’s electricity demand today and on course to meet about 10 per cent by 2020.
"While offshore wind developers, as with any business, will continue to review their development pipeline in light of their own appetite, market dynamics and the policy framework, this is a robust pipeline for post 2020.”Huub den Rooijen, Head of Offshore Wind
To date, investment in wind farm generating stations and offshore transmission links totals over £15 billion, a market set to double over the next five years. In recognition of this, the UK has been acknowledged as the most attractive country globally to invest in offshore wind by consultants EY.
As the technology has matured, the risk profile of the construction and operating phases of these long-term assets has become increasingly attractive to institutional investors. Crucially, the industry has also had major validation earlier this year that costs have come down significantly, due in large part to the breath-taking scale and pace of development in the UK and internationally.
Following reform of the Electricity Market, revenue streams are now underwritten by 15-year Government support contracts (‘Contracts for Difference’) allocated on a competitive basis. Following the bid prices from two offshore wind farms earlier this year, Neart na Gaoithe and East Anglia One, the sector can hold its head high in the knowledge that it will be cost competitive with other forms of low-carbon energy by 2020. As a result, the sector has a meaningful contribution to make to a reliable, affordable and low-carbon energy mix alongside new nuclear and gas.
As manager of the UK seabed, we take an active approach to supporting the offshore wind industry to unlock value from this natural asset. The sector has continued to mature, as reflected by the progress of our seabed leasing rounds. This summer, a number of developers including EDF Energy Renewables, Eneco Wind UK and the Forewind consortium, announced they had identified those projects they wished to take forward from within their allocated areas of search. This represents a welcome reaffirmation of their development pipelines beyond 2020.
In addition to over 10 GW of projects already operational or consented with financial support, there is more than another 10 GW with planning consent, not to mention further projects in planning and pre-planning. While offshore wind developers, as with any business, will continue to review their development pipeline in light of their own appetite, market dynamics and the policy framework, this is a robust pipeline for post 2020.
The upshot is that while industry must continue to work hard to reduce costs, it has never been in a stronger position to play its part in the UK’s long-term energy future.
Huub den Rooijen is Head of Offshore Wind at The Crown Estate.Back to Media & Insights