Global energy giants including Iberdrola, Orsted, TotalEnergies, Shell and BP unsurprisingly dominated the headlines as Scotland earlier this year announced the winners of its eagerly-awaited ScotWind seabed leasing round in the North Sea, where as much as 25GW of new offshore wind plant could be developed in the next decade.
But the auction had its subplots. One was that 75% of the acreage awarded was in water-depths needing floating wind platforms; another was that the pioneering tender – Scotland’s first – had created the conditions for a wide range of new-model partnerships – oil operator and investment bank, utility and industrial conglomerate, technology designer and tier-1 contractor – as groups jockeyed to formalise their bids.
One such consortium was formed by Germany renewables developer BayWa re, Belgian peer Elicio and floating wind technology developer BW Ideol, as the Floating Energy Allyance (FEA), which landed a 960MW plot in waters from 75-110 metres deep some 75km off Aberdeenshire for $330m.
FEA, says BayWa re UK managing director Gordon MacDougall, who is running the project development – known as NE8 – said the award was “thrilling”, not least as the “[ScotWind tendering] was a long process and during a pandemic and so on, and so the bid was developed largely ‘virtually’ and that presented its own unusual challenges but… we got there by innovating in all aspects, not least how we collaborated on our project and proposal.
“First appraisal: a manageable size, just shy of 1GW; good visibility on some of the other projects that are going to be moving ahead, so there is room to optimise when it comes to supply chain, grid connection and so on,” he said, speaking exclusively to Recharge.
“We believe we got both the size of project and more importantly ‘the project’ we wanted. Now we need to deliver on our commitments.”
There is no question of the desire in Scotland either in government or industry for ScotWind to be the launch pad for a new era – North Sea 2.0 as some have coined it – but delivery remains a big ‘if’.
A supply chain needs to be developed in tandem with the first gigascale projects – and this means both renovating old oil & gas fabrication yards as well as building new facilities for the offshore wind industrial hardware, particularly the monopiles, jackets and floating foundations that will be needed in the hundreds.
It is a fact that every one of the winners of ScotWind acreage is keenly aware of. For MacDougall, building the NE8 project will be of a “particular magnitude”, given it will not only be a gigawatt scale floating wind array but also an early engine for the creation of Scotland’s still-nascent offshore wind supply chain.
“Cold light of day as soon as the tender awards are out the reality is we [like other ScotWind winners] have acreage not a project, we have a right to develop. It is going to take four-to-five years to detail all this and then we can start construction,” he said.
MacDougall, who in earlier incarnations had high-level roles at developers Iberdrola and RES, believes FEA’s approach to “all the local content, the supply chain development, all the sustainability” improves it chances of success. “None of this came out of a ‘tick box exercise’. It was about doing the right things for the right reasons.”
“The reason [BayWa re] went into floating and chose the partners we did is because we saw a lot of potential for innovation coming at it a bit ‘differently’ that would deliver not only a good project but also took into consideration the role of the supply chain and wider benefits that floating wind can bring to Scotland [in economic development].”
We won the prize [of ScotWind acreage] – and the prize is we get to spend vast sums building a first project and with it helping to build a new industry
The combination of BW Ideol – with its track-record including two floating wind prototypes installed off Europe and Asia and the backing of floating oil player BW Offshore as majority stakeholder, Elicio – which has shares in 1.2GW of offshore wind projects off Belgium including Norther, Rentel and SeaMade, and BayWa re – currently operating 10GW of clean-energy projects worldwide including a clutch of Scottish onshore wind farms, and a further 20GW in its development portfolio – was “an innovation in itself”, said MacDougall.
“Look at some of the other partnerships and you have to wonder whether the purpose is size for competition-sake, are they [corporate-culturally] similar? In our case, our partnership has three companies who each bring something unique and different to the table – this gave us real synergies from the start.”
Yet while he reckons the consortium has “some competitive advantages” in partner BW Ideol’s existing fabrication agreement with the owner of the Scottish port of Ardersier, near Inverness, he cautions that what the industry “most of all needs [is] a solid foundation to start from”, not developers rushing to “tie up” supply chain for their own corporate ambitions.
“We need to be careful we compete in the areas we should and collaborate where we should – and that applies most directly to the supply chain. After the [ScotWind award] announcement there were some developers coming out with statements saying they were tying up some capacity within the supply chain – to my mind, it’s far too early for that. We want to ‘socialise’ the supply chain, get the skills sets in, the training too, creating the workforce that we will need to succeed in building all these first gigawatts.
“There is huge amount of excitement in the [Scottish offshore energy manufacturing sector] now and in all companies that can invest to create supply chain, but we are all still working on promises. The big thing to me is that we don’t get too tied up in this – overexciting a supply chain could be as damaging as not getting it ‘excited enough’,” said MacDougall.
“We as an industry need to keep things as stable as we can to create the greatest market visibility for the greatest number of companies. The whole process [of an auction] is a competition to reach another competition [in building a first project in the coming wave of floating wind farm construction].
MacDougall added that “competing too intensely, too early” could slow the pace of supply chain development just when it is needed the most: “We want to put ourselves in a position where the supply is ready to deliver, not just for us, but for the whole sector as it looks then. We need to work sensibly.”
The sheer size of the prize off Scotland – 60 years a major offshore oil & gas province but long in decline and having so far come up short in its plans for ‘diversification’ into sea-based wind development – will hopefully now concentrate government and sectoral minds, he suggested.
“You look at the numbers [of gigawatts in the project pipeline] that could come through and they are quite staggering. But we have always had this [wind] resource and [supply chain development] potential and it hasn’t come together because strategies have been disjointed and the timing has been wrong or….
“To go from no gigawatts to 20GW-plus of offshore wind will be quite a big feat,” he underlined. “What’s good about this now is that there is trajectory and visibility and scale.” Still, MacDougall can’t help circling back to the hurdles on the near horizon, “the significant industrial aspects of this [that] are yet to be developed”.
“Competition for ports, for supply chain, for all types of technology solutions – fine – but tie up the supply chain with one project and that project doesn’t go ahead – you’ve a majorly stranded supply chain.
“There is no point in developing our project in isolation and then in eight years’ time coming out and saying ‘we have £4bn ($4.4bn) to spend in Scotland on the supply chain’ and of course the supply chain isn’t ready because we haven’t prepared them to be,” said MacDougall. “You don’t want a supply chain where there are ‘winners’ and ‘losers’ – that would hurt the whole industry.”
Driving down the price of floating wind from current levellised cost of energy (LCOE) of £120-150/MWh to sub-£50/MWh – as has been achieved in conventional offshore wind – could be helped hugely by the ScotWind projects. LCOE is a “funny business”, offered MacDougall, remembering some of the earlier bottom-fixed UK offshore wind rounds that were won at LCOE levels “that no one was certain [at the time] could be delivered”.
“For us it’s more about the site acreage and the [wind] resource. These are your limiting factors. Beyond that is about making it happen, harnessing the value. The technology is advancing every day – and yes, it is very important we don’t stand still over the next eight years – but we rather feel floating wind will deliver and partly because it ‘has’ to deliver.”
Ultimately, he noted, “ScotWind will be a huge learning opportunity for us [and the wider industry].”
FEA is now girding itself to get going in earnest, with expectations it will to enter into a key ‘option lease agreement’ with Crown Estate Scotland “by April 2022”.
“We have won the prize [in being awarded ScotWind acreage] – and the prize is we get to spend vast sums building this first project and with it helping to build a new industry,” MacDougall concluded.
