With just hours to go before it closed for applicants, the announcement by Shell and Iberdrola – an energy power couple if ever there was one – that they would link to enter ScotWind added more weight to the argument that Scotland’s first solo offshore wind leasing tender is the most significant in the industry’s short history.
That may sound a stretch, but the facts speak for themselves; an ambition to spur up to 10GW of capacity and a £9bn ($11.5bn) investment wave; a world-first process to offer seabed suitable for both fixed-bottom and floating wind; a who’s who of entrants from the global offshore wind market (see panel at foot), including another last-minute contender in German giant RWE; an unprecedented pile-in by oil & gas players in what has, until now, been the backyard of the UK’s hydrocarbons sector; and a first ever leap into floating wind by Orsted, the company that put fixed-foundation offshore on the map.
It also marks a bold attempt by the devolved nation to carve out a distinct offshore wind sector, even with the main policy mechanism to support renewable energy projects – the contract for difference (CfD) power auction – still under the direct control of the UK government in London, from where it has been the main driver of Britain's world-leading offshore wind build-out, mainly off eastern England.
Neil Douglas, a director at renewables consultancy BVG Associates, tells Recharge it should be remembered that ScotWind, which has been in the works since 2016, was not always seen as a guaranteed draw, with questions over whether projects there could be competitive in the wider UK context.
“Looking back a few years when ScotWind was first announced, some people questioned the extent to which it would be subscribed, because in Scotland you have deeper water, higher grid charges, there’s not so much development of the supply chain.”
Now with so many big-hitters and innovative pioneers in the mix, Douglas says: “The competition is going to be intense. I expect Crown Estate Scotland have got quite a job on their hands to determine who the winners are, especially because it’s not a price auction – the whole process has been set up around experience and delivery.
“The way the scoring works it may be very, very fine margins between winners and losers.”
It may be very, very fine margins between winners and losers.
Much of the excitement around ScotWind has focused on the potential for floating wind power to play a major, or even dominant role in the winning projects that are due to be built-out from mid-decade.
A study earlier this year by the UK’s Offshore Renewable Energy Catapult said that it expects floating platforms to be the most-used foundation type in projects enabled by ScotWind, at about three-quarters of the total – or 469 out of 646 – assuming a 10GW build-out and deployment of floating beyond 70-metre depths.
The fact that floating projects may enjoy higher ‘strike prices’ in future CfD rounds – they will compete in a separate ‘pot’ to fixed-bottom projects – may even spur their deployment at depths that would theoretically be suitable for jacket foundations, said the study.
“This is the first time that significant real estate has been made available for floating projects,” Douglas says.
“I think a significant proportion will be floating. Many of the outfits that have declared a hand are known to have an interest in floating wind – some have explicitly said it will be about floating.”
Indeed, it would be a surprise if a large-scale floating build was not the outcome, given Scotland’s interest in establishing itself as a major international centre for deployment and technology in the sector alongside other possible hotspots such as France, Spain, Japan and California.
Scotland could legitimately already claim the title of global floating wind champion – the world's first commercial floating array, Equinor's Hywind Scotland, has been spinning since 2017, while the world's largest floating wind farm so far, the 50MW Kincardine, has within the last few weeks been completed off Aberdeen, part of 2.3GW of mostly fixed-bottom capacity commissioned or in construction off the Scottish coast. The nation has a target for 11GW installed by 2030.
“Production for serial floating foundations is a big opportunity, many people are looking at that very seriously, both fabrication and installation techniques that have the potential to bring significant local content – and that’s a big deal for Scotland,” says Douglas.
Energy transition enabler
The other notable aspect of ScotWind is its potentially transformational role in the heartland of the UK North Sea oil & gas industry. Shell, BP, TotalEnergies, Equinor and Eni are all taking part in various ScotWind bids, along with a clutch of key contractors to the fossil sector, and it would be no surprise to see them heavily involved in the projects that result.
Mike Hay, commercial director at RIDG – the specialist independent developer that is part of a bid with TotalEnergies and Macquarie’s Green Investment Group – says having a supermajor on board is a big asset.
“They’ve been hugely helpful across the board in terms of the bid,” Hay tells Recharge.
“Health and safety, procurement, quality aspects – we’re building on a lot of their experiences from offshore.
“There’s a big focus on the energy transition and building on the strengths Scotland’s got. ScotWind presents some great opportunities to do that.”
BVGA’s Douglas also expects fossil players to be strong contenders in the mix. “Oil & gas companies have expertise and experience. The closest analogy [to floating wind] is floating infrastructure for oil & gas that has got mooring, cabling and anchoring. That experience of delivery will score quite highly, I think.”
Bumps in the road
The path to ScotWind’s closing date with a stellar cast of contenders on board has not always been smooth. The original schedule was delayed, and a last-minute spanner in the works came in February this year when the process was paused for a review following the unexpectedly high option fees paid for new seabed rights under the UK Round 4 process run by Crown Estate Scotland’s counterpart off England and Wales.
The result was a tenfold increase to a maximum £100,000 per sq km of seabed under a revised option structure, as well as a boost in requirements for local supply chain commitments.
Douglas believes the late change won’t have a drastic impact on ScotWind. “The implications are that those costs have to be absorbed by the project, and they have an impact on the signature levelised cost of energy of the projects.
“But if everyone is bidding at the cap and everyone is moving up by the same amount, it doesn’t impact competitiveness [in a Scottish context].”
Most of all ScotWind should be good news for Scotland and for offshore wind – especially floating.
Floating is new – nobody has experience of producing dozens or hundreds of hulls.
“There are hopes that the Scottish supply chain will benefit, there are ports and facilities that are able to respond,” says Douglas.
“What remains to be seen is to what extent the Scottish supply chain is able to compete internationally on price and capability.
“But the advantage here is that floating is new – nobody has experience of producing dozens or hundreds of hulls, everybody’s in the starting blocks from that point of view.”
A good proportion of the projects spawned by ScotWind may not end up relying on UK CfDs, Douglas believes, pointing to opportunities in the merchant market and for feeding new opportunities in areas such as green hydrogen production.
Douglas reckons that with such fine margins at play in such a competitive process, the best-prepared may end up with rewards.
“If you look at how the competition is run, so many points are awarded on experience and readiness. I do wonder if there’s going to be an advantage to those developers who have already put their hands in their pockets and done a bunch of early work, people have been speculatively doing survey work and doing stakeholder engagement to get ahead of the game.
“I’d imagine they would be at an advantage to those coming from a standing start.”
Douglas added: “To what extent have they secured grid connection capacity and been derisking their consenting by doing bird surveys? You don’t need a site licence to do a bird survey.”
The winners are expected to be announced late this year or early in 2022.
Note: Updated to add RWE as entrant
Shell/Scottish Power Renewables (Iberdrola)
Ocean Winds/Aker Offshore Wind
Orsted/BlueFloat Energy/Falck Renewables
Vattenfall/Fred Olsen Renewables
TotalEnergies/Green Investment Group (Macquarie)/RIDG
Eni/Red Rock Power
SSE/ Marubeni Corporation/Copenhagen Infrastructure Partners (CIP)
Magnora Offshore Wind/TechnipFMC
Publicly-declared bidders as of the morning of the closing date for applicants, 16 July