Contributors
Chris Towner, Energy Partner at Womble Bond Dickinson, was a panel member at a recent event hosted by Windpower Monthly. Chris explores some of the key themes from the event which was recorded and available here.
The challenging target is achievable but there are a number of hurdles that need to be lowered or crossed to enable this to occur. Broadly, these key issues relate to consents, financing and grid connection.
The largest issues with consents relate to the time taken to get consent and the risk of consents being quashed even after they have been granted, with Vattenfall's Norfolk Vanguard project being a prime recent example of this. Part of the issue here relates to some regulators taking a "parochial" approach to Offshore Windfarm (OWF) developments rather than engaging with the overall need to achieve the 40GW target. If the precautionary principle is applied over-zealously, the target will not be achieved. Regulators will need to accept that there will be a risk of potential harm to the marine environment. Collecting the data to provide conclusive evidence of the impact of OWFs will not be possible within the timeframe that we have. The sharing of data, as exemplified by the Crown Estate's approach is very helpful and evidences the collaborative mindset that each stakeholder will need to take. The creation by the MMO of a strategic team was also recognised as a positive step.
The regulators involved, being either Ofgem or environmental regulators do not have the same objectives in mind. Ofgem is seeking to reduce overall costs to the consumer and may not consider steps to protect the marine space as being economic and efficient. Similarly, some environmental regulators are not considering the costs to the consumer their approach entails.
The level of option fees being paid by developers following Round 4 is very high; delays caused by the lack of resources at statutory bodies (which are treasury funded) that lead to additional years' of option fees being paid to the Crown Estate (which then flow to the treasury) will play especially badly with investors.
Many of the most vocal opponents of OWFs are objecting to the onshore infrastructure that is associated with these projects. Ending the current point to point approach to connections by co-ordinating the offshore network could reduce the number of onshore cable runs and sub-stations, thereby reducing the level of objections to projects. Offshore network co-ordination could also protect projects against the risk of cable failure and allow projects to export power to continental Europe.
The current regulatory regime is not set up to facilitate these developments. At a high level, export cable for OWFs are treated in very different terms from interconnectors between countries, in terms of the UN Convention on the Law of the Sea, how capacity on those systems is reserved and how charges for using each type of network are levied. The one defence of the current point to point connection process is that lenders are familiar and comfortable with this approach.
Financing projects is the third key area of concern. While strike fell in the last allocation round to close to (or below) market prices, the CfD is a key element in achieving finance at affordable levels for developers. Certainty over the timing of the next two allocation rounds and as importantly the capacity of offshore wind projects that could receive support via each round is key to giving confidence to investors that support will be available.
The immediate high level next steps for the sector include the Scottish Crown Estate leasing round, the UN Conference of the Parties in Glasgow (to update the Paris agreement on climate change) and the next CfD allocation round which is due towards the end of this year. Of those, the volume of projects that obtain support from the CfD allocation round is the most vital in terms of achieving the 2030 target. But as projects need to be consented to participate in the allocation round, the success or not of that round is dependent on the consenting issues being resolved.
