2012

UK offshore wind report

UK Offshore Wind Report 2012
‘I am pleased The Crown Estate continues to take such a proactive role in the offshore wind industry. The opportunities for the supply chain and financial investment are significant. I look forward to working with industry and government organisations who, like us, are striving to help the sector continue to be the world leader.’ The UK is the global leader in offshore wind power, with more capacity installed than the rest of the world put together and over 10 years’ experience in delivering increasingly large projects. Policy makers, The Crown Estate and offshore wind developers are committed to delivering what is one of the most ambitious renewable energy programmes in the world. This will reduce greenhouse gas emissions from the energy sector, generate a secure supply of electricity for consumers and bring much needed jobs. The Department of Energy and Climate Change (DECC) launched its Renewables Roadmap in 2011, stating an ambition to deploy up to 18GW of offshore wind capacity by 2020. We are working to deliver 25GW of capacity, either completed or under construction, by 2020. We are also working hard to support the development of a competitive offshore wind industry and supply chain, which could create an industry which supports the UK economy. In response to the rapid growth of the sector, I was this year appointed The Crown Estate’s first Head of Offshore Wind, responsible for the delivery of its offshore wind programmes around the UK as well as for the operating assets. My main objective is to ensure the best possible investment climate for offshore wind in the UK, both in assets such as wind farms and transmission systems, and in the supply chain. Last year’s series of supply chain events were oversubscribed with more than 2,500 individuals attending events across the UK. The success of these events depends on your contributions, the industry needs your insights and skills to continue to innovate and grow.

Alison Nimmo CBE, Chief Executive Officer, The Crown Estate

Main cover image: courtesy of Peter Barker inset cover images: courtesy of siemens / fotolia IFC image: courtesy of siemens

Huub den Rooijen, Head of Offshore Wind Energy, The Crown Estate

2 • UK Offshore Wind Report 2012

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Overview
Today offshore wind power contributes 1.5 per cent of the UK’s electricity supply and that figure will significantly increase in order to achieve the renewable energy 2020 targets. The Crown Estate is determined to help Government create favourable market conditions for companies to invest in UK offshore wind farms, to improve energy security and create thousands of green jobs.
Offshore wind developers have registered their interest in deploying 46GW of capacity, of which around 10GW has been progressed to consent determination, construction and operation as shown in the table below. The Crown Estate is committed to funding initiatives for Round 3 and providing other means of support to ensure the remaining 36GW is progressed. The vast majority of new wind farms will be delivered as part of The Crown Estate’s Round 3 programme, consisting of nine offshore wind zones around the coast of the UK, covering areas as far north as Moray Firth, in Scotland, and as far south as the West Isle of Wight zone, off the Dorset and Hampshire coasts. Our Round 3 development partners have been working very hard to move projects forward during the last two years and we are playing our part alongside them. This year we expect some of those developers to take major steps forward as they submit the first consent applications. We are also working with industry and governments to explore the ways in which the whole life cost of offshore wind energy can be driven down. The Government’s Renewables Roadmap set its sights on cutting the cost of wind power to £100 per megawatt hour (MWh) and installing 18GW capacity off the UK coast by 2020. We have set our own goal to see 25GW of wind power either commissioned or under construction by the end of the decade. With that in mind, The Crown Estate launched a project to map out the best options for reducing the cost of offshore wind energy, which included interviews with more than 300 individuals in the industry. We are due to report on the findings of that study this year, highlighting the need for all parts of the supply chain to play their role in building an industry and bolstering innovation to drive down the cost of energy. We also look forward to the conclusion of the Government’s Electricity Market Reforms, which will include changes to the support available to offshore wind power projects in the future. We support the Government’s ambition to create an UK electricity market which is fit for purpose as we move forward, and see this as an opportunity to create the right conditions for a diverse, secure and low carbon electricity mix.

Developer shares of the total UK pipeline as of April 2012
25 Capacity (GW) 20 15 10 5 0 UK “Big 6” Other Integrated Energy Suppliers Companies (8) OEM EPC (2) Specialist InsƟtuƟonal/ Developer Financial (2) Investors (6) ■ Pre-planning ApplicaƟon ■ AwaiƟng Planning Consent ■ Consented ■ Under ConstrucƟon ■ In OperaƟon

Source: The Crown Estate

Current Project Status, April 2012
OperaƟonal First power achieved, construcƟon and commission ongoing Under construcƟon, not started exporƟng Consented, pre-construcƟon In planning, awaiƟng determinaƟon
Source: The Crown Estate

1.9 0.8 1.5 0.9 4.0
0 2 4 6 8 10

‘ We lead the world in offshore wind: the UK already generates more power from offshore wind than the rest of Europe combined. We also have an exceptionally strong pipeline of projects going out to 2020 and beyond. Offshore wind is a clean and almost limitless source of energy, right on our doorstep – which will help us improve our energy security, cut our emissions, and create new industries and employment around the Country. Offshore wind is already an important part of the UK energy mix, and this is just the beginning of our deployment plans.’
Charles Hendry, Minister of State for Energy, Department of Energy and Climate Change

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UK Offshore Wind Report 2012 • 3

Around the UK
UK Government
The Government aims to make the most of the UK’s offshore wind resource, whether in terms of economic opportunity or energy security. To do this, and help accelerate the deployment of offshore wind, the industry needs to be able to quickly develop a supply chain that is competitive, credible and creative. This means focussing on the areas where the UK has the best ability to compete, and making the most of our world-class test facilities and research and engineering capabilities. Winning a significant share of the UK market will provide British businesses with a strong platform for exporting both goods and proven professional services as further offshore wind markets develop around the world. Inward investments by top-level turbine manufacturers are key to developing the sector, and overseas manufacturers view the UK market as one of the most attractive for future investment. It is, however, in the supporting supply chain where many of the most significant growth and job opportunities lie. The Offshore Wind Developers Forum recently published its vision for the UK to be the centre for offshore wind technology and deployment, with a competitive supply chain in the UK, providing over 50% of the content of offshore wind farm projects. The supply chain needs to be in a position to support this. The Government is working closely with developers and their sub-contractors to help them realize this vision, and will be reviewing options for enabling companies to identify new opportunities in the offshore wind sector.
courtesy of siemens

Scotland
The offshore wind programme in Scottish waters is pivotal to the Scottish Government’s renewable energy targets and could make a major contribution to Scotland’s sustainable economic growth. Agreements for Lease are now in place for ten offshore wind energy projects in Scottish waters. This is an important step and provides developers with the confidence to proceed with the survey and environmental work that is a prerequisite to making the planning application that will in turn be considered by Marine Scotland. These projects are the forerunners of a pipeline amounting to almost 10GW. During the next 12 months up to four planning applications will be submitted to Marine Scotland. We continue to work with the Scottish Government’s Energy Planning and Consents Taskforce and liaise at all levels with Marine Scotland to support the scoping and consenting of offshore renewable developments.

Northern Ireland
In partnership with the Northern Ireland Executive we launched the Northern Ireland offshore wind and tidal leasing rounds in December 2011, and we are planning to award development rights to the winning bidders in autumn 2012. These competitions could lead to 600 MW of offshore wind capacity being developed off the southeast coast of County Down, contributing to the Executive’s target of delivering 40 per cent of its electricity from renewable sources.

Wales
The Crown Estate and the Welsh Government signed a Letter of Intent to work together to support the development of the renewable energy industry in Wales in March 2011. This was the first agreement of its kind with any devolved administration. Two of our nine Round 3 zones are in waters close to Wales: the Irish Sea Zone and the zone in the Bristol Channel, which we continued to progress in 2011/12. Additionally, offshore construction started on Gwynt y Môr in January 2012, which will be Wales’ largest wind farm when completed, generating enough power for 400,000 of the homes in Wales.

4 • UK Offshore Wind Report 2012

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Supply chain
photos courtesy of siemens

The Offshore Wind Developers Forum, which includes senior executives from offshore wind developer companies, chaired by Energy Minister Charles Hendry, agreed a bold vision to encourage UK-based firms to provide more than half the value to the next generation of offshore wind farms.
Hand in hand with this we are currently working to develop a standardised reporting system of UK content in wind farm development, construction and operation. Since the UK’s Round 3 development programme kicked off in 2010, The Crown Estate has held annual supply chain events in partnership with regional organisations and the devolved administrations to encourage local businesses to invest in offshore wind. These are designed to bring together key industry players to promote the development of specialist supply chains, maintain confidence in the market and boost the drive to increase offshore renewable manufacturing and wind farm support service opportunities in the UK. Last year we also held a session with UKTI in Amsterdam to promote the UK wind programme, showcase the strengths of regions around all of the UK and provide information for European companies

to investigate opportunities for partnerships and investment in the growing UK supply chain. We have seen a tremendous growth in the number of wind turbine manufacturers unveiling plans to build the next generation of dedicated offshore turbines, with a capacity of 5-7MW. Many are using direct drive technology in a bid to reduce the number of moving parts and scale down whole life costs. These facilities could underpin regional growth in the offshore wind sector and provide the basis for hubs of activity including R&D and skills development, creating an industrial ecosystem to support the UK economy. We also provide a yearly report on the status of the supply chain and the key issues affecting the future delivery of offshore wind. For example, subsea export cable suppliers will need to increase in their manufacturing output to meet Round 3 project delivery timelines. In response to this concern, The Crown Estate this year will publish a study examining the potential bottleneck of High Voltage Direct Current (HVDC) cable supply. In response to industry demand, we invited Royal Haskoning to provide a generic summary of the concrete substructure solutions currently available, to help developers progress alternatives for consenting purposes and allow ports to assess the suitability of their sites for various types of foundation. In order to further explore the opportunities for the UK to produce components, we have also published a guide, written by BVG Associates, providing background information and relevant contacts for interested companies.

Opportunity Curve of the pipeline comparing trajectories of operational capacity
■ ■ ■ ■ ODIS 2011 – Sustainable Growth ODIS 2011 – Gone Green ODIS 2011 – Slow Progression ConnecƟon agreements in NaƟonal Grid TEC register (April 2012) Opportunity Curve – Consent DeterminaƟon (April 2012) Opportunity Curve – Financing Agreed (April 2012) Opportunity Curve – Works CompleƟon (April 2012)

50 40 30 20 10 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

GW

Year

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UK Offshore Wind Report 2012 • 5

Updates
Strategic Workstreams
The Crown Estate manages all of its enabling actions via five strategic workstreams: •  Health and Safety •  Supply chain and Skills •  Project Economics and Finance •  Grid and Technology •  Planning and consenting sustainable health and safety culture,’ he said. ‘This has proven to be an area where the industry has come together, helping each other.’ Also in partnership with RenewableUK, we recently launched industry guidance on vessel safety for the development phase of offshore renewable energy projects. Topics covered include effective vessel selection and operation and the regulatory aspects of vessel selection. We expect this guide to be the first of a series in safety documents, designed to help developers throughout all phases of offshore wind energy projects. Our health and safety initiatives are intended to foster good practice and address issues, which are common across zones and are therefore beneficial to offshore wind developers and the wider industry.

Health and Safety
Safety is the number one priority for any construction project, and The Crown Estate is taking active steps to ensure the offshore wind sector maintains an exemplary track record in this area. Together with RenewableUK, The Crown Estate launched a Renewable Energy Health and Safety Award, designed to recognise outstanding practice in this area. E.ON Climate & Renewables won the 2012 award for their shallow gas case study at the Rampion offshore project. Mainstream Renewables was also commended for the Hornsea Met mast project, and the deployment of innovative environmental, safety, health and quality management systems. Alastair Dutton, programme manager of wind development at The Crown Estate said the award is designed to recognise those companies executing a high standard of health and safety, while encouraging companies to share best practice. ‘The Crown Estate wants the UK’s world leading offshore wind industry to have a robust and
courtesy of siemens

Skills
The growth of the offshore wind energy cannot happen without the parallel growth of a highly skilled labour force. The Crown Estate can play a useful role as a skills advocate, promoting the sector’s overall attractiveness, tackling key risks and helping stakeholders from across the sector to collaborate in this area. We are supporting a number of initiatives designed to address critical skills shortages within the industry, including the new £1.2m Renewables Training Network, launched by RenewableUK in October 2011, which aims to facilitate the transition of professionals into the offshore wind industry from other sectors. We have sponsored the Talent Bank project hosted by EU Skills, designed to make it easier for businesses to access and organise apprenticeship schemes. We have made available up to nine £3,600 bursaries for postgraduates studying for a newly created MSc in Marine Renewable Energy, which leads to Chartered Engineer status. We are planning to work with secondary schools in 2012 to engage with pupils making their GSCE options choices, with the aim of attracting the next generation of skilled employees into the offshore wind sector. Finally, this year we are also planning to develop a series of interactive websites aimed at both raising awareness for a wide range of students which will also provide feedback to industry on sector attractiveness, future growth areas or skills shortages.

6 • UK Offshore Wind Report 2012

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photos courtesy of siemens

Finance
The UK’s offshore wind programme could require £50-£100 billion of investment over the next 10 to 15 years. Most projects so far have been funded through the construction phase using utility equity, but future projects must attract new sources of capital. To help bring new players into the market place, DECC and The Crown Estate hosted an offshore wind investors’ conference last year, which was well attended and stimulated a number of firms to explore the investment opportunities of offshore wind. Government regulation plays a key role in determining the economics of offshore wind farms and boosting investor confidence. The policy framework created by government through the Electricity Market Reform (EMR) and existing Renewables Obligation incentive scheme is designed to support investment in offshore wind and provide long-term investor certainty. The entire offshore wind industry is eagerly anticipating the outcome of the EMR and The Crown Estate supports the government’s ambition to structure the electricity market in a way that keeps costs down for consumers.

Grid: Taking the energy home
Helping deliver cost-effective and reliable transmission links, which allow developers to export energy into the national electricity transmission system, is a crucial connection in our offshore wind programme. Currently the total capacity of offshore wind schemes with connection agreements on place with National Grid is 35.2GW, of which 23.6GW is for Round 3 projects. A key industry issue during 2011/2012 has been how to move toward a more coordinated onshore/offshore grid, which could reduce costs and speed up the connection process. The Crown Estate published a study with National Grid in September 2011 exploring the feasibility of a co-ordinated grid network. DECC and Ofgem signalled support for this approach in March, after its research found it could save between £500m and £3.5bn compared to a purely radial approach. The Crown Estate will continue to work closely with Government and industry to resolve issues arising from developing a co-ordinated approach, including unlocking barriers to enable developers to connect to grid offshore. Transmission charging has undergone a fundamental review in the last year. In December 2011, Ofgem effectively ruled out a socialised charging model largely on the grounds that it would be too costly, preferring instead an improved locational charging model, reflecting load factor as well as location. Reaching a landing on this soon will be essential to reduce uncertainty, as will developing charging arrangements for coordinated grid. We will continue to work with stakeholders to resolve key commercial issues such as this. We have also continued to actively engage in the development of the OFTO enduring regime, where longer-term developer options have been confirmed as ‘generator build’ and ‘late’ OFTO build. Further details will be determined during 2012.

Transmission Programme
The Crown Estate’s Transmission and Energy Storage Programme enables us to play a more active role in the delivery of offshore infrastructure. The immediate challenges we aim to address in this programme are: •  The potential risks to offshore wind deployment of consenting transmission infrastructure through a radial or coordinated grid design •  Regulation to allow offshore wind farms to secure timely and cost efficient grid connections, including the potential to connect offshore •  Working with planners to better understand and mitigate any consenting difficulties for large scale transmission infrastructure •  Considering energy storage options to support offshore renewables

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UK Offshore Wind Report 2012 • 7

Demonstration sites
photos: jan oelker, re power systems se

The Crown Estate is encouraging the offshore wind industry to locate demonstration projects for new technologies such as turbines, foundation designs and installation methods in the UK.
We hope this will accelerate the commercialisation of next generation technology and showcase innovations designed to reduce lifetime costs. Bringing new products to market early will also boost initiatives to see that a supply chain for major offshore wind farm components is established within the UK. In August 2010 The Crown Estate announced four offshore wind demonstration sites and, following this, we commissioned GL Garrad Hassan to conduct a gap analysis to assess whether there is a need in the UK and Europe for further demonstration sites. The report identified an urgent need for test and demonstration sites for at least 17 new wind turbines, which are currently in the design and development phase. The first of our four test sites will be installed at the end of 2012 at Gunfleet Sands, and we welcome interest in further demonstration projects that could be deployed in the next few years.

In the news

Wind Farm Firm Pledges 1,000 Tyneside Jobs (Sky News, 13 April 2012) Gamesa announces plans to build £125m offshore windfarm facility (Guardian, 23 March 2012) Offshore wind turbines set to benefit British industries (Guardian, 6 February 2012)

Samsung wind turbine project to create 500 jobs in Fife (BBC News, 31 January 2012) Japanese company invests in UK wind farm (Financial Times, September 1, 2011) New 367 MW offshore wind farm opens in UK (Reuters, 9 February 2012)

8 • UK Offshore Wind Report 2012

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Examples of ongoing work
Strategic Navigation Study
This will identify and prioritise the strategic issues affecting navigation and shipping as a result of the planned offshore wind farm development programme, and make appropriate recommendations. The project is looking at the cumulative and incombination effects of offshore wind development on marine activities and navigation. Workshops were held with developers and key national shipping and navigation organisations.

Cost reduction pathways
The Crown Estate is set to publish a major report this year mapping out the best options for reducing the cost of offshore wind energy. The Cost Reduction Pathways project is based on unprecedented engagement with around three hundred individuals from the offshore wind industry, and the finance community during a six-month period. The costs of offshore wind in the UK have significantly increased since the first commercial scale wind farms were deployed in the early 2000s, as a result of underlying cost increases, such as commodity prices rises, and by more specific factors such as supply chain bottlenecks, reliability concerns and deeper water sites. In 2011, the government established an industry taskforce to determine how best to slash the cost of offshore wind energy to £100/MWh. The taskforce is due to report its recommendations to Ministers by Summer 2012. This will be underpinned by The Crown Estate’s Cost Reduction Pathways project, as well as other findings.

PILOT study
This study was designed to help the offshore wind sector accelerate its maturity and cut costs by learning lessons from the oil and gas sector. The report evolved through three stages; an initial review, a high level analysis and a detailed analysis, culminating in recommendations on initiatives that should be taken forward to achieve cost reduction and increased competitiveness in the offshore wind sector.

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UK Offshore Wind Report 2012 • 9

courtesy of siemens

Offshore windfarms in construction or operation
No Project name Operational demo sites 01 Beatrice Demo 02 Blyth 03 Barrow 04 Burbo Bank 05 Gunfleet Sands I & II 06 Inner Dowsing 07 Lynn 08 Kentish Flats 09 North Hoyle
01

Equity investors

Capacity (MW) 10 4 90 90 173 97 97 90 60 90 180 60 300 184

SSE E.On Centrica, Dong Dong Dong, Marubeni Centrica, TCW Centrica, TCW Vattenfall RWE, JP Morgan IIF, Prudential M&G RWE E.On E.On Vattenfall Dong, SSE, PGGM & Dutch Ampere EDF

Round 1 operating assets

10 Rhyl Flats 11 Robin Rigg (E&W) 12 Scroby Sands 13 Thanet 14 Walney 1

Round 2 operating assets

11 22 20 03 04 16 10 09

Round 1 assets under construction
02 14 15

15 Teesside 16 Gwynt y Môr
06 17 07 21 12 18 13 19

62

Round 2 assets under construction RWE, Siemens, 576 Stadtwerke Munchen 270 Centrica, Dong, Siemens Dong, E.On, Masdar 630 RWE, SSE Vattenfall Statkraft, Statoil Dong, SSE, PGGM & Dutch Ampere 504 150 317 184

17 Lincs 18 London Array 1 19 Greater Gabbard 20 Ormonde 21 Sherringham Shoal 22 Walney 2

Round 2 partially operational sites

05 08

Round 1 and 2 extension sites Round 3 zones Scottish territorial waters sites

Territorial Waters Limit UK Continental Shelf Limit

10 • UK Offshore Wind Report 2012

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Offshore wind projects under development
No Project name Developer Indicative Capacity (MW) 12 Up to 100MW

Demo sites 01 Gunfleet Sands 3 02 Aberdeen Bay European Offshore Wind Deployment Centre 03 Blyth offshore wind demonstration site Round 2 sites
26 16

Dong Vattenfall Wind Power UK, and Aberdeen Renewable Energy Group (AREG) New and Renewable Energy Centre (NAREC) Centrica Dong E.On Dong, E.On Centrica RWE Iberdrola, Dong Warwick Dong SSE, RWE Vattenfall Dong

Up to 100MW

02

27 25 28 29

17

03

04 Docking Shoal 05 Westermost Rough 06 Humber Gateway 07 London Array 2 08 Race Bank 09 Triton Knoll 10 West of Duddon Sands 11 Dudgeon
18

540 240 219 370 620 900-1200 389 560 234 504 51 750

Round 1 and 2 extension sites 12 Burbo Bank Extension 13 Galloper Extension 14 Kentish Flats 2 Extension 15 Walney Extension Round 3 zones
13

15 10 24 12

05 06

19 09 11 04 08 20

01 14 21 07

16 Moray Firth 17 Firth of Forth 18 Dogger Bank 19 Hornsea 20 21 22 23 24 East Anglia Rampion Navitus Bay Atlantic Array Irish Sea

23

22

EDP Renovaveis, Repsol SSE, Fluor RWE, SSE, Statkraft, Statoil Mainstream, Siemens, Dong Iberdrola, Vattenfall E.On Eneco, EDF RWE Centrica, Dong Iberdrola SSE, Repsol EDP Renovaveis, Repsol SSE Mainstream

13001500 3465 900012800 4000 7200 665 900-1200 1500 4185 1800 1000 905 690 450

Scottish territorial waters sites

Territorial Waters Limit UK Continental Shelf Limit

25 Argyll Array 26 Beatrice 27 Inch Cape 28 Islay 29 Neart na Gaoithe

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UK Offshore Wind Report 2012 • 11

London 16 New Burlington Place London W1S 2HX Tel. 020 7851 5000 Edinburgh 6 Bells Brae Edinburgh EH4 3BJ Tel. 0131 260 6070 www.thecrownestate.co.uk

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