Britain is emerging as an attractive destination for investment with
Scotland offering a very strong industrial base, finds Anthony Harrington
To date, the renewable energy sector has not been a massive contributor to
the revenues of Scottish ports. However, a handful of major offshore
projects are now edging towards the build stage and it looks as if 2017
could start to see the renewables sector bringing some lucrative business
to several ports.
RenewableUK’s Executive Director, Emma Pinchbeck points out that these
about-to-be-built-out projects include Beatrice, Aberdeen Bay, and the
Hywind Scotland Pilot Park. “As of today it looks like Nigg will be
supporting Beatrice, while Hywind is looking to the Port of Peterhead for
its operations and maintenance support. The Port of Aberdeen and the Port
of Rosyth will also be involved in the future of offshore wind,” she notes.
Burntisland Fabrications (BiFab), which has a facility in Methil, will
provide jackets for the Beatrice offshore wind farm so it is likely they
will be using ports around the Forth and Edinburgh areas. This activity
will swell port revenues, Pinchbeck says.
Robin Rigg excepted, since it is the only large scale project operational,
Scotland has been waiting to continue its large-scale roll out of offshore
wind farms for so long now that it is easy to forget just how extensive the
build out of offshore wind has been south of the border. The UK is the
undisputed world leader in offshore wind, which already generates five
percent of the UK’s electricity. Pinchbeck points out that by 2020 this
will have doubled to over 10 per cent. By the time the projects already in
the pipeline have been completed we could see around a third of the UK’s
entire electricity demand being met by offshore wind.
The industry will be investing in excess of £18 billion in projects over
the next five years. “We now have over 5GW of installed capacity offshore.
By 2025 it is possible that the UK will have up to 15GW worth of offshore
wind generation capacity,” she comments.
The government has already said that in addition to the 10GW of renewable
offshore wind energy it has already committed itself to supporting with its
Contracts for Difference programme, it is now looking at future support of
potentially another 4GW, which would be enough to deliver that offshore
wind energy the industry is already working on. The way support for each
project is worked out is fairly complex. Basically, the CfD guarantees the
consortium a certain price for its electricity. If the price of electricity
at any point during the period covered by the CfD falls below this “strike
price”, the taxpayer makes up the difference between the agreed strike
price, and the actual price. The auction ensures that the awarding of
government support is competitive.
One way of looking at this is to analyse what has happened in the case of
the Westminster government’s agreed strike price with EDF over power
provided by the Hinkley Point nuclear reactor that EDF is committed to
build and run. The government guaranteed EDF a price of £92.50 per megawatt
hour, or £89.50 if EDF goes on to develop another reactor at Sizewell. By
comparison the forward price of electricity per megawatt hour for February
2017 is currently £55.10, which means the government’s guaranteed support
for nuclear power currently stands at a whopping £37.40 per MWh.
Each consortium has to work out, in advance of the auction, what level of
support it will require to make its project viable, bearing in mind that
the auction is designed to support lowest price projects first. The
government then awards CfDs on the basis of the lowest bid, until its
budget for that auction round is spent.
Despite the complexities, offshore wind continues to be seen as a very
attractive industry for investors and projects targeting Scotland’s east
and west coasts have either completed or are close to securing their
funding. There are three operating offshore wind farms, the 174MW Robin
Rigg site run by E.ON, the 10MW Beatrice Demonstrator and the 100MW
Aberdeen Bay project run by Vattenfall. However, projects consented and
planned take the potential total offshore production capacity around
Scotland’s shores to over 4.2GW, enough to power over 4.3 million homes.
The Robin Rigg East and West wind farms were the first commercial scale
offshore wind farms in Scottish Waters, back in 2010. The combined output
of the two generates enough electricity to power approximately 117,000
homes, and offsets around 230,000 tonnes of CO2 emissions annually. A
report on the sight highlighted the fact that more than 30 per cent of the
development, manufacture and construction work for the site was carried out
by UK-based businesses. At the same time, in its first year of operation
the UK’s share of operating and maintenance revenues from the two sites
amounted to 86 per cent, of which 34 per cent was local to the project in
Cumbria, with Scotland and north west England between them capturing some
45 per cent of the expenditure.
SSE’s Beatrice Offshore Windfarm Ltd (BOWL) is a £2.6 billion project and
recently received the green light from the consortium behind the project,
which comprises SSE, Copenhagen Infrastructure Partners and SDIC Power. The
project represents one of the largest private investments ever made in
Scottish infrastructure.
Each of the 84 turbines has the potential to generate 588MW and the project
will be situated in the Outer Moray Firth. When complete it will power
around 450,000 homes, or three times the number of homes in the Moray and
Highlands region. Beatrice is expected to be fully operational by 2019. All
in all, it is expected to deliver some £680 million into the UK and
Scottish economies via employment and supply chain opportunities, during
its construction phase. A further £400 million to £525 million is expected
to be generated over the course of the farm’s projected 25 year operational
life.
“Britain is clearly an attractive destination for offshore wind investment
and the sector has come a long way in a short period of time. There is
great potential to build a very strong offshore wind industrial base in the
UK,” Pinchbeck comments.
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