Four areas of seabed are being made available to the market, and have the combined potential to bring 7GW of wind power to the UK – enough to power over 6 million homes.
The auction could bring enormous investment, totalling £20bn, and help the UK reach its target of expanding offshore energy to 30GW by 2030.
The Crown Estate, which operates the royal family’s property portfolio, owns the exclusive rights to all the seabeds around the British Isles. The estate is overseen by the Treasury, and profits generated also go to the Treasury, though 25 per cent are returned to the royal family in the form of the sovereign grant.
The leasing round is expected to attract bids from established offshore wind power developers, as well as major European oil companies – many of which are under pressure from shareholders to demonstrate their willingness to be seen to be aligning their businesses with international efforts to cut greenhouse gas emissions from fossil fuels.
According to Reuters, Shell said earlier this year it plans to take an “active role” in the auction – the fourth round of leases auctioned by the Crown Estate.
In a statement, the Crown Estate said the auction comes after “18 months of engagement with the market and stakeholders through which The Crown Estate has developed and refined its proposals”.
Companies will assess the areas available and then make their own proposals for project sites.
The Crown Estate will then asses the viability of the proposals, with the tender process beginning in October and expected to take around 12 months.
First seabed rights could be awarded in early 2021, The Crown Estate said.
Existing leases on the Crown Estate charge royalties equal to 2 per cent of revenues for use of its seabeds. In 2018 the business collected £41m from offshore wind. The latest round is expected to generate millions more for the Treasury and the Crown Estate.
Huub den Rooijen, director of energy, minerals and infrastructure at the Crown Estate said: “The UK is home to the world’s largest offshore wind market, attracting global investment, meeting UK electricity needs, and playing a crucial role in the transition to a net zero economy.
“Leasing Round 4 is the next chapter in this remarkable transition, developed and refined through extensive engagement with the market and stakeholders, to deliver an attractive, fair, objective process, which helps to balance a range of interests in the marine environment.
“Round 4 projects will take the UK sector from strength to strength, delivering clean, affordable, home-grown electricity and joining a robust pipeline of projects in UK waters, which together will deliver a fourfold increase in operational offshore wind capacity by 2030”.
The estate’s last major licensing round for offshore wind took place a decade ago, with winners including Britain’s SSE and Norway’s Statkraft announced in early 2010.
Britain currently has around 9.3GW of operational offshore wind capacity, with over 8 per cent of the country’s electricity coming from offshore wind in 2018.
This includes the world’s largest fully operation offshore wind farm, Orsted’s 659 megawatt Walney Extension project off the coast of Cumbria.
Crown Estate Scotland is also set to launch an offshore wind seabed licensing round for sites off the Scottish coast in October.
Hugh McNeal, Chief Executive of industry body RenewableUK said: “It’s great to see the UK stepping up its ambition with a new round of offshore wind development now underway. This will engender further momentum in our world-leading offshore wind sector, securing billions of pounds in investment in new infrastructure.
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“These powerhouses of the future will create thousands of highly-skilled jobs, continuing the rapid regeneration of our coastal communities, as well as benefitting our UK-wide supply chain.”
Jonathan Marshall, head of analysis at the Energy and Climate Intelligence Unit, also welcomed the move.
He told The Independent: “The more people we have competing for the contracts that underpin offshore wind, the more competitive it is and the lower prices will be, so the less we’ll be paying for our electricity.”
He added: “The amount of offshore wind the UK needs to build to meet its carbon targets is quite significant.”
“If the government wants to stay within any sort of distance of its carbon targets it’s going to have to allocate more and more offshore wind.
Andrew Cooper, the Green Party’s energy spokesperson, told The Independent: “Our preference is for publicly or community owned wind farms where energy is generated for the common good rather than private or corporate gain, but we can’t let the perfect be the enemy of the good. We have a climate emergency and we need to generate energy from clean sources urgently so we welcome any positive action that addresses the climate crisis.
“We would also ask the royal estate to invest the share they receive from the wind farm into further actions which reduce carbon emissions preferably to benefit people on lower incomes and those in fuel poverty.”
Additional reporting by Reuters