RenewableUK responds to results of Round 4 offshore wind leasing process

The Crown Estate is making available six new areas of seabed to develop nearly 8 gigawatts (GW) of new offshore wind projects in the UK and the IIT 2 process has used an auction system to determine which companies will be allocated the option to develop these new sites. Companies were invited to submit bids for an ‘option fee’ for each of the available sites which will be paid annually until companies finalise their plans to build the new wind farms, up to a maximum of 10 years.

This is the first time a bidding process to set ‘option fees’ has been used in the leasing process for offshore wind farms. Previously The Crown Estate had set fixed annual option fees. The industry had warned that the limited number of sites available and high demand risked an auction that resulted in very high bids. The nearly 8GW awarded in this 4^th Leasing Round is significantly lower than the 32GW secured in the 3^rd leasing round held in 2010.

The option fees announced today totalling £879m per year, or £111m per GW per year, represent a very significant sum for developers. In comparison, developing and constructing a 1GW offshore wind farm currently requires investment of c.£2.5bn. 

Responding to the results, RenewableUK’s Deputy Chief Executive Melanie Onn said: “Offshore wind will be the backbone of our future electricity system and growing the pipeline of offshore wind projects is essential to ensure we have the capacity we need. These new sites can make a huge contribution to decarbonising our energy system and achieving net zero.

The result of this leasing round shows that while demand for new offshore wind projects has never been higher, too few sites were made available to meet this demand. Any auction run on that basis will inevitably lead to high fees like these, and our concern is that this could ultimately mean higher costs for developers and consumers.

Going forward we need more clarity from the Crown Estate on the timing, size and speed of future leasing rounds. Sustainable competition and prices are vital for consumers, industry and the supply chain”.