Crown Estate Scotland has extended the application window for its ScotWind offshore wind leasing round to give itself time to conduct a review of the option fee arrangements.
The corporation, which is owned by the Scottish government, said it took the decision in response to the high option fees that emerged in the recent tender for The Crown Estate’s fourth offshore wind leasing round and with the support of Scottish ministers.
However, an industry source told Utility Week it was their understanding that ministers had put pressure on Crown Estate Scotland to undertake the review over fears they were selling the rights for too little.
Crown Estate Scotland said they are aiming to finish the review by 24 March 2021. It said the deadline for applications will now be later than 31 March 2021 and that the updated date will be confirmed upon its completion.
Amanda Bryan, chair of Crown Estate Scotland, said: “The unprecedented outcome of The Crown Estate Round 4 process has, overnight, changed the market dynamics around offshore wind leasing, and could have significant implications for offshore wind development in Scotland. It is only right that we consider the implications of this new situation in relation to ScotWind Leasing.
“Our team will now work on the details of how these latest developments can be properly reflected in the ScotWind Leasing option structure, and we’ll ensure our registered applicants, and the wider sector, continue to be kept engaged and informed.”
Roseanna Cunningham, cabinet secretary for environment, climate change and land reform, said: “It is the Scottish Government’s responsibility to secure a fair price for the seabed sites being leased for offshore wind developments around Scotland and to make sure that the people of Scotland benefit fully from decisions taken in relation to the Scottish Crown Estate.
“In light of the significant changes that we are now seeing in the wider UK offshore wind market, ministers have agreed with Crown Estate Scotland that it would be sensible to review our leasing process in order to fully consider the implications of recent auction outcome announcement by The Crown Estate UK for sites around England and Wales.”
The industry source said ministers are worried Crown Estate Scotland is “selling off the family silver” for a lot less than it is worth.
A launch document for ScotWind stated that applicants would be able to enter bids at three pre-defined prices – £2,000/km², £6,000/km² or £10,000/km². It said approximately 2,000 km² of seabed would be required to deliver up to 10GW of generating capacity and that a maximum of 8,600 km² would be available.
If rights were awarded for 2,000 km² of seabed, then the one-off option fees would therefore range from £4 million to £20 million. If rights were awarded for the full 8,600 km², then they would amount to between £17.2 million and £86 million.
The options fees for The Crown Estate’s fourth offshore wind leasing round were for the first time determined through a competitive bidding process, rather than being set in advance. The successful applicants agreed to pay annual fees totalling £879 million for the almost 8GW of generation capacity they are developing. They will continue to pay the fees until they finalise their plans, up to a maximum of ten years.
A spokesperson for the Scottish government denied that ministers had leant on Crown Estate Scotland to launch the review: “This is simply not true. The recommendation to review the ScotWind process was put forward by Crown Estate Scotland, in light of the significant changes to the wider UK offshore wind market caused by the outcome of UK Crown Estate Round 4 process.
“It is the joint responsibility of both the Scottish Government and Crown Estate Scotland to secure a fair price for the seabed sites being leased for offshore wind developments around Scotland and to make sure that the people of Scotland benefit fully from decisions taken in relation to the Scottish Crown Estate.”
A spokesperson for Crown Estate Scotland also reiterated that the decision was its own.
RenewableUK expressed disappointment over the delay, which it warned would be detrimental to investor confidence.
Deputy chief executive Melanie Onn said: “Offshore wind developers will be dismayed by this latest delay to ScotWind, coming just weeks after Crown Estate Scotland opened applications for new leases. Having spent over a year setting out the process for awarding these new leases and making clear to developers what is required from them, Crown Estate Scotland is now rewriting the rules at the eleventh hour.
“Scotland has a unique opportunity to secure billions of pounds of investment in new renewable energy projects which will support thousands of jobs across the supply chain. Delays and U-turns are bad for investor confidence and for Scotland’s position as a world leader in offshore wind”.