4C Offshore – Offshore Wind 2021

4C Offshore – Offshore Wind 2021

2021 Outlook – without guilt but can UK’s offshore wind keep its crown?

2021 will be a landmark year for the UK offshore wind industry, setting the scene for this decade and beyond

Capacity awarded in this year’s Contracts for Difference Auction and site leasing rounds will be critical in maintaining the rate and scale of decarbonisation needed to meet the UK’s 40GW by 2030 offshore wind target and wider ambitions for net-zero emissions by 2050.

UK leads the way

The offshore wind industry has become one of the country’s most prized industrial success stories and is expected to boom over the next few years. According to a speech given by British Prime Minister Boris Johnson, the UK would become… “The world leader in clean wind energy. Your kettle, your washing machine, your cooker, your heating, your plug-in electric vehicle – the whole lot of them will get their juice cleanly and without guilt from the breezes that blow around these islands,” he stated.

There is currently 20.3GW of offshore wind either operational, underway, or having secured a CfD in the UK with 2,300 turbines spinning off the coast. Over the next year 4.8GW will be under construction including the world’s largest offshore wind farm. Ørsted’s 1.4GW Hornsea Two windfarm will feature 165 Siemens Gamesa 8MW turbines which stand at 204m high. When operational in 2022 the project will feature enough clean energy to power over 1.3 million homes in the UK.

Preparing for this year’s CfD bidding war

The government plans to attract investment for offshore wind from the private sector through a major contract auction this year. The Contract for Difference (CfD) model is the government’s main mechanism for supporting low-carbon electricity generation.

The previous CfD round, held in 2019, saw the cost of offshore wind fall to a record low of £40/MWh. This represents a 74% drop in costs since the introduction of competitive allocation. Offshore wind is now considered competitive with gas and cheaper than nuclear, with further cost declines expected.

Prime Minister Boris Johnson recently confirmed support for up to 12GW of renewable energy capacity in this year’s CfD auction. This is double the 5.8GW of contracts awarded in the previous auction.

All previous CfD auctions have been hampered by delays and 2021 is no exception. The global pandemic has pushed the auction back to late 2021. This will enable projects lodged with the planning inspectorate to achieve consent before the auction, ensuring that there is sufficient competition.

Competitive showdown

A big Scottish Power vs Vattenfall showdown is expected in East Anglia with the 3.1GW East Anglia Hub and sister projects Norfolk Vanguard and Boreas (3.6GW) due to go head to head. Both companies are adopting an economies of scale approach which was successful for the Dogger Bank project in the 2019 auction. Other likely contenders include: Ocean Wind’s 950MW Moray West; Ørsted’s 2.4GW Hornsea Three; and Red Rock Power’s 1GW Inch Cape project. But for some success hinges on projects achieving the necessary consents from the Planning Inspectorate.

Subsequent CfD auctions are to be held biennially, but industry is calling for this to be increased to every year to ensure the UK meets 2030 targets. With an additional government commitment for 1GW of floating offshore wind by 2030, it’s also likely that floating offshore wind will be ring-fenced in the 2021 and future auctions.

New Leases offer long term potential

Two leasing rounds are currently ongoing in the UK, with the aim of awarding the next generation of offshore wind sites to developers.

As the UK seabed landlord, the Crown Estate will grant leases for at least 7GW of new offshore wind capacity off the coasts of England and Wales. COVID-19 has delayed proceedings and bidding cycles will now start in 2021 with leases to be awarded spring 2022.

The Crown Estate Scotland is also looking to award 8,600km2 and up to 10GW off the Scottish coastline. Developers have until March 2021 to submit proposals. It is expected that these sites will help catalyse the UK floating offshore wind industry, with the majority of sites having water depths exceeding 60m.

An optimistic schedule, depending on consenting and reaching financial close, could see the first phase of new lease sites starting construction and potentially operations from 2030.

Understanding the market

The UK is leading the way for offshore wind but other markets are also ramping up ambitions across the globe. 4C Offshore’s team of industry leading experts forecast that 233GW could be installed or underway across the world by 2030.

4C is a consultancy and market research organisation specialising in the global offshore wind and subsea electricity markets. With over ten years of experience they provide unparalleled insight into key industry trends and demands, emerging technologies and market context e.g. policies and regulation, project pipelines.

4C offers a range of tailored intelligence services as well as bespoke research and analysis, GIS, exclusive industry news and subsea engineering expertise.

Bridget Randall-Smith

4C Offshore