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Scotland’s Opportunity to Lead the World in Offshore Wind

The ScotWind offshore wind leasing round announced last week represents a huge leap forward in the industrial future of the country. Crown Estate Scotland awarded projects totalling almost 25 GW around Scotland. If fully realised this would be enough clean electricity to power more than 8.5 million homes. This is around three times as many homes as are in Scotland.

Eleven of the 17 sites have potential for floating offshore wind to be installed, placing Scotland at the forefront of the floating wind industry globally. Currently, only three projects worldwide have installed more than one floating wind turbine, with two of these projects in Scottish waters.

Major Strategic Investment

Interested organisations and consortia applied for leases through a competitive process. As part of this they were required to detail their approach to development of the projects. Applicants demonstrated their technical understanding and competence in establishing, refining and promoting large scale projects in a way that considered the human, physical and environmental effects of constructing and operating the infrastructure. 

Applicants outlined their proposed approaches to securing infrastructure requirements through a Supply Chain Development Statement, a series of documents which set out their ambition for Scottish and UK supply chain enhancement measures. This included a minimum threshold commitment of 25% overall spend in Scotland. The construction bill for major offshore windfarms can run into billions of pounds, so this represents major investment in Scotland. To achieve this the industry will create a large number of high-skilled, long-term manufacturing and construction jobs.

The bidding process required successful applicants to make a financial commitment, with applicants proposing a fee (“Option Fee”) based on the amount of seabed used. Crown Estate Scotland provided a maximum amount per km2 for the Option Fee, allowing a wider pool of applicants for prospective sites and ensuring that the technical element of the application played a part in awarding sites. The Option Fees secured by Crown Estate Scotland through this leasing round totalled nearly £700m, with projects due to pay additional fees once they enter lease agreements. Having paid high Option Fees, applicants are now likely to commit to, and progress these projects. 

Just Transition

Successful applicants comprise three broad groups: established offshore wind developers, owners and operators; organisations with a background in the oil and gas sector; and new market entrants to offshore wind development from other backgrounds (such as construction, technology design or onshore wind development).

This, together with Scotland’s position as an established renewable energy market, provided for a high degree of Foreign Direct Investment (FDI) through foreign-owned developers bringing capital into Scotland throughout the development and construction of projects. There is a strong correlation between FDI and the ability for a country to establish and grow a new market.

By awarding development rights to traditional oil and gas organisations, ScotWind has meaningfully contributed to the objectives of the Just Transition Commission, the Scottish Government’s body for overseeing a fair journey to net zero. The significant investment and commitment made by successful applicants ensures there will be a long-term, strategic approach to offshore wind development. This, by definition, improves the environmental credentials of these organisations and limits any reasonable accusation of “greenwashing”.

Supply Chain Opportunity

Second only to China, the UK has the highest amount of operational offshore wind generation in the world. While this is a major achievement, the majority of manufacturing and fabrication for these projects has taken place outside of the UK. 

A major prize of ScotWind is the opportunity to establish this supply chain infrastructure. Scotland now leads the world in offshore – and in particular floating – wind opportunities. Given the supply chain commitments made by successful applicants, and the nascent stage of the market, there is an opportunity for Scotland to become a global centre for manufacturing and fabrication capability. 

Next Steps

The next phase for these projects is to undertake environmental impact assessment, with the first projects set to achieve planning permission in around 2025, and for projects to start generating electricity from around 2028. 

Over the course of the coming years, we can expect to see major activity throughout Scotland in support of these projects through direct investment and employment, as well in related and supporting industry such as ports and transmission infrastructure.

The opportunity facing Scotland is huge, and this is an excellent step in the right direction.