ScotWind: 5 talking points from 25GW tender

This week started with ‘Blue Monday’. That is the day spuriously dubbed the ‘most depressing of the year’ following a PR campaign in 2005. However, for the offshore wind industry it was anything but depressing.

The sector’s eyes were on Scotland at 10am local time as the Crown Estate Scotland shared the winners of the ScotWind seabed tender. The Crown has picked winners to develop 17 sites totalling 8,600 sq km, after looking through 74 applications, and is set to receive just under £700m in option fees.

Here are the winners by zone number:

1. BP and EnBW for 2.9GW Morven project (fixed)
2. SSE, Marubeni and CIP for 2.6GW project (floating)
3. Falck, BlueFloat and Quantum for 1.2GW (floating)
4. Shell, Scottish Power Renewables and Eolfi for 2GW CampionWind (floating)
5. Vattenfall and Fred. Olsen Renewables for 798MW (floating)
6. DEME, Aspiravi, Qair and Otary for 1GW (fixed)
7. DEME, Aspiravi, Qair and Otary for 1GW (floating)
8. Falck, BlueFloat, Quantum and Ørsted for 1GW (floating)
9. Ocean Winds (EDPR and Engie) for 1GW (fixed)
10. Falck, BlueFloat and Quantum for 500MW (floating)
11. Scottish Power Renewables and Shell for 3GW MarramWind (floating)
12. Floating Energy Allyance (BayWa, BW Ideol and Elicio) for 960MW (floating)
13. TotalEnergies, GIG (Macquarie) and RIDG for 2GW West of Orkney (fixed)
14. Northland Power for 1.5GW (floating)
15. Magnora Offshore Wind for 495MW (fixed and floating)
16. Northland Power for 840MW (fixed)
17. Scottish Power Renewables for 2GW MachairWind (fixed)

This enabled the the Crown to award leases for projects totalling 25GW, which is two-and-a-half times the 10GW it was originally targeting. But what does it all mean? Here are our five main observations so far:

1. Floating wind made up 15GW of the 25GW total

We said earlier this month that the sector’s eyes would be on floating projects in this leasing round, and it did not disappoint. Floating accounted for 60% of the total capacity awarded (15GW of the total 25GW), across 11 projects.

This shows that utilities and developers are confident in the commercial side of these projects, but now the pressure is on to overcome technical challenges to deliver. The largest working floating wind farm today is the 50MW Kincardine. It will take a huge leap technically and financially to realise projects of 15GW.

Offshore wind has often shown it can make major leaps to deliver projects that would have been previously unthinkable. Now it must do so again.

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2. Option fee rules put emphasis on local content plans

‍The Crown paused ScotWind in early 2021 after winners in a seabed leasing process south of the border in February 2021 had to pay huge option fees.

It eventually decided to move ahead with the process while raising the cap on option fees tenfold to £100,000/sq km and forcing bidders to focus more on pledges to invest in local communities through Supply Chain Development Statements. This is a step that should help to boost winners’ social license to operate in Scotland, which has often lost out on investment as cost has forced developers to look overseas.

The result is £700m of option fees will now flow to the Scottish Government for use in public spending, and developers must now deliver promised local investment. There will be an uproar if they don't.

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3. Oil giants pick up big wins – but don’t dominate

‍Oil giants dominated the last UK seabed auction in early 2021, but not here.

There were big wins for BP, Shell and Total, which were in the bidding groups for four of the largest six projects, totalling 9.9GW (or around 40% of the total awarded). That is to be expected given the huge capital requirements of these schemes. These four projects were also split equally between fixed and floating developments, which means oil giants certainly did not dominate on lower risk fixed projects either.

However, wins for the likes of BayWa, Falck Renewables and Northland Power show there are still opportunities in offshore wind for ‘smaller’ players.

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‍4. Green hydrogen projects make strides‍

One notable feature of this auction is the inclusion of green hydrogen projects, such as the Total, GIG and RIDG 2GW West of Orkney wind farm, which is set to power the large Flotta Hydrogen Hub on Orkney. This will be a good case study as we look at the evolution of wind-and-hydrogen projects.

BP and EnBW have also committed to green hydrogen in their 2.9GW project, and we would expect others to follow suit as well.

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5. Disappointment for Eni, Equinor and Red Rock‍

Where there are winners, there must be losers – and losing bidders this time included Aker, Eni, Equinor, ESB, Mainstream Renewable Power, and Red Rock.

The result looks especially tough on Equinor, which has established itself as a leader in floating wind with its Hywind Scotland floating project. However, sealing a 2.5GW power supply deal alongside BP for offshore wind in New York (see news, below) will lessen the sting.

Monday may have been blue for these companies. For the rest of the industry, the mood was of jubilation. Now it’s time to deliver.