Wind in the sails
Last month, the winners of the first Scottish offshore wind leasing round in over a decade were announced. Some of the world’s biggest energy firms were among the 17 successful bidders to build the next generation of wind farms in Scotland’s waters.
The winning projects cover an area of seabed spanning more than 7,000km2, with a combined capacity of 24GW - more than double what was anticipated, and far more than the 5GW Scotland currently needs.
And because this was the first leasing round since the management of Scottish Crown Estate assets were devolved to St Andrew’s House as a result of the post-referendum Smith Commission, the Scottish Government are in line for a £699,200,000 payout.
Nicola Sturgeon hailed it as a “transformational” opportunity. “ScotWind puts Scotland at the forefront of the global development of offshore wind, represents a massive step forward in our transition to net zero, and will help deliver the supply chain investments and high-quality jobs that will make the climate transition a fair one,” she said in a statement after news of the bidding round was announced.
The scale of the leasing round wouldn’t just allow Scotland to meet its energy needs from renewable sources, she said, but to become a major exporter of renewable energy, including green hydrogen, too.
Others were underwhelmed by the deals, with the First Minister’s opponents on the left accusing her of selling Scotland’s wind on the cheap.
“It looks like the Scottish Government have surrendered vast chunks of the North Sea wind resource for a relative pittance just as Westminster gave away Scotland’s oil in the 1970s,” complained Alba MP Kenny MacAskill.
Labour’s Colin Smyth said Scotland’s seabeds were “now being franchised entirely to private, overseas-owned big multinationals and investment funds”.
“It will raise around £700m to the public purse, but billions more for firms, none of which are registered in Scotland or owned in Scotland,” he added.
Trying to quantify the value of the ScotWind bids is no mean feat. It goes far beyond the money raised upfront. Each of the 74 tenders had to include a commitment to “local content”.
Under the agreement, offshore wind developers had to promise supply chain commitments that would see Scottish companies benefit. According to the Crown Estate, “initial indications suggest a multi-billion pound supply chain investment in Scotland”.
We don’t yet know what these commitments are - though the government has said the developers will invest at least £1bn in the Scottish supply chain for every GW generated via ScotWind projects.
Details of each successful bidder’s supply chain development statement will only be published when they’ve signed a full agreement.
These statements would, energy minister Michael Matheson told MSPs, make sure “Scottish communities reap the maximum possible economic benefits from ScotWind projects”.
“These statements are not only an indication of what Scotland can achieve, they are our expectation of what the winners will deliver for Scotland,” he added.
As early as last year, BP was promising that in return for a successful bid they would “unlock a number of investments” including making Scotland the company’s “global centre for offshore wind excellence”.
In a consortium with German firm EnBW, the energy giant said they could “bring multi-billion pound investments into Scottish offshore wind projects and supporting infrastructure, including ports, harbours and shipyards”.
They even promised to “invest in net-zero industries, including green hydrogen production and significantly accelerating the expansion of Scotland’s EV charging network”. This would, they added, “represent up to £10bn of investment in support of offshore wind and Scotland’s energy transition”. They were successful, winning the rights to the largest prospect, costing them £85.9m.
The site, which they’ve named Morven, is around 860km2 some 60km off the coast of Aberdeen, and will see a fixed-bottom offshore wind project developed with a total generating capacity of around 2.9GW, sufficient to power more than three million homes.
Other winners include Scottish Power, which was awarded the seabed rights to develop three new offshore windfarms. These include two new floating windfarms being developed in conjunction with Shell.
The Scottish Power projects have a total capacity of 7GW, the potential to create enough clean energy to power almost 8.5 million homes. It’s worth noting here that at least 10 of the 17 ScotWind projects are for floating wind power, which means turbines will need to be bigger and will be positioned further offshore.
The Scottish Power developments off the north east and east coast, will be among the world’s first large-scale floating offshore windfarms, and will, the firm says, “kickstart a new green global offshore industry – with Scotland and the UK leading the way”. “Scotland is the windiest country in Europe,” Scottish Power CEO, Keith Anderson, said.
He added that ScotWind would “help create a whole new industry in floating wind that will play a crucial role in putting the country on course for a cleaner and greener future”. Two of the successful bids have been tabled by state-owned firms. Sweden’s Vattenfall is the lead partner on a wind farm site approximately 67km off the east coast.
Meanwhile, Ørsted, the world’s largest developer of offshore wind power, whose majority shareholder is the Danish government, has teamed up with Falck Renewables on a site around 50km east of Wick.
It’s their first large-scale floating wind development project anywhere in the world, as well as the company’s first offshore wind project in Scotland.
The success of the Nordic state-owned firms has led to questions over why there was no publicly backed Scottish firm benefiting from the leasing round.
“Scotland set to lose billions in windfarm profits,” said one paper, quoting research from the CommonWeal thinktank, which claimed the “failure to create a state-owned energy company which could have sold the new ScotWind electricity to the grid and retained operating profits, has led to concerns that the nation will lose between £3.5bn and £5.5bn every year”.
Though, given the eye-watering sums involved in initially developing each project, it would be a massive gamble for any administration to take.
It’s not just the monetary value of ScotWind that’s been raised in the weeks since the successful bidders were announced.
SSE Renewables has teamed up with Japanese conglomerate Marubeni Corporation and Danish fund management company Copenhagen Infrastructure Partners to develop 858km2 in the Firth of Forth. Just two years ago Marubeni was fined $88m after admitting to bribing Indonesian government officials to secure a lucrative power project.
Meanwhile, France’s TotalEnergies, which is in a consortium that has secured rights to develop a wind farm off the west coast of Orkney, has been implicated in historical claims that the military in Burma used forced labour and its soldiers had employed murder and rape in the laying of a pipeline through the country.
Three days after the ScotWind announcement, the firm said it would be leaving Myanmar, where, ever since a coup in February 2021, revenue from the gas production at their Yadana field had, it has been claimed, flown directly to the military dictatorship.
“Surely these aren’t people the Scottish Government should be doing business with,” Labour leader Anas Sarwar said during a recent session of First Minister’s Questions.
Sturgeon said there were “appropriate processes in place to do due diligence”. We’re still a long way from the projects coming to fruition.
That upfront money that the 17 firms pay now only secures the rights to develop those areas of seabed within 10 years. If that doesn’t happen the Crown Estate can sell it on again. But it seems unlikely that any of the firms that go to final agreement here will walk away, especially after handing over millions to the Scottish Government.
The biggest obstacles will be in the cost of development - manufacturing of turbines, and jackets, the anchoring legs for the wind farms.
That doesn’t necessarily bode well for Scotland - firms looking to cut costs could instead go abroad. Cheaper coal-fired energy and low-paid workers, as well being able to do the job at scale, means it’s more efficient for firms to have the turbines and jackets shipped from China
That’s what SSE did last year, with Seagreen, a farm with a capacity of 1.075GW being developed just 30 miles out to sea from Methil, where the BiFab fabrication site was based.
On the leases themselves, when the projects are developed, the Crown Estate gets an annual fee which is then passed on to the Scottish Government. This is still just the first stage in a very long process.
Before we see turbines into the water, the consortiums behind each of the projects will need to go through a rigorous consenting and planning process.
It could be years before we see a ScotWind turbine in the water, but there’s no doubt that Scotland is on the cusp of something exciting.