The UK Prime Minister Boris Johnson announced today his ambition for UK offshore wind to generate 40GW of electricity by 2030.
The UK is well on the way to achieving this already, and the International Energy Agency predicts it will continue to lead Europe’s offshore wind market to 2030.1 But what are the next steps to delivering this target? How can the UK strengthen its regulatory regime to support this ambition?
The offshore wind industry is already taking off in the UK, in part due to the supportive and stable regulatory regime, a streamlined consenting procedure, and the well-established and understood financial support package in the form of CfDs.
To further strengthen the existing financial support mechanisms to maintain private investment in the sector, we anticipate that, pursuant to the UK Government’s consultation2 in respect of the fourth CfD allocation round (which is planned to open in 2021), the Government will implement its proposals to:
- Separate fixed offshore wind into its own CfD allocation pot (guaranteeing support for this technology);
- Treat floating offshore wind as a separate category from fixed offshore wind for CfD allocation (in line with the different stage of commercialisation and risk associated with this technology); and
- Extend delivery years under the CfD to cover projects commissioning up to 31 March 2030 (rather than 31 March 2026, thereby plugging the gap in time to the target).
The other key aspect to consider when looking forward to 2030 is the evolution of offshore wind technology. Floating turbines are already moving from the conceptual to commercial phase development. With the expansion of this technology, new geographical areas will be made available for generation, but with this comes the technical challenge of managing increasing transmission distances. Unlike traditional offshore oil and gas, where the extracted energy can be packaged and transported readily to a use point, electricity will suffer losses when it is transmitted over long distances. The technological solutions for managing this are still being developed. Options include HVDC transmission, which is a maturing technology, but one other option key to delivering a net zero energy system, and which will require regulatory amendments, is to develop integrated offshore energy opportunities.
The UK Oil and Gas Authority, Department for Business, Energy and Industrial Strategy, the Crown Estate and Ofgem are already working together to assess and evaluate opportunities and barriers for UKCS energy integration3. Options assessed with potential for development prior to 2030 include electrification of existing oil and gas production, carbon capture and storage, and production of blue hydrogen. In the 2030s, they think this could be built up further to achieve green hydrogen production, and integrated into large-scale offshore energy hubs with other technologies.
The regulatory regime is not currently designed or equipped to support these integrated developments, and significant further work is needed to achieve this.
We look forward to helping our clients navigate this rapidly evolving area.
1 IEA Offshore Wind Outlook 2019
2 Contracts for Difference for Low Carbon Electricity Generation: Consultation on proposed amendments to the scheme (closed 29 May 2020), available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/885248/cfd-ar4-proposed-amendments-consultation.pdf
3 UKCS Energy Integration: Final Report (published 6 August 2020), available at: https://www.ogauthority.co.uk/media/6625/ukcs_energy_integration_phase-ii_report_website-version-final.pdf; and see our HSF Energy Notes post covering the report, Essential to act now – CCS and hydrogen vital to UK’s decarbonisation and transition to clean energy by 2050.