ScotWind results light blue touch paper on floating growth
The results are finally in. 17 successful bids have been announced by Crown Estate Scotland, which if agreed, consented and financed will deliver almost 25GW of offshore wind in Scottish waters.
That is a huge step for Scottish offshore wind which has languished while other markets have surged ahead over the last decade. In part this has been because of the more challenging conditions in Scotland compared to other areas such as the east of England.
However, as detailed in the 2021 Strategic Investment Assessment, coordinated by LumenEE Director Maf Smith for SOWEC, a challenge for Scotland has been the delay in consenting and also of schemes being cancelled. That delay cannot be allowed to happen again.
Here though, let's try to look at these ScotWind projects in context to get a clearer idea of the scale of what is on offer.
A quick look at who has been successful shows that there is a wide mix of developers, with new partnerships also on show. Some such as Falck are new to offshore wind, while others such as ScottishPower are old hands. There are also a large number of players new to the Scottish market attracted in by the size of opportunity. Our analysis of who's who is below.
The 25GW announced is well in excess of the 10GW capacity proposed by ScotWind. The overall potential capacity of the different zones was 26GW, so essentially high volume of bids (and enough bids to avoid overlapping projects) have meant that Crown Estate Scotland has been able to award more than its publically stated figure. The bulk of different zones are full or nearly full to capacity, with only 1 zone not utlised. That is good news both in terms of pipeline and level of investment of course.
The Scottish Government has estimated that each GW will deliver at least £1bn of value in terms of supply chain contracts, if built. That level of activity and contracts could be transformative for Scottish projects. Current Scottish and UK content levels are close to 50%, but the clear aspiration is to move this percentage upwards. The maths here is simple - each additional 1% growth in UK content will mean an additional £10m value to Scotland per GW delivered, so a shift from 50% to 60% will mean an additional £2.5bn across the 25GW ScotWind programme.
Delivering that additional value will require coordination between government, agencies and industry. A critical piece of this work is coordination between ports and industry to embed Scottish manufacturing around new component needs such as floating wind platforms. Prior to bid success, a number of companies including Ideol, Ocean Winds and BP made significant commitments. It will be interesting to see how these individual commitments now stack up and how the sector can work together to make these individual important investments add up to more than the sum of their parts.
A vital element of ScotWind is the high proportion of floating offshore wind projects. Almost 60% of bids are to develop floating projects.
A quick look at the list of who's who shows a mix of partners. There is important floating expertise within many of these teams, including platform companies and floating specialists. However, not a single developer in this list has experience of building floating offshore wind at scale. The sector will need to mature rapidly, with vital considration given to how to build port capacity and capability. Scotland, alongside early markets like South Korea looks to be an important learning zone for how to build floating offshore wind at scale.
How big is ScotWind?
At 25GW in size, including 14GW of floating projects, ScotWind is certainly big and transformative even to a large offshore wind market like the UK. But how big is it in comparison to other market activity?
First, in comparison to what is already happening in Scotland, it marks a huge step change. Right now 3.4GW of offshore wind is either in construction or in operation. Before ScotWind there was "only" a further 7GW at different stages of consent or development. So adding in a further 25GW will radically change the size of the pipeline.
Looked at on a UK basis, ScotWind is also significant. 61GW of capacity is in development across the UK. ScotWind's 25GW, plus another 5GW in development as well as the forthcoming INTOG leasing round will mean a shift in focus from England to Scotland, with at least 50% of future activity based here (at least until The Crown Estate finalise plans for the Celtic Sea).
On a global basis, ScotWind is also important, but probably not world beating. Other markets such as South Korea already have major pipelines of defined floating projects, with many others now growing rapidly. GWEC forecasts that by 2030 some 16.4GW of floating projects will be in operation and is tracking over 60GW of floating projects in development.
16.4GW by 2030 would mean significant growth from the 120MW in operation today. But this growth hides the fact that the major growth for floating offshore wind is likely to be in the 2030s when a second generation of projects start to come on line. That wider pipeline of 60+GW is likely only the tip of the iceberg.
How quickly this pipeline can develop in the early 2030s will define out whether these Scottish floating projects will be world beating or not. The UK Government has a target of 1GW of floating projects by 2030. ORE Catapult and others have suggested that this ambition could be raised to 2GW for 2030, but even this highlights that the bulk of UK projects will not be delivered until after 2030.
The 2030 milestone is not one of great significance. But it does help highlight that projects built out later will be built using learning from a first generation of schemes built in the late 2020s. Scotland must therefore work hard to help at least some of this 14GW move to operation quickly so that it is Scottish companies doing the learning and offering their expertise to the world.
That means having a streamlined consenting system, a transmission system ready to connect, and ports ready to deliver. There are good signs across all these indicators, but also concerns to be addressed.
Right now the offshore wind industry is split into those who were successful, and those who's bids were rejected and starting a post-mortem. But the scale of projects going ahead still demonstrates the size of opportunity for the successful ones and a much wider supply chain. ScotWind's nominal capacity was for 10GW so the 2.5x increase certainly means more opportunity. But it also signals that floating offshore wind and a Scottish supply chain will be doing a lot of growing up in public over the next few years.