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Is cash behind ScotWind delays?

© PRESS AND JOURNALThe large floating crane barge, Seajacks Scylla loads wind turbine base platforms at Nigg Energy Park for the Moray East offshore wind farm
The large floating crane barge, Seajacks Scylla loads wind turbine base platforms at Nigg Energy Park for the Moray East offshore wind farm

Does anything ever go right for the ambition to turn Scotland’s renewable energy resources into actual jobs? Waiting for Godot was a brief intermission by comparison with delays in matching that rhetoric to reality.

That background helps explain suspicions attracted by the latest apparent setback – a further delay to the allocation of leases under the ScotWind programme of massive offshore wind farms.

Over the past couple of years, a great deal of hope has been vested in the ScotWind programme, which requires the Crown Estate’s Scottish offshoot to allocate seabed leases for the development of 17 large wind farms round our coast.

Would-be developers have been spending significant amounts of money on drawing up their bids. The more pro-active ones have been interacting with local authorities and supply chain companies to stake out potential for engagement with coastal communities. Once again, hopes and expectations have been raised.

Now, once again, that process has been held up for reasons that are, to most of the population, opaque. Crown Estate Scotland announced last month that it would carry out a review of the “option structure” for leases, to be completed by March 24. Only at this point will it provide a new deadline for applications, which had been in the diary for March 31.

So what is the change in circumstances which has driven the decision to put the Scottish competition on hold? It is what has happened in England and Wales that has prompted the sudden foot on the brakes to allow for a “review” with, one suspects, the pound signs flashing in ministerial eyes.

Unlike the Crown Estate in England and Wales, Crown Estate Scotland did not launch the competition for leases as a straightforward auction. The alternative concept of “best project” is flexible enough to take account of commitments to the Scottish and local economies rather than being based purely on the highest bid. And quite right too.

Now, according to Amanda Bryan, chair of Crown Estate Scotland:  “The unprecedented outcome of the Crown Estate Round 4 process (in England and Wales) has, overnight, changed the market dynamics around offshore wind leasing, and could have significant implications for development in Scotland. It is only right that we consider the implications of this new situation in relation to ScotWind Leasing.

“Our team will now work on the details of how these latest developments can be properly reflected in the ScotWind Leasing option structure, and we’ll ensure our registered applicants, and the wider sector, continue to be kept engaged and informed.”

What, one wonders, does “properly reflected” mean?  And are we entitled to become a little more curious when the environment secretary at Holyrood, Roseanna Cunningham, adds that it is “the government’s responsibility to secure a fair price for the seabed sites being leased”?

Might the aim now be to follow the Crown Estate model in England and Wales in order to maximise short-term revenue from the Scottish sites for the Scottish Government’s finances, rather than give priority to the wider socio-economic value of the bids? All I seek is clarity in response to the question – what exactly is being reviewed?

The issue with the England and Wales auction is that it has raised far more money than was anticipated. This is attributed to oil companies entering the fray with eye-watering bids, so that the auction resulted in a potential windfall to the Crown Estate of £8.8 billion in “option fees”, payable to the Crown Estate over 10 years.

As the oil companies seek to greenwash themselves and also hedge against declining value in the oil and gas sectors, they have entered into these fierce bidding wars to secure offshore wind leases.

That might be good news for the Treasury which gets three-quarters of the proceeds and the royal household which gets the rest. But for all other practical purposes, these enormous, speculative bids give rise to more questions than answers.

Securing the leases is only the first of two steps to be overcome. The next is to enter a competition for subsidy under Contracts for Difference (CfD). So how are these huge initial payments going to skewer that market?

Will these projects ever come to fruition? What will the impact be on  consumers if the outlay on leases is then recouped through CfD? What are the implications for established wind farm developers who might be squeezed out of the market by this sudden orgy of wealth?

What are the potential implications for Scotland? If a revised approach emerges from the review and oil companies come along with the same monster bids, will Crown Estate Scotland take the money, regardless of all else? Or will the current approach be maintained with due account taken of (a) the projects actually happening and (b) tangible commitments in terms of jobs and community benefits?

There is a strong counter-argument for the Scottish Government to factor in, which is that keeping the leasing costs low, as is current policy, will make it more likely that Scottish projects will be competitive when they enter the UK-wide bidding for CfD. Making the projects actually happen must surely be the priority.

It may be understandable that the Scottish Government and Crown Estate Scotland want to “review” their options in the light of what has emerged elsewhere in the UK. However, there need be no delay in providing reassurance that the parameters and objectives of that review will not be driven by the lure of a short-fall windfall.

Brian Wilson is a former UK energy minister

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