RenewableUK Voices Concerns Over Round 4 Option Fees

RenewableUK has welcomed the selection of preferred bidders at the Crown Estate’s Offshore Wind Leasing Round 4, but warned about the effect of the option fees on developers and, ultimately, consumers.

RenewableUK’s Deputy Chief Executive Melanie Onn; Photo: RenewableUK

The Crown Estate has selected six projects that will now move to the next stage of the process, whose developers have committed to the investment of a total of GBP 879 million (around EUR 1 billion) in option fee deposits. 

This is the first time that option fees were part of a bidding process for offshore wind farms in the UK. The Crown Estate previously had set fixed annual option fees.

The tender participants were invited to submit bids for an option fee for each of the six areas of seabed made available in Round 4. The fees will be paid annually after the award of seabed rights (expected to take place in 2022) and until companies finalise their plans to build the new wind farms, up to a maximum of ten years.

RenewableUK said that the demand for new offshore wind projects has never been higher and too few sites were made available, which resulted in very high bids. The nearly 8 GW awarded in Round 4 is significantly lower than the 32 GW secured in Round 3 in 2010, the organisation said.

According to the Crown Estate, the option fees will contribute to its annual profits and will be entirely paid to the Treasury for the benefit of the nation.

However, RenewableUK voiced its concern about the high option fees resulting from the latest leasing round could raise project costs for the developers and ultimately fall onto the consumers.

“The result of this leasing round shows that while demand for new offshore wind projects has never been higher, too few sites were made available to meet this demand. Any auction run on that basis will inevitably lead to high fees like these, and our concern is that this could ultimately mean higher costs for developers and consumers”, said RenewableUK’s Deputy Chief Executive Melanie Onn. “Going forward we need more clarity from the Crown Estate on the timing, size and speed of future leasing rounds. Sustainable competition and prices are vital for consumers, industry and the supply chain”.

The selected projects will now move to the Plan-Level Habitats Regulations Assessment (HRA) process, which is expected to conclude in Spring 2022, after which the Crown Estate will award the seabed rights.

The bidders selected for the six Round 4 sites are: RWE, a consortium of BP and EnBW, a joint venture between Total and GIG, and a joint venture between Cobra Instalaciones y Servicios and Flotation Energy.