UK Round 4 Offshore Wind Winners to Start Paying Option Fees with Lease Agreements Now Signed

Contracts & Tenders

The Crown Estate has signed Agreements for Lease for all six offshore wind projects selected in the UK’s Round 4 offshore wind seabed leasing. This enables the developers to now further progress their plans and also kicks off the period in which they will be paying annual option fees of almost GBP 900 million to The Crown Estate and HM Treasury.

Image source: The Crown Estate (archive)

The six offshore wind farms are RWE’s Dogger Bank South East & West (3 GW), EnBW and BP’s Morgan and Mona (3 GW), TotalEnergies and Corio Generation’s Outer Dowsing (1.5 GW), and Cobra and Flotation Energy’s Morecambe (480 MW).

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The lease agreements follow The Crown Estate’s Round 4 seabed leasing that resulted in the six projects being selected to move forward at the beginning of 2021, the completion of the Plan-Level Habitats Regulations Assessment (HRA) in April 2022, and the final decision to proceed that The Crown Estate reached in August 2022.

By signing the Agreements for Lease, which can be in effect for a maximum of ten years, the developers have committed to at least three years of option payments and will pay an annual option fee for each project until they are ready to enter into a lease for the seabed site.

The Crown Estate; Offshore Wind Leasing Round 4 – Tender process outcome

The option payments, totalling some GBP 879 million per year, reduce as a project moves into a lease, or leases, and cease when a lease(s) for the maximum capacity/whole site is granted, at which point developers will move to paying rent. 

“The option fee sum was determined by the project developers themselves through an open market process to ensure fair value for seabed rights was captured. Option fees will contribute toward The Crown Estate’s net revenue profit, 100% of which is paid to HM Treasury for the benefit of the nation”, The Crown Estate says.

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The six offshore wind farms, which have the potential to generate about 8 GW of renewable electricity, could begin to generate renewable electricity by the end of the decade and produce enough electricity to power more than seven million homes.

CORRECTION NOTE: The article has been amended to say that the annual option payments total some GBP 879 million instead of the initially written GBP 979 million.

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