The government’s recently announced “Ten Point Plan” reaffirms previously pledged support for the offshore wind industry, while introducing further supply chain requirements in the Contract for Difference (CfD) and trailing future updates to onshore and offshore network strategies.
In November, the UK government announced a £12 billion “Ten Point Plan” to lead a “Green Industrial Revolution”. This plan aims to mobilise £42 billion of private investment by 2030 with the aim of reducing UK emissions by 180 million tonnes of carbon dioxide equivalent between 2023 and 2032. Point 1 on the Ten Point Plan is dedicated to offshore wind.
In particular in relation to offshore wind, government is aiming to:
- double the amount of renewables procured through the next CfD auction (due to open in late 2021);
- increase offshore wind power to 40GW by 2030; and
- include at least 1GW of innovative floating offshore wind in the targeted 40GW.
As well as increasing the amount of renewables to be procured in the next CfD auction, government aims to enable the delivery of 60% UK content in offshore wind projects through more stringent supply chain requirements in the CfD. A separate consultation on these changes has already been launched (see the separate note on this consultation from the HSF Energy team here).
On related matters, the Ten Point Plan also informs us that:
- the ongoing Offshore Transmission Network Review will set out a strategy to design and deliver offshore connections consistent with the ambition to deliver net zero emissions by 2050 – an update on the review is expected by the end of the year with clarity as to the enduring approach emerging in 2021;
- plans for smart systems and introducing competition in onshore networks will be outlined in the forthcoming Energy White Paper; and
- government is to invest £160 million into modern ports and manufacturing industry – it appears that within this £160 million commitment, up to £70 million is available under the Offshore Wind Manufacturing Investment Scheme (an award for a single large coastal manufacturing site for the offshore wind industry, open for applications until 8 January 2021, see the government scheme page here).
In relation to offshore wind generation, the Ten Point Plan reiterates the pledge given by government in October this year to deliver 40GW of offshore wind by 2030. It is also consistent with the results of the recent CfD consultation (see HSF Energy post here) where offshore wind is allocated a separate “pot” and floating offshore wind is included in pot 2 for less established technologies. This pot structure is likely to facilitate the procurement by government of the desired capacities of offshore wind and floating offshore wind. While the Ten Point Plan therefore provides a consistent message of support from government, in our view it does not necessarily extend previously announced commitments.
Project developers may however be interested in the local content requirements government is currently consulting on and the promised update on the Offshore Transmission Network Review. In particular we look forward to the update on the Offshore Transmission Network review, as, in our experience, the existing regulatory framework presents a number of challenges to the development of novel connection structures for offshore wind projects beyond the typical radial connection structure.
The reference to competition in onshore networks is also of note and represents a potential new asset class for investors.
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© Herbert Smith Freehills 2021