The Titans of Wind

Last week saw the announcement of some very exciting plans for future offshore wind farms in the UK: Two consortiums of colossal size and power have been created with the aim of winning rights to develop large scale wind power generation farms in alignment with the Crown Estate’s proposed high potential zones off the coast of the UK.

Where there is nothing stopping an individual company bidding on its own for a zone, there has been much talk in the industry over the last 6 months or so about the sensitive process of forming partnerships, JVs and consortiums. However, the weight and power of those consortiums was really hammered home this week, with the announcement of two of the newly created consortiums bringing together giant European players in the energy industry: Airtricity (recently acquired by SSE) will join RWE npower renewables (the UK subsidiary of RWE Innogy), Statkraft and StatoilHydro to prepare a joint bid under the consortium name of Forewind, project managed by Peter Raftery, a well respected heavy weight and long-term employee of Airtricity. To compete with them, DONG Energy, E.ON and Fred. Olsen Renewables has also announced that they have formed a consortium to bid for a piece of the offshore wind action.

I don’t know why it surprised me so much, but the brute force of these players all working together really hammered home to me the sheer volume and seriousness which this next round of offshore wind farm development will bring to the UK’s renewable energy capacity. Developing renewable energy projects is very expensive and requires a great deal of initial capital. The application process alone, to gain consent for a multi-MW wind farm can cost up to £200,000 and the current acceptance rate is only one out of three applications, so it is no surprise really that it will be the larger and richer organisations who are leading the bids. With giants like these joining forces how can the smaller, less cash rich, specialists even try to compete?

The 10 Scottish offshore zones (with a combined potential capacity of nearly 6.5GW) that were released in February, have also been dominated by the European Utility giants – Airtricity (SSE), Dong, E.ON, Npower and Scottish Renewables all being awarded zones. It is good to see that Fluor (working with Airtricity), SeaEnergy (working with Airtricity and with Npower) and Mainstream – ex-Airtricity boss O’Connor’s new baby – have also seen a share of the action. Mind you, Fluor may not be such a big name in Wind Energy, but as a Fortune 500 company with 60 office locations in 6 continents, it is hardly an SME! Will the second tier players (in terms of size, not speciality) also get a share of the English offshore action, or will it be dominated by the titans of energy generation? And does it really matter? It might be nice to see more variation of asset owners, but given the expense that is obviously going to be needed (just look at the quoted prices for DONG/E.ON/Masdar’s London Array project) it’s hardly any surprise that it will be the companies with the deepest pockets (and the proven track records) who will be footing the bills!

The round 3 projects are going to be high value, high visibility and high importance projects that will be absolutely crucial to helping the UK deliver its 2020 renewable energy targets.

By Clare Buxton
Sector Lead for Wind Energy