Ed Miliband, the UK’s energy secretary, announced the partnership between GB Energy, a state-owned company, and Crown Estate on Thursday. The partnership is touted as a means to speed up the construction of thousands of offshore turbines over the next few years.
Miliband argues that an increase in domestic clean energy will improve Britain’s security of supply and make it more affordable. The Labour government is still facing questions over whether it will be able to achieve its ambitious goal of a decarbonised energy system by 2030, not least because new wind and solar farm connections to the electricity grid have been delayed for a long time.
Ministers have rushed through legislation in order to create GB Energy based in Scotland. This company will receive £8bn from taxpayers to invest or operate renewable energy projects.
The announcement on Thursday is based on the idea that a closer partnership will allow GB Energy to bring greater strategic heft to Crown Estate while giving their projects greater access public capital.
The government said the partnership could lead to new offshore wind developments of up to 20GW-30GW, securing seabed leasing by 2030.
This is not a recent development. The Crown Estate set this target in November, well before the deal with GB Energy.
This deal also generated headlines that it would generate enough wind energy to power 20 million homes by the end decade. Many of these projects won’t be producing electricity until 2040. This is because it can take up a decade for projects to begin operating after they have been awarded their seabed lease.
Officials insist that the partnership will increase the likelihood of achieving the 2030 net-zero power target. One said, “The old government set targets but didn’t deliver.”
The government said that the GB Energy tie up with the Crown Estate (which manages the monarch’s legacy portfolio for land and seabed) could attract £30bn to £60bn in private sector investments, including offshore wind turbines, and other earlier-stage technologies, such as hydrogen and carbon capture.
However, the proposal for GB Energy, to perform development work for offshore projects, including scoping out of the seabed and navigating through the planning process, triggered concern from the industry that the state could potentially take a too large role in a marketplace which has so far been largely successful.
The UK is the world’s largest offshore wind power producer outside of China. Private sector investment has been significant over the last decade, and government guarantees have helped to ensure that the private sector can earn a fair price for the electricity it produces.
One industry source said that companies see it as an advantage to complete [development work] faster and more efficiently than their competitors. The risk is it will be even slower, as nobody in the state has done this before.
Dan McGrail is the chief executive of trade association RenewableUK. In the offshore wind sector alone, more than £100bn in private capital will be required to meet the government’s 60GW target by 2030.
The Crown Estate announced Wednesday that profit more than doubled, largely due to leases of wind seabed.
The Ministry of Defence, for example, has intervened at various times to try and block new wind farms due to concerns about their impact on aerodromes as well as explosive stores, radar equipment, and range areas. It resisted a plan to extend the Clashindarroch Wind Farm near a training area for pilots in RAF Lossiemouth.
After an intervention by the MoD, Whitehall sources told people that the Crown Estate had scaled back its next leasing round for floating offshore winds in the Celtic Sea from a maximum of 6.5GW to only 4.5GW.
The capacity of the grid to transmit power from offshore wind farms to the land and all over the country is still a major problem. Alasdair Grainer, Grant Thornton’s net zero managing director, said that the biggest challenge will be connecting to the grid.
A Tory MP claimed that Miliband focused on the supposed lack of capital in the sector, when the real problems were a lack community consent, environmental obstacles and a shortage of grid connections.
James Alexander, Chief Executive of the UK Sustainable Investment and Finance Association said: “The decision that the public sector would take on more early development work will be a positive step. It will reduce the risk for developers and encourage greater private investment.”
The current inadequacy and lack of investment due to our grid connections will remain a barrier.
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