GB Energy urged to earn floating wind spurs with Celtic Sea 'stepping stones'

A 1.5GW chunk of floating offshore wind acreage left over from the UK’s fifth leasing round presents a perfect opportunity to try out a more “joined up” support for the fledgling technology, preferably with a role for new industry champion GB Energy, industry insiders have argued.

One of the awarded areas went to Gwynt Glas, a joint venture between French utility EDF and Ireland’s ESB, and the other area went to Norwegian oil giant Equinor.

The leasing round was hailed as a success, considering that it was opening up an entirely new region to the commercial scale development of a floating offshore wind technology that has strugguled to scale up in the face of industry headwinds.

“Awarding two projects with 3GW of leases is a good win because I don't think anyone was sure exactly how much interest there was,” said Leo Bertels, associate director of BVG Associates.

"Floating at commercial scale is challenging and new, and the Celtic Sea doesn’t have suitable large-scale infrastructure in place to deliver projects. It's not an area that has much experience with offshore wind to date."

“This was a fantastic result,” agreed Lara Lawrie, director of environment and consents at renewables consultancy OWC, who admitted that two out of three was "not necessarily surprising” given the challenges facing floating wind in a brand new region.

The Crown Estate did not provide information about whether there were competing bids in the tender, although a clue to this was offered by the fact that five different integration ports were nominated during the qualification process, and eight or nine different companies were involved at that stage.

The seabed landlord stated that it is continuing to work on a range of options to deliver this additional capacity and expects to set out next steps by the end of September 2025.

“The Crown Estate may want to do a special additional process or bilateral negotiation to get that third site leased,” Bertels commented.

“Building the business case for that investment requires a robust pipeline. So I don't think The Crown Estate can just walk away after failing to allocate the third area. They are saying that they are going to make it happen.”

Bertels noted that annual option fees of £350 ($473) per MW submitted by the winning bidders were a tiny fraction of Leasing Round 4, where fees as high as £154,000 were bid.

"That's a huge drop and I think it reflects the challenge of deploying floating in the Celtic Sea and that these projects are not going to be necessarily easy or quick to get over the line," he said.

Now comes the hard bit

This mirrors a broader situation in the UK where leasing rounds such as the Scotwind tender have spawned a host of gigascale floating projects but challenges with port infrastructure, grid connections and other risk perceptions make it difficult to progress to a final investment decision.

“How you step that up is a challenging question for the supply chain, especially in a region like the Celtic Sea which hasn't yet got the infrastructure to support fixed bottom, let alone floating wind,” Lawrie said.

She suggested that the leftover development area could offer potential for “doing things differently” aimed at building a pathway for larger scale delivery.

"We have argued that there is a missing link between 100MW test or demonstrator projects and going to full commercial scale at 1.5GW," Lawrie commented.

Mark Baxter, a project director with Ocean Winds, agreed that a shift toward early stage commercial projects of around 300MW could provide a stepping stone.

Baxter recalled that the early stages of fixed-bottom wind development in the UK provided more support on the path to industrialised commercial development.

"The pre-CfD stages that encouraged fixed bottom to move through the gears were very important to long-term development, and floating offshore wind has probably been given less time to go through this process," he said.

“We need to see a different kind of support for pipeline development, building knowledge as we grow in scale,” he added. "Otherwise we risk seeing a few big floating offshore wind projects that eat up all the CfD budget."

Tailor-made for GB Energy?

The Celtic Sea tender has thrown up this acreage just as the UK has been putting in place new institutional machinery to facilitate the development of the green economy, with clean energy, including offshore wind, identified as one of the main planks of a new industrial strategy.

Expectations have built up around by GB Energy, a new state company that is still carving out its role but has at least £1bn ($1.35bn) available for a supply chain fund for clean energy industries, and an overall budget several times this amount.

Other entities, such as the National Wealth Fund and the Scottish National Investment Bank have already begun backing port infrastructure projects designed to muster much greater streams of private sector investment.

'The market has given its answer'

The availability of these funding streams led some commentators to advocate a departure from price-led tenders for the leftover Celtic Sea acreage.

“These Celtic Sea areas have been offered to the market, and the market has given its answer, which was just two-thirds" said John MacAskill, a director of OWC.

"It is certainly valid to ask now if there is a place for Great British Energy. This could start with a stepping stone project, then move to a gigascale project in a way that might not work if left to the market.

"I think it is time for some more joined up thinking on how you can bundle this with objectives on infrastructure, local content and grid investment, ” he added.

“Bundling a project with port investment and grid investment would be quite bold and ambitious and quite a departure from the economics of the CfD, but this is an opportunity to create a new kind of vehicle.”

MacAskill stressed that the approach would allow feeding government funds into something "that becomes investible once you’ve taken some early development risks."

Baxter, said he was also in favour of deploying "stepping stone" projects on the way to full scale industrialised commercial floating offshore wind.

"It would be reasonable to do this kind of thing in the Celtic Sea, and facilitating these stages is exactly the kind of thing that GB Energy should be there for," he noted.

Will Crown Estate find another bidder?

Not everyone expects such a sea change in the Celtic Sea outcome, however.

“I think the Crown Estate will simply find another bidder,” said Pranav Menon, UK power & renewables lead with Aurora Energy

"Firstly, the low option fees ultimately mean that you're also minimising the full cost of developing and this is pretty good news for consumers,” he said.

Secondly, Menon argued, The Crown Estate's tender had already gone a long way toward addressing the challenge faced by floating wind.

“This included more communications with [the National Energy System Operator] around how these project development areas would be integrated to the grid, and on transmission planning as part of the pathway to [the government’s Clean Power 2030 objective].

Menon also pointed to additional work on habitats and assessments before the lease.

“This is something that a developer would have to do after getting the lease, and that can mean sitting on a planning process for up to four or five years before you can even apply for a CfD.

The inclusion of some non-price criteria in the pre-qualification process also addressed some of the uncertainty that has been slowing down lead times in the supply chain, Menon noted.

This included the naming of preferred ports for assembly and integration, with Bristol and Port Talbot named by the two successful bidders.

"Highlighting preferred choices can reduce inflationary pressures...they are already thinking in a more co-ordinated way," he argued.