Extension Licenses Granted by Crown Estate for U.K. Offshore Wind Power Development

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading European energy companies, including Dong Energy A/S (Fredericia, Denmark), RWE AG (OTC:RWEOY) (Essen, Germany), and Vattenfall AB (Stockholm, Sweden), have secured extra permits from The Crown Estate (London, England) to develop 2,000 megawatts (MW) of offshore wind power capacity in the U.K. The combined capacity will be enough to power 1.4 million homes.

The Crown Estate recently announced the release of additional leases under its round 1 and 2 offshore wind projects. Three of the selected companies are already part of rounds 1 and 2, and they will now have the opportunity to extend five of their existing sites and create about 1,700 MW of offshore wind capacity. An additional 340 MW has been offered within the round 1 and 2 site areas for two more projects. The new capacity is expected to help the U.K. achieve its renewable energy targets and meet the country's climate change obligations. The U.K. hopes to generate 15% of its energy from renewable sources by 2015.

The developers and their permitted extensions include:

• Dong Energy, which can add 234 MW to the Burbo Bank windfarm and 750 MW to the Walney windfarm
• Vattenfall can add 51 MW to the Kentish Flats 2 project and 147 MW to the Thanet 2 facility
• Greater Gabbard, the joint initiative between the renewable energy units of RWE and Scottish and Southern Energy plc (OTC:SSEZY) (SSE) (Perth, Scotland) has been granted more space and the license to set up the Galloper Wind Farm with a capacity of 504 MW.

A total of more than 386 square kilometers have been granted for the five extension projects.

Integrated energy company Centrica plc (OTC:CPYYY) (Windsor, England) has been permitted to build 80 MW of additional capacity at the company's Race Bank facility, while renewable energy company Warwick Energy Limited (Wellesbourne, England) can add 260 MW of wind power capacity to the Dudgeon facility. The two extensions will be set up within the previously allocated areas.

Agreements between the developers and The Crown Estate will be finalized in the next few weeks. A statutory consenting process will follow the agreements. Each area will have to obtain the necessary clearances before The Crown Estate grants construction leases to the developers.

Provided all the necessary consents are secured, construction of the extensions is expected to commence in 2014 and be completed by 2016, before the commencement of Round 3 construction. The extensions are expected to benefit from the original projects in terms of electrical systems, construction crews and vessels, construction bases, onshore facilities, and ports.

In 2008, the U.K. overtook Denmark to become the leader in installed offshore wind power. By April this year, the U.K. had installed 1,000 MW of wind power generation capacity. However, the country is facing stiff competition from other nations. Investments to the tune of £100 billion ($144 billion) over the next decade are expected in the U.K.'s offshore wind sector. Despite the huge potential, the sector faces several hurdles such as an undeveloped supply chain, high development costs, engineering and technology challenges, and a lack of grid infrastructure.

The Crown Estate owns most of the seabed within the 12 nautical miles of the U.K. coast. Under the Energy Act of 2004, The Crown Estate has the right to grant licenses to renewable energy projects on the nation's continental shelf, up to 200 nautical miles from the coast. The U.K. currently has more than 40,000 MW of offshore windfarms in various stages of development, and the announced extension permits will provide the offshore wind supply chain with a steady flow of projects until Round 3 commences.

According to Anders Eldrup, the chief executive of Dong Energy, "Providing the possibility of medium- and long-term planning with a stable flow of construction projects allows Dong Energy to interact with and develop the supply chain." Director Rob Hastings of The Crown Estate's marine estate said that the upcoming development has been driven by the project developers, and the additional capacity will increase the potential of U.K.'s installed wind power capacity to 48,000 MW by 2020. With the new capacity, the U.K. will have about 10,000 MW of wind power capacity from the first two licensing rounds. The third round allocated in January saw permits distributed for 32,000 MW of wind power.

For additional details about the U.K. windfarm extensions, see May 12, 2010, article - U.K. Approves 2 Gigawatts of Offshore Wind.

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