‘Scotland’s small but mighty tender for greener offshore oil could be key for floating wind’

The launch by Crown Estate Scotland recently of its Innovation and Targeted Oil & Gas (INTOG) leasing — a special round for seabed rights for offshore wind projects in Scottish waters to power oil and gas installations — may not have grabbed as many headlines as the nation’s ScotWind leasing.

Capacity expected on the block for INTOG is less than a fifth of the giant ScotWind — 4.5GW versus 25GW, respectively. Even so, the round, designed for smaller scale projects of less than 100MW or those connected to oil & gas infrastructure to provide low carbon electricity, could play a vital role in the success of offshore wind generally off Scotland and prove key to accelerating development of floating technologies.

INTOG projects may well prove to be much more important than their scale suggest. They may be delivered before many ScotWind projects due to their more modest size and easier (or non-existent) gird requirements. This could enable them to stimulate the required supply chain, infrastructure, innovation and gird investments needed to achieve ScotWind’s ambitions.

Floating wind projects are currently perceived as carrying significant extra risk. No one has yet built a floating project larger than 50MW. The associated construction and logistics are still in their infancy. It took 20 years for fixed foundation projects to grow from 50MW projects to gigawatt-scale offshore wind projects. Floating progress is likely to be quicker but the leap from array to megaproject will not happen overnight.

Projects developed under INTOG can provide ‘proof of concept’ for floating offshore wind.

Extra risk means extra costs. Not only does risk drive the cost of finance up but suppliers will charge more if there is uncertainty. INTOG’s importance arises from the role the projects could play in reducing this risk.

Projects developed under INTOG can provide ‘proof of concept’ for floating offshore wind. They will facilitate accelerated learnings for consenting processes, floating technology, and logistics. The industry (and investors) will then become more comfortable with the risk profile of large-scale floating. The supply chain can also then have more confidence in floating solutions. They will be able to invest to scale up with a better understanding of the lowest cost floating concepts.

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Unlike ScotWind, bid price is the major criterion for success in INTOG, although Crown Estate Scotland has retained the need for a Supply Chain Development Statement (SCDS). Being smaller projects opens up INTOG supply opportunities to more new and local entrants. Smaller supply chain companies will be better able to compete for work.

Larger scale projects would typically need large investment for suppliers to compete. INTOG SCDSs may kick-start local supply chain capability growth and facility investments. Subsequent ScotWind projects can use this as providing a platform to build on.

Floating risk, technology, logistics, operations and supply chains should all see considerable advancement thanks to the INTOG projects. Although small in scale, the INTOG projects could have a mighty impact on offshore wind development globally not just in Scotland.

  • Alun Roberts is associate director at UK-based analyst group BVG Associates

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