The Crown Estate has confirmed the final design of its 7GW Round 4 offshore wind tender, including controversial plans to award leases based on option fees proposed by developers.
The seabed landlord outlined a three-stage auction process for new acreage in waters off England and Wales to over 100 representatives from the offshore wind industry on Thursday afternoon and will formally launch the new round later this year.
The first stage, pre-qualification, will see would-be developers examined on financial strength and technological competence including project management, the Crown Estate said.
Bidders that clear the first hurdle will then have project proposals examined for compliance with further technological and technical requirements.
The final round of the auction will see developers lodge option fee bids to secure new acreage.
“This approach reflects the more mature market context, ensuring that the award of projects is made on an objective, fair and transparent basis, which is accessible to a broad range of bidders,” the Crown Estate said.
This final round will take the form of a multi-cycle bidding process that will award projects at daily bidding rounds.
The seabed landlord said the daily bid process will ensure “developers have information about the price and location of awarded projects at each stage, and can therefore review and adjust their bidding strategy as the process progresses”.
Developers will be allowed to bid for sites as part of a consortium but will only be able to participate as one single bidding entity in order to prevent “information asymmetry” during the bidding process.
Winning developers can pay a single one-off option fee or stagger payments annually, subject to an initial three-year commitment.
“We are reducing the upfront capital requirement on developers, helping to open the process to a broader pool of potential bidders and share development risk, since option fee payments for the full development cycle only apply where projects are progressing,” the Crown Estate said.
Crown Estate business development manager Jonny Boston said the new process is fit for the UK’s offshore market, which “has matured and evolved significantly since our last major leasing round, over a decade ago”.
“We have been working closely with industry and stakeholders over many months, listening to their feedback to help inform the design of leasing round 4,” he added.
The Crown Estate said it will also offer developers a 50% discount on the annual rent operational projects must pay.
Projects with “a qualifying innovation” will be eligible for a reduction on up to 10% of the project capacity for the first five years of its operation.
“Developers will have the opportunity to propose hybrid projects, such as those which integrate offshore wind generation with inter-connectors, or other energy sources,” the Crown Estate said.
Sites in Northwest England and North Wales, Dogger Bank, the Southern North Sea and East Anglia will be made available, but more areas could be unlocked before the auction opens.
Fresh acreage will be awarded in at least three seabed areas with a maximum of 3.5GW being allocated in any one area to help “ensure geographic diversity”.
“Our goal has been to design a process that is attractive, accessible and fair, supports the sustainable development of the seabed and ultimately delivers a robust pipeline of new projects that will help the UK’s transition to a low carbon economy,” Boston added.