" "UK politics:The high profile given to strategic energyissues in recent years makes future energy sources atopic of significant political interest and, therefore,subject to potential changes in policy. Given theavailable options, the UK Government is more likely toincrease rather than reduce the drive for offshorerenewable energy. UK firms advise on green projectsaround the world, and the City hosts the world's largestactive carbon-trading market - the European CarbonExchange. The creation of green jobs scores highly onthe political agenda and this is a primary driver toprovide political support for renewables to continue.Global and EU perspective:Any shift in stance oncombating climate change, or more rapid progress inthe development of low carbon energy sources, couldimpact the perceived need for offshore renewablegeneration. Concerns over supplies of fossil fuelgeneration and increased electricity prices are alsolikely to make energy security a more prominentrequirement, strengthening the case for renewables. Technology and Project economics:The production ofwind energy from offshore turbines in shallow seascosts about 50 per cent more than land based onesand turbines in deep waters cost more than in shallowwaters. However, advancements in technology willimprove project economics over time. The concept offloating turbines in the deep ocean is being tested inNorway by StatoilHydro and Siemens with a two-yeartrial pilot turbine towed out to sea in June 2009.Turbines are also likely to get bigger from an average of3MW to 5/6MW or even more, making deeper waterlocations a more viable option. Supply chain capacity: The UK's offshore windprogramme will create huge demand across the supplychain at a time when other countries are also looking tosignificantly increase their wind energy capacity. Thiswill create high demand for improved port facilities,vessels, wind turbines, transmission cable and otherkey items of plant, as well as services such as turbineand cable installation, and skilled engineers toundertake equipment and project design. Grid Connections:Offshore transmission is an area ofgrowing importance; the combination of a constrainedonshore network and increase in demand forconnection of offshore generation means offshoretransmission infrastructure is absolutely vital.INVESTING IN OFFSHORE WINDThe Sector is considered more complex than most, dueto the large involvement of government policy,UTILITIES, ENERGY COMPANIES ANDOTHER INVESTORSHAVE ALREADY INVESTED IN US$3BILLION IN THEOFFSHORE WINDSECTOR AND COMMITTED A FURTHER US$5BILLION TO NEARTERM PROJECTS080RENEWABLE ENERGYDELIVERING THE NEED: A NEW MODEL FOR PUBLIC PRIVATE PARTNERSHIP
Furthermore, in time, as a leader in this sector, the UKis likely to benefit from exports to the global economy.CONCLUSIONThe need to maintain and potentially increase overallgeneration capacity, and to significantly increase thelevel of renewable generation, creates a very strongcase for offshore wind playing a major role in the UK'senergy mix over the next decade. It will replace thecapacity which the UK is losing. As a proventechnology that can be deployed on a large scale,offshore wind will be a key component to the UKmeeting its targets for reduced CO2 emissions by2020. Offshore wind is a low-carbon technology thatcan be deployed on a sufficiently large scale within thenext ten years - the new generation of nuclear stationsare likely to have a longer lead time with little newcapacity expected to be operational before the early2020s. And not least it is an indigenous resource,contributing to energy security.Achieving the promise still presents a single key issue:delivering to time. Efficient markets that are free toperform will deliver the programme to achievemaximum economic benefit to the market.Unfortunately, that does not necessarily coincide withthe public imperative to deliver to the timescales at anacceptable cost. To square this circle, there is a clearneed for a new public- private partnership model whichaligns the public imperative and the private sectorneeds. It is a compelling story to consider such aproposition, and there would appear to be, at least inthe UK, a willingness to contemplate what this couldlook like. Contrary to the outdated believes of twentiethcentury free market economics, such positiveintervention by the Government is being welcomed bythe private sector as an opportunity to place risks in thehands of those who are more able to manage them.It can only be a truism that the delivery of the UK'senergy and power needs to the timescales availablewhile protecting the way of life that the country isaccustomed to can only come from new ways ofthinking. Believing in that breeds confidence in thepublic, in industry and in investors. And confidence isunderlined by the fact that failure is not an option. ntechnology, commodities, the ebbs and flows ofcapital, long-term planning and execution horizons,and defined lives of assets (usually 20-25 years),which are shorter than investments in other sectors.While the investment amounts targeted for UKoffshore wind are large, they are well within thecapability of international markets. The global energysector invests US$80 to US$120 billion every year -and a large proportion of this is in some exoticjurisdictions. This global capability has been wellestablished for over 25 years, and in large partdeveloped from and deployed from the UK.There is a perception of "above normal" risk withoffshore wind, and "new" associated with the industry,where costs and risk of failure in each stage ofplanning, development, procurement, constructionand operation are unknown. New technology, which isyet to be proven, is considered to be required and leadsto investment in infrastructure such as ports, ships,and equipment manufacture.In balance, there is a perception of "below normal"returns from the sector. The current economic climate,including the weakness of the Sterling, has added toupfront capital costs - reducing further returns thatinvestors might expect from these investments.Capital costs have gone up from £2.6m/MW to around£3.2m/MW, and returns on equity are assessedbetween 8 and 10 per cent per annum. The UK tariffregime - while much improved from inception in 2002- contains a higher level of uncertainty than isperceived with other regulatory incentive programmes.In practise, and despite these overarching issues,industry has responded very positively. Utilities, energycompanies and other investors have already invested inUS$3.0 billion in the off-shore wind sector andcommitted a further US$5 billion to near termprojects. This can be partially explained by a numberof perceptions by the sector. There is wide acceptancethat the UK Government will continue to make thesector a priority and help in reducing risks andincreasing return. A large measure of the commitmentthat is being made in the Off-Shore wind sector isbased on the cost and risk reduction that is expected toaccrue from the cumulative "learning" impact as aresult of early deployment of infrastructure and supplychain between 2010-2015. The UK is at the forefrontof development, a key driver for industry is thatexperience gathered in the UK will in time be rolled outglobally. And while investors are credible and theircommitment strong, they are obligated to beopportunistic in the uptake of investments dependingon how attractive these sectors turn out to be.There is a pioneering element relating to theimplementation of off-shore wind which should berecognised. However, there is prior experience both inthe UK (and globally) in implementing such a sector.RENEWABLE ENERGY081Above: Director of MarineEstate, the Crown Estate,Rob HastingsBIOGRAPHYRob Hastings is The Crown Estate's Director of theMarine Estate. His career has included working in theOffshore Oil and Gas industry, followed by six yearsdeveloping and managing projects and businesses inthe UK wind energy industry, including as a directorof Shell Wind Energy Limited and a Director of theBritish Wind Energy Association. Rob is a member ofthe UK Government's Renewable Advisory Board(RAB) chaired by the Minister of Energy.