Chancellor Kwasi Kwarteng’s Growth Plan for the UK economy should be good for offshore wind, but it is short on detail and the steep fall in the pound, inflation and higher interest rate rises aren’t
The Chancellor outlined plans to speed up the rate at which offshore wind projects are developed and overcome bottlenecks in the regulatory and review process, but the Growth Plan he unveiled 23 September 2022 was short on detail, made no mention of the need to enhance the grid and said little about offshore wind and green hydrogen. And other well-publicised aspects of the plan – including unfunded tax cuts – are likely to make projects more, not less expensive.
Announcing his Growth Plan for the economy as whole, the Chancellor said he wanted to accelerate energy infrastructure and other major projects. He noted that in 2021, it took 65% longer to get consent for major infrastructure projects than in 2012. The Chancellor said legislation would be introduced that will cut barriers and restrictions, speeding up the deployment of energy infrastructure like offshore windfarms and streamlining environmental assessments and regulations.
The Growth Plan said, “The UK’s planning system is too slow and too fragmented. For example, an offshore windfarm can take four years to get through the planning process… On some metrics, the system has also been deteriorating in recent years: the timespan for granting development consent orders (DCOs) increased by 65% between 2012 and 2021.”
As the Plan noted, delays to delivery undermine investor confidence and restrict the growth potential of the government’s investment in infrastructure. Delays are partly a result of a complex patchwork of environmental and regulatory rules, some of which are are retained EU law. The government wants to reform and streamline these arrangements to promote growth while ensuring environmental outcomes are protected.
“New legislation will be brought forward in the coming months to address these barriers by reducing unnecessary burdens to speed up the delivery of much-needed infrastructure,” said the Plan. This includes: reducing the burden of environmental assessments; reducing bureaucracy in the consultation process; reforming habitats and species regulations; and increasing flexibility to make changes to a DCO once it has been submitted. The overall aim of the reforms is that energy infrastructure, including renewables, gets built more quickly. Offshore wind developments that could benefit from a new approach include remaining Round 3 projects and Round 4 projects; so-called Extension Projects; those selected as part of the ScotWind leasing process in Scotland; INTOG projects; floating wind commercialisation projects; and those being planned in the Celtic Sea.
Responding to the government’s plans, RenewableUK said it welcomed the fact that the Growth Plan states the Government will streamline the planning process for offshore wind projects. It noted the cost of offshore wind has fallen by around 70% since 2015, making it the lowest cost large-scale power source available in the UK. However, the offshore wind industry has long identified planning and grid issues as major obstacles to speedier development.
RenewableUK chief executive Dan McGrail said, “Speeding up the planning process for offshore wind is vital and will allow us to unlock an enormous amount of new capacity much faster and help us to meet the Government’s target of quadrupling our offshore wind capacity by 2030. It will also help us to meet the Prime Minister’s vision of the UK becoming a net energy exporter by 2040. At the moment it can take up to 10 years to get a project over all the hurdles. We can’t afford these glacial timescales any longer, especially as offshore wind has now reached a point where it’s even cheaper to build than onshore wind.
“It is also vital that we speed up grid connections,” said Mr McGrail. “Some offshore windfarms are being given connection dates which are 10 years into the future. Alongside the changes announced by the Government, we are urging Ofgem and National Grid to accelerate grid reform, as one of the most important steps towards decarbonising our power system in the years ahead.”
Energy UK policy manager Aradhna Tandon said she welcomed the government’s commitment to reduce bureaucracy and complexities in the planning regime. She said the changes proposed to streamline the consenting process – including providing flexibility to DCO applications and simplifying the consultation process – will be vital to speeding up the transition to domestically-sourced low carbon energy.
However, as she also noted, details on how cuts to red tape will be implemented remain to be seen and will not become clear until the new Planning and Infrastructure Bill is published. “Alongside these changes,” she told OWJ, “it is also important to speed up grid connection, with some low carbon projects facing up to 10-year delays. We therefore urge the government to accelerate grid reform to upgrade and expand the grid network to roll out low carbon technology at pace.”
PA Consulting energy transition expert Alon Carmel agreed there is much in the Growth Plan to be pleased about, but was also concerned by the dearth of attention to the grid. “It is great news for developers of offshore windfarms that the Government is going to tackle the bottlenecks in the planning system – though what we need now is the detail,” he told OWJ.
“We also need greater clarity on the required expansion and strengthening of the grid, as well as the specific business and regulatory models for multipurpose interconnectors and other ways of co-ordinating grid connection.”
As Mr Carmel also noted, investment zones that are also part of the Growth Plan will boost supply chains in a way that can help make the target of 50 GW by 2030 a reality. But as he further noted, in contrast to the recent US stimulus package – the Inflation Reduction Act – there is little about how to support the hydrogen economy, even though offshore wind and hydrogen is a very promising area.
“The overall impact on investment in offshore wind projects and the supply chain will depend on the macroeconomic risks as well,” said Mr Carmel. “For example, will the tax proposals and increased borrowing lead to higher inflation and interest rates, which would disproportionally affect investors in major capital projects?”
CMY Consultants renewable energy consultant Charles Yates said the fall in the value of Sterling against the Dollar since the Plan was announced would have negative consequences for the cost of imports, inflation and interest rates. He noted that the Growth Plan was “very focused” on quickly boosting economic growth but said renewables were actually “low down the list of priorities” compared with plans for things like fracking for gas.
“The impacts of the Growth Plan on offshore wind are indirect,” he told OWJ. “The Government missed an opportunity to confirm support for the industry and reassure developers who are being told they have to switch projects granted renewable obligation certificates on to lower CfDs; and it has caused a fall in the value of the pound and the prospect of higher interest rates which will reduce project returns and discourage investment in new projects.”
ABL Group renewables managing director John MacAskill also agreed the planning system for offshore wind undoubtedly needs improving. It if isn’t reformed, he said, it will be hard to deliver on the government’s target of 50 GW of offshore wind by 2030.
Mr MacAskill described plans for more fracking and modular nuclear reactors as dead ends. What the UK actually needs to do, he suggested, is “accelerate and increase the diameter of the planning system ‘pipe’ for offshore wind.
“With circa 20 GW of the 50 GW not yet consented, for there to be a chance these projects are operating by 2030, they will need consent by the middle of the decade.
“Definitive action to reduce the burden of environmental assessments – without abandoning the ecological duty of care – is vital, as is the ability to make changes to a DCO to reflect the evolution of technology in what is a fast-moving sector. I would worry about ripping up or ‘reforming’ habitats and species regulations. Achieving net zero should not come with an ecological cost, not if we can help it.”
Mr MacAskill said he hopes the government understands it also needs to increase budgets at the agencies that handle the planning and environmental processes. “Streamlining alone won’t solve this, additional resources are needed,” he said. “I hope there is real follow through from the Plan. The government could have stormy water to navigate in the next 12 months and I would hate to see the changes proposed in the Growth Plan slip down its list of priorities. So to some extent, the jury is really out on how effective all this will be.”
BVG Associates associate director Mike Blanch said, “Consenting requirements have grown with time. In part that reflects a greater cumulative impact but speeding up decision-making by better resourcing is a highly desirable response to the impact of climate change on ecosystems if we don’t radically reduce our carbon footprint.”
NARDAC renewable energy and offshore wind partner Tom Harries agreed the Growth Plan is good news but questioned whether the consenting process for offshore wind was really broken. He highlighted the “high success rate of consented to commissioned projects” and what he described as “a comprehensive, transparent process.
“Four years was consistent and could be planned for by developers, the supply chain and the grid,” he said. “Doesn’t acceleration just open the door to post-consent disputes?
He agreed that speeding-up the time to change a DCO is a good thing, given how quickly technology is changing. “Even if all the pipeline is consented by 2023 it certainly can’t all start construction,” he concluded. “There is a huge wave of global offshore wind construction next year, needing all the available installation vessels. And what about the grid? There was no mention of accelerating the grid build-out. Grid is the golden ticket.”
