Offshore and Onshore Wind UK Market Outlook Rebecca Williams, Offshore and Onshore Lead

About RenewableUK RenewableUK was formed from the British Wind Energy Association (est. 1978 – 40 years ago). Over time we evolved from a group of engineers, academics and enthusiasts to a professional association with staff and a dedicated Westminster office and staff in London, Wales and Northern Ireland. Our aim is to ensure increasing amounts of renewable electricity is deployed sustainably across the UK, and to support our members to win business in renewable markets around the world. We have two, equally important, purposes which flow from this aim: To make sure that renewable energy plays a leading role in powering the UK, with RenewableUK members at the heart of this delivery, whether as developers, as members of the supply chain, or in any other capacity. To bring demonstrable benefits to our members from their membership of RenewableUK. This means providing them with the highest possible quality services and information, supporting them in any way we can to do more, and better business. Renewable uk made up of 450 companies from small supply chain guys making bolts in Halifax to major utilitiy companies. We represent manufacturers, surveyors, shipping companies, consultants fabricators – whole range. offshore, onshore, W&T and floating wind. Exciting sectors but nascent technologies and small project stage so will focus on onshore and offshore Set the scene – outline policy and context What does this mean for deployment

What is happening in the energy market?

The UK Market Installed wind capacity UK over time Installed offshore and onshore capacity now 18.4GW Powering over 12 million homes World leading offshore wind sector Exporting to every continent apart from Antarctica Largest single renewable source in UK mix MW UK wind has grown from humble beginnings – UK’s first commercial wind farm Delabole, began generating on 21st December 1991. Offshore wind farm Blythe was the UK’s first operational, commercial farm – 2000. RenewableUK Project Intelligence - installed wind capacity

Decarbonisation Decentralisation Digitalisation The 3Ds We used to have the concept of the trilemma. But now the energy market is undergoing rapid change and is becoming decarbonised, decentralised, digitialised. Heat and transport decarbonisation increasing demand

UK Market Scenarios: Capacity vs RES Deployment in the 2020s Generation Gap from decommissioning Coal, Gas and Nuclear plants reaches almost 120TWh by 2030 Total power demand is expected to grow by + 30TWh from current levels in the next 12 years High RES deployment will be able to fill the energy gap, but falls short when we include demand growth forecasts Decarbonisation: UK carbon budgets mean that UK will need an additional 120TWh of low carbon generation by 2030 due to retiring plant Subject to change due to amount of demand from electricity and heat. Even under the most optimistic renewables scenarios, there is a significant capacity gap in the 2030s. This is a policy problem for government that renewables could solve. RenewableUK analysis of FES data and RUK Project Intelligence. Includes new nuclear, with Hinkley Point C from 2026. Offshore and Onshore generation based on our High Capacity Deployment scenarios and National Grid’s empirical load factor estimates per year for these technologies

UK Market Forecast: Renewables Incumbency in the 2030s In every major scenario to 2032, renewable generation will be the major source of electricity generation. To meet the fifth carbon budget, electricity is expected to be at a grid intensity of 50-100gCO2e by 2032 The main scenarios have modelled this with combinations of nuclear and renewables - This is mapping the different scnearios for the power mix against each other. Out to 2032, in every majopr scenario RES will be major energy generation source RenewableUK analysis comparing FES, CCC scenarios

Some see much greater decentralisation “The idea of large power stations for baseload is outdated” Steve Holliday, ex-CEO National Grid: There are nearly 1,000,000 FiT deployed units, >99% under 100kW Increasing EV demand will be matched by household generation (solar) and storage – e.g. vehicle to grid or Tesla Power wall – as battery costs fall

Wind – the Cheapest Renewable Power Baringa report estimates £49.40 (2017) for onshore Most recent German auction 38EUR (onshore) CfD AR2 £57.50 (offshore) Whatever happens securing dercarbonised electircty at the the lowest cost electricity will be the key to the success of these trends. This slide shows the plummeting LCOE at a European level of onshore and offshore wind. CfD AR2 secure record low prices last year. Onshore not able to compete in UK auctions currently but most recent research suggests an auction for onshore wind could come in at 49.40 real time price.s

Focus on Onshore Wind

Record 2017 Onshore Deployment but Facing a Cliff Edge There is opportunity for more onshore deployment. RUK Project Intelligence

All scenarios suggest more renewables, just a question of scale - Onshore According to the onshore Project Intelligence, repowering projects listed resulted in a 36% increase in the original capacity. We assume that 1/3 of projects reaching 20 years of age is respectively repowered, extended or decommissioned Figures up to 2020 are based on real RUK data, the rest is forecasted However, these scenarios do not meet the FES Two Degrees scenario. There is opportunity for more onshore deployment. RUK scenarios: High: New auctions every 3 years between 2018 and 2030 Medium: No auctions. Independent developers build consented projects over 50MW subsidy free + current projects under planning and development Extreme: No auctions. Only the projects currently under development are built. Nothing after 2020.

UK Capability

Onshore Investment The new onshore wind capacity installed in 2017 represents an overall investment value of £7.69 billion across the projects’ lifetimes. £5.3 billion, of the investment value is retained in the UK. £3.7 billion is spent either in the region or devolved nation £2.07 billion is retained within local authority.

Policy and Politics

Policy and Politics Research finds that onshore wind is the cheapest form of new generation – £46.1/MWh (Baringa) But UK Government’s 2015 changes mean that onshore not able to access large scale renewables funding mechanism, CfD, and faces restrictive planning regime. Change in attitude? Claire Perry, House Magazine

Where is the conusultation? Feed in Tariff Where is the conusultation? Clarity of policy is vital for business investment – no visibility post 2019 for small scale/community energy. Potential sector deal?

Offshore Wind

Total Portfolio - UK Project Spotlight The UK portfolio currently has the potential to deliver 34.5GW of offshore wind if fully constructed UK Portfolio by Owner Share (%)* UK Portfolio by Status (MW) * does not include capacity that is ‘On hold’ UK Commissioning Activity & Forecast by Status (MW p.a.) Hornsea Project One Status: Pre-construction Owner(s): Ørsted (100%) Country: UK Location: North Sea (England) Capacity: 1,197MW #Turbines: 174 Turbine model: SWT-7.0-154 Turbine manufacturer: Siemens Gamesa Distance to shore: 103-130km Water depth: 20-36m UK pipeline has potential to deliver 35.5GW Project Spotlight

Recent UK Policy Developments – Offshore Wind Dramatic cost reductions Cost of offshore wind dropped 50% since 2015 in last CfD allocation round – with prices as low as £57.50/MWh for Hornsea 2 and Moray East The Government’s Industrial Strategy featured offshore wind as a UK success story and mentioned the dramatic reduction in the cost of offshore wind as “an example of how business innovation can be supported through effective market design” Third Contracts for Difference auction Next CfD round scheduled for spring 2019, with £557 million available for allocation New Control for Low Carbon Levies policy replaces the Levy Control Framework – guarding against boom-and-bust policy uncertainty Future developments Crown Estate Scotland working with Government and industry to consider new leasing round for fixed and floating offshore wind projects in 2018 Subsidy-free offshore wind? Floating offshore Even under the most optimistic renewables scenarios, there is a significant capacity gap in the 2030s. This is a policy problem for government that renewables could solve.

UK Offshore Wind Scenarios: subsidy free in the 2020s? Offshore market will continue to grow into the 2020s There are enough projects in the pipeline to deliver National Grid’s most ambitious scenario However, the extent of future growth depends on further auction rounds, followed by a clear framework to deliver long-term deployment RUK Scenarios: High: Based on RUK PI model Medium: This scenario assumes that there will be a 3rd CfD round occurring in 2020 with the results being announced in 2021. Projects will be built subsidy free from 2025 onwards Low: This scenario assumes that there will be no further CfD auctions after the one in Sep. Projects will be built subsidy free from 2025 For offshore Wind, the story is subsidy-free and scalability Issue to consider: Next leasing rounds could/should be brought forward Future of balancing services – getting more sophisticated, can the OFTO regime support this? Increasing deployment means increasing conflict with natural environment and NGOs challenging planning constraint Role of industrial strategy and opportunities for export

Offshore Wind Forecasts: O&M Spending in the 2020s O&M spend per year in the UK has steadily increased over the past decade and can be expected to continue to increase into the 2020s CAPEX spend for the offshore sector is influenced by the frequency and predictability of the UK auction rounds Auction results in September 2017 returned 3 successful projects with the lowest strike price at £57.50. Further auction rounds, with £557m allocated, are expected before 2020 but not yet timetabled How can we adapt our events to reflect changes in the market?

Wave and Tidal

Wave and Tidal Priority for wave and tidal is enabling deployment to get costs down OREC report due out shortly, shows that costs will become competitive with other generation [1GW deployment <£90/MWh] Access to CfD funding is one option for larger projects [e.g. Atlantis] Innovation PPA, to enable route to market for smaller deployment and development projects Even under the most optimistic renewables scenarios, there is a significant capacity gap in the 2030s. This is a policy problem for government that renewables could solve.

More Information Policy Analytics Project Intelligence: Bahzad.Ayoub@renewableuk.com RUK Policy Analytics: Marina.Valls@renewableuk.com