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(Alliance News) - BP PLC on Monday said it and Germany's Energie Baden-Wuerttemberg AG have been chosen as preferred bidder for two major UK offshore wind leases.
In the Offshore Wind Round 4, the first UK leasing round since 2010, BP and EnBW won their bid for two leases in the Irish Sea. The leases have a combined 3 gigawatt potential generating capacity, the maximum award possible under the round's rules, plus a 60-year lease life.
BP said the move marked the London-based oil major's entry into the UK's offshore wind power sector, which is "currently the largest in the world". It is also progress toward BP's goal to rapidly build "a world-class wind energy business."
One operational, the 4 gigawatt operational capacity will be enough to power over 3.4 million UK households.
Energie Baden-Wuerttemberg and BP will form a 50-50 joint venture for joint development and operation of the leases, with the joint venture expecting to make four annual cash payments of GBP231 million per lease before the project reach final investment decision.
The projects are set to become operational in seven years, with the leases being "highly advantaged, with strong wind resources and proximity to shore that make them attractive investment opportunities".
The leases are located only 30-kilometres off the coast of north west England and north Wales, allowing for lower costs and more reliable transmission infrastructure. Their shallow water depths, being between 35 and 40 metres, are also advantageous in terms of "efficient and cost-effective development".
The first least covers an area of approximately 300 square kilometres and lease to a 500 square kilometres. The leases are adjacent, which should result in "significant synergies in procurement, development and operational costs".
BP Chief Executive Bernard Looney said: "Offshore wind is integral to delivering the UK's green industrial revolution. Building on the UK's strengths, the government's 10-point plan aims to produce enough offshore wind to power every UK home, quadrupling output to 40 gigawatts by 2030 – and BP is delighted to play a part in this."
Shares in BP were up 2.8% at 259.15 pence in London on Monday afternoon.
In the same leasing round, Paris-based petroleum refining company Total SE aid an equal joint venture between Macquarie's Green Investment Group and Total has secured rights to a seabed lease in the Eastern Regions zone. The area is located off the UK's East Anglian coast, could deliver up to 1.5 gigawatts of renewable electricity.
Additionally, German energy company RWE AG was awarded two adjacent sites on Dogger Bank, 110 kilometres from the North East coast of England, with a total potential capacity of 3 gigawatts close to its Sofia offshore wind development project.
The Crown Estate, which manages the Queen's property and land, owns the seabed off the UK coast and conducted the auction,
RenewableUK, a trade body, has criticised the Crown Estate - which auctioned off 8 gigawatts of potential new offshore wind capacity overall - for pushing up prices for businesses to deliver renewables for the UK grid.
RenewableUK noted that at the last leasing round, 32 gigawatts of potential wind farms were assigned with no option fees levied on bidders.
Melanie Onn, RenewableUK's deputy chief executive, said: "The result of this leasing round shows that, while demand for new offshore wind projects has never been higher, too few sites were made available to meet this demand."
By Anna Farley; annafarley@alliancenews.com
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