Global offshore wind lease and subsidy auctions are becoming increasingly competitive processes as the industry matures and new markets open. Rights need to be secured to develop designated project areas, followed by obtaining essential financial support to successfully pass financial close. Developers, investors and consortia make significant investments in preparing auction tenders with only a handful successful, the attrition rate is high. Winning bids comprise many common attributes, including:
- Detailed understanding of the risks of the site characteristics, whether they are environmental, geographic, social or economic;
- A thorough understanding of the revenue potential of the zone/project;
- An optimised project in terms of installed capacity, spatial area, and economics;
- A robust estimation of the costs associated with developing, constructing, financing and operating an optimised project;
- A well-tuned crystal ball to understand how each of the above will change in the future.
Developing a functional investment model is the cornerstone of bidding success, enabling scenarios and ‘what-if’ analyses to be examined for the purpose of identifying the premium projects with the highest likelihood of success. Within this article we are going to focus on the revenue side of the balance, with fundamental consideration given to:
Revenue = units of energy produced x sale price of energy produced
How many units of energy does the optimised project produce, and what risk is there in this prediction? For each of the proposed Characterisation Areas, and associated projects, the wind resource isn’t going to vary depending on who bids, however competing bids will use different assumptions of wind resource and have differing levels of confidence within their analysis. This choice of input wind resource conditions an associated confidence level will have a huge bearing on the success of the bids at the submission stage, and as the project is developed and operated.
What can be done to enhance confidence in wind resource analysis?
LR has used our understanding of the wind resource around the UK, including data from offshore meteorological masts, fixed and floating LiDAR as well as operational wind farms to produce a heatmap of wind resource confidence around the UK. We have performed confidence analysis for each proposed Characterisation Area at two critical project milestones: lease auction entry and financial close, this has allowed us to build up a wind resource risk profile for each zone. This article outlines our understanding of the risk profile associated with each zone has been presented.
To find out more about the analysis or the services LR can provide please get in touch.
For wind resource queries:
Team Manager, Energy Resource Services
T +44 (0) 3304 140940
M +44 (0) 7976 763700
For wind farm development engineering queries:
Development Engineering Manager
M +44 (0) 7583 067166