William Gard on the potential procurement opportunities for offshore wind
In January, The Crown Estate signed exclusive agreements with development partners for each of the nine zones making up Round 3 of the UK’s off shore wind programme. It is probably the world’s most ambitious off shore wind project with a planned capacity of up to 25% of the UK’s total electricity requirements and an anticipated market of £100bn.
As developers and supply chains grapple with the resourcing and technical challenges it is worth exploringtheir likely procurement strategies and timelines.
There are likely to be some common themes as developers seek to maximise certainty as to cost, consents, timetable, deliverability and regulatory compliance. There will also be concerns about the capacity of key providers, the planning system and off shore transmission and connection regulations.
■ Each zone is likely to be delivered on a phased basis. Resource constraints aside, this is driven by the availability of finance and the management of project risks.
■ Procurement of key site data, long lead items (eg installation vessels, turbines and materials), port facilities and front end design should start more or less immediately.
■ As information is gathered consenting work will start but with approvals unlikely to be granted until early/mid 2013 (even under the new IPC regime).
■ Early design will need to identify the choice of turbines, foundations, cable routes, grid connection locations and land requirements. Detailed design will follow more extensive surveys.
■ Contractors and operators should be involved early to advise on buildability, operability and cost plans. Some will have to be formally appointed so that orders of materials and equipment can be placed. These contracts are likely to be conditional (at least in part) on obtaining final consents and financial close.
■ Invitations to tender are likely to go out shortly after consents are received with contracts let by the end of 2013. First phase construction works should start in 2014 with an 18 month to two year contract period. Subsequent phases are likely to continue up to 2020.
■ Works will generally be let on a multiple contract basis (as opposed to a turnkey approach). For example, foundations, turbine supply and installation, substations, cabling and grid connections.
■ The developers are expected to manage significant elements of interface risk with internal project teams and external specialists.
■ Forms of contract will be bespoke and likely based on international engineering forms such as FIDIC. These and the usual associated security documents will be required by developers as they will wish to keep open all options for the funding and future sale of the project.
■ As part of the new regulatory requirement the developers must sell the development and operation of the transmission works. Any sale is likely to be after consents have been obtained, as by then the projects will be sufficiently developed to be properly priced by bidders. This will have major implications for the supply chain.
There is much to think about − let’s get to work!
● William Gard is a partner at law firm Burges Salmon