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Uncharted waters for offshore wind

The UK is embarking on one of its most challenging ever programmes of marine engineering projects − and I am not referring to the much publicised Severn Barrage.

We are in uncharted waters in terms of the sheer scale of marine and associated engineering in relation to the UK’s offshore wind projects.

Round One of these projects will deliver about 1GW from approximately 450 wind turbine generators. Most of these are now either under construction or in operation. Round Two comprises a more ambitious programme which will deliver 7GW. These schemes are generally consented and in various stages of engineering procurement.

We are in uncharted waters in terms of the sheer scale of marine and associated engineering in relation to the UK’s offshore wind projects.

Rounds One and Two are broadly equivalent to the largest of the seven tidal energy projects under consideration and, like the Severn Barrage, are likely to have a capital cost of well over £20bn. However, bids for the Round Three Zones are now under review by The Crown Estate. Much more ambitious still than Round Two, and even more challenging, being in deeper water and further offshore, expectations are that Round Three will deliver a further 25GW by 2020.

These projects are really happening. Further substantial support was given in the Budget for Round Two underlining their significance to bridging the UK’s energy gap. To put this into financial perspective, the total capital spend on the recently closed Greater Manchester Waste PFI project (reportedly the largest in Europe) will be in excess of half a billion pounds. This equates to the likely investment on the foundations package alone on a single medium sized Round Two project. The recent High Court judgment in Amec Group v Universal Steel (Scotland) identified a number of major risks in offshore engineering. These included:

  • The quality of steel to be used in a marine environment
  • The availability of suitable installation vessels
  • The availability of working “windows” for marine work

The Court ordered Universal Steel to provide certain quality assurance documentation in order to allow Amec to make use of the window for construction of a new berthing facility at Clyde naval dockyard. The order (known as a mandatory injunction) was unusual and reflected the particular risks on the project.

There will be no one solution although, as with onshore projects, we will undoubtedly see significant standardisation of risk allocation over the coming months.

Risk apportionment on the Round Two projects is still in a state of flux. We are seeing risk sharing procurement principles commonly found in oil and gas projects coming together with the more traditional turnkey energy projects approach. Neither procurement option provides the whole answer. The financial return in relation to an oil and gas project is significantly greater than an equivalent offshore wind project. This skews the parties’ priorities. Offshore wind developers need some certainty as to total overall cost and time for completion. They cannot simply throw more money at a problem − the returns do not justify it. However, given the substantial risks, contractors will not take on these projects without limiting their exposure, particularly to risks outside their control. In any event, the price for contractors taking such risks would make these projects unviable.

There will be no one solution although, as with onshore projects, we will undoubtedly see significant standardisation of risk allocation over the coming months. These projects are certainly providing opportunity for innovation from lawyers as well as engineers!

  • Will Gard is a chartered civil engineer and a partner at law firm Burges Salmon LLP

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