UK 3rd Offshore Wind Round

32.2 GW of potential new capacity has been identified under the Crown Estate's programme. From the Crown Estate website:

The developers who have signed exclusivity zone agreements are:

1. Moray Firth zone, Moray Offshore Renewables Ltd which is 75% owned by EDP Renovaveis and 25% owned by SeaEnergy Renewables – 1.3 GW

2. Firth of Forth zone, SeaGreen Wind Energy Ltd equally owned by SSE Renewables and Fluor – 3.5 GW

3. Dogger Bank zone, the Forewind Consortium equally owned by each of SSE Renewables, RWE Npower Renewables, Statoil and Statkraft – 9 GW

4. Hornsea zone, Siemens Project Ventures and Mainstream Renewable Power, a consortium equally owned by Mainstream Renewable Power and Siemens Project Ventures and involving Hochtief Construction – 4 GW

5. Norfolk Bank zone, East Anglia Offshore Wind Ltd equally owned by Scottish Power Renewables and Vattenfall Vindkraft – 7.2 GW

6. Hastings zone, Eon Climate and Renewables UK – 0.6 GW

7. West of Isle of Wight zone, Eneco New Energy – 0.9 GW

8. Bristol Channel zone, RWE Npower Renewables, the UK subsidiary of RWE Innogy – 1.5 GW

9. Irish Sea zone, Centrica Renewable Energy and involving RES Group – 4.2 GW


The clear winners, as shown in the graph above, are the big 6 utilities (except for Eon and especially EdF who are complete absent), plus Vattenfall, which is increasingly becoming a member of the big 6.

MCT power curve - analysis

MCT has just published a power curve for its Seagen device in Strangford Narrows (see figure above and link here). The curve shows a period of output at the design capacity of 1.2 MW, in what is described as a “medium tide”. This tide appears to have peaked at 3.1 m/s, which may be medium for Strangford, but is pretty impressive for most sites.

We realised that it’s possible to drill into this curve to come up with some (very) theoretical ideas of the capacity factor which might be achieved by the technology. First we constructed a velocity lookup table by taking a ruler to the graph, which shows the power output (kW) at various stream speeds (m/s).

m/s - Power
0 - 0
1 - 20
1.25 - 100
1.5 - 180
1.75 - 400
2 - 600
2.25 - 900
2.4 - 1200

We then constructed a model which characterises a simplified tidal environment, with stream speed varying according to a diurnal cycle (sinusoidal variation over 24 hours, in 2 flood, 2 ebb tides) and a 28 day lunar cycle (again simple sinusoidal variation).

We entered a maximum stream speed (peak rate achieved at spring tide) and a minimum stream speed (peak rate achieved at neap tide) and constructed a lookup on an hour by hour basis to estimate the power output over a month.

Based on a maximum stream speed of 3.2 m/s and a minimum stream speed of 1.6 m/s (ie neap maximum is half as fast as spring maximum), we find that the average theoretical power output (assuming no outages) to be 450 kW, making the capacity factor 38%.

The model shows that output is sensitive to both maximum stream speed and the ratio between spring and neap peak rates. The table below shows the relationship between capacity factor and the maximum stream speed) assuming that neaps are limited to 50% of the maximum stream speed in springs. The month-average capacity factor for various maximum spring stream speeds is:

m/s - CF (%)
2.8 - 28%
3 - 34%
3.2 - 38%
3.5 - 45%
4 - 53%
The table below shows how the capacity factor is influenced by the ratio between the maximum neap speed and the maximum spring speed based on a maximum spring stream speed of 3.2 m/s. The table shows maximum neap speed and month-average capacity factor.

m/s - CF (%)
0.8 - 31%
1.2 - 33%
1.6 - 38%
2.1 - 45%
2.4 - 48%

All of these power output estimates are wildly theoretical – and should be treated with extreme caution. Next we’re going to combine this power curve with some actual tidal data from tidal diamonds on charts to see how that looks.

Another data point in windfarm valuation

By now, you will have seen Centrica's announcement on the sales of 50% interests in windfarms at Lynn, Inner Dowsing (offshore) and Glens of Foudland (onshore).

The key section is here: Centrica also announced that it has agreed the sale of a 50 per cent equity stake in its Lynn, Inner Dowsing and Glens of Foudland wind farms to the US-based investment management company TCW for a cash consideration of £84 million, and entered into agreements to raise approximately £340 million of non-recourse project finance facilities from a consortium of banks for these assets. The transactions value the wind farms at approximately £460 million in aggregate.

Using a 10% discount rate, and what we think are reasonable electricity and ROC prices (£60/MWh and £37/MWh respectively), we see the values (100%) as:

Glens of Foudland (26MW) - £35 million
Lynn (81 MW) - £134 million
Inner Dowsing (81 MW) - £134 million
Lynn (extension, 90 MW)- £181 million
Inner Dowsing (extension, 90 MW) - £181 million

So we get a total of £675 million for 100% of the windfarms - a considerably higher number. We have to drop the power price to less than £40/MWh or increase the discount rate to around 15% to get the value to line up with Centrica's valuation.

Also, Centrica announced that the 270 MW of Lincs would cost some £725 million - £2.69 million per MW installed. Not bad - less than the equivalent (announced) amount for Greater Gabbard. I wonder if this suggests turbine prices are weakening somewhat?

Novera in play

If you've got shares in Novera Energy you'll have noticed that they leapt by 32% this morning as the company announced that it had rejected an offer from largest shareholder Infinis to make an offer for the remaining shares at 62.5pence.

Using our Value of ROCs Model, we have valued Novera's assets, and applied a weighting of 100% to operational projects, 75% to projects under development, 25% to approved projects and 10% for projects in planning. We reach an asset value of around £312 million, and according to the last accounts, there is net debt of £112 million, making the net asset value £200 million or around £1.40 per share!

Even if Infinis is atttributing no value to the wind portfolio, the asset value of £244 million would justify a share price of more than 90p/share. We're holding on.

I don't believe it!

Sad to report, Trident Energy's wave energy prototype which was being deployed off Southwold came off its barge and capsized. Details here and the company's own take on things here.

Fortunately no injuries were sustained, and the damage to the device is being assessed.