UK Offshore Wind: Opportunity, Costs & Financing November 2011

Whitepaper available online: http://www.dbcca.com/research

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Climate Change Investment Research Mark Fulton, Editor Managing Director Global Head of Climate Change Investment Research New York

Lucy Cotter, Lead Author Associate London

Bruce M. Kahn, Ph.D. Director Senior Investment Analyst New York Camilla Sharples Assistant Vice President New York

Jake Baker Associate New York Reid Capalino Analyst New York

2. UK Offshore Wind: Opportunity, Costs & Financing

Table of Contents

Page List of Exhibits…………………………………………………………………………………..

4

Editorial Letter…………………………………………………………………………………...

6

Executive Summary…………………………………………………………………………….

8

I.

Opportunities

16

Resource Opportunity……………………………………………………………………..

16

Job Creation…………………………………………………………………………………

19

Economic & Investment Opportunities…………………………………………………

21

Challenges & Solutions……………………………………………………………………

25

Costs…………………………………………………………………………………………..

27

Finance………………………………………………………………………………………..

35

Regulation……………………………………………………………………………………

43

Transmission & Supply Chain…………………………………………………………….

48

Skills …………………………………………………………………………………………..

55

III. Concluding Remarks………………………………………………………………………..

58

II.

3. UK Offshore Wind: Opportunity, Costs & Financing

List of Exhibits

Page 8

Exhibit 1:

Key UK Offshore Wind Statistics

Exhibit 2:

There are multiple goals of offshore wind scale-up to the UK

Exhibit 3:

Offshore Wind Leased Capacity in the UK

Exhibit 4:

Exhibit 4: Low and Median CAPEX for Round 2 and Round 3 Offshore Wind Projects (2010-2030)

Exhibit 5:

Exhibit 5: Levelized Cost of Electricity (LCOE) for various renewable technologies

11

Exhibit 6:

Possible Public and Private Finance Sources and Financing Instruments

12

Exhibit 7:

Changes to Offshore Wind Support – RO to the FiT CfD

14

Exhibit 8:

Offshore wind capacity in Europe; regional capacities in the UK and the offshore resource

16

Exhibit 9:

Round 3 Offshore Wind Farms

18

Exhibit 10:

Total Offshore Wind Potential Capacity UK

Exhibit 11:

Projected Jobs along the Offshore Wind Supply Chain under a high and low scenario in 2020

Exhibit 12:

Proposed UK Port Upgrades – 20 ports have been identified that meet the criteria to become offshore wind ports in the UK

Exhibit 13:

The UK power generation mix and installed renewable capacity in 2010

Exhibit 14:

Levelized Cost of Energy (LCOE) estimates of selected renewable technologies

Exhibit 15:

CAPEX associated with offshore wind is spread across 4 main elements

Exhibit 16:

Round 2 Offshore Wind CAPEX at financial close dates (real)

Exhibit 17:

Round 3 Offshore Wind CAPEX at financial close dates (real)

29

Exhibit 18:

Low and Median CAPEX for Round and Round 3 Offshore Wind Projects (2010-2030)

29

Exhibit 19:

UK undeveloped offshore wind projects and capital requirements

Exhibit 20:

Comparing median CAPEX estimates of offshor