[ad_1]
Queen's property managers will this week define the conditions for the world's largest offshore wind sales auction in a decade.
Industry experts expect the complex tendering process to generate record amounts, which could increase energy bills and give the Crown a windfall – potentially generate hundreds of millions for the Queen.
The Crown Estate, which manages the Monarch's property portfolio, holds the exclusive rights to lease the seabed around the British Isles for wind and wave power generation. Its profits go to the Treasury, which then returns to the royal house for 25% in the form of a sovereign grant.
The Queen's right of ownership on the British coast is an aboriginal right, but her power to collect royalties on offshore wind and wave power is much more recent. The full Crown operating rights were granted by Parliament in 2004.
Until the 1960s, there was no formalized legislation declaring the Crown's participation below the low-water mark. Until then, sovereignty was governed by convention and common law. In the eighteenth century, most coastal states adopted a limit of three miles.
There were exceptions, like Soviet Russia, which was 12 nautical miles. In the twentieth century, this broader limit has come into force around the world, including the United Kingdom, and is still in effect.
The Queen's marine domain extends much further. It extends up to the continental shelf, an area up to 200 m deep around the British Isles. To the east, the UK's boundary extends halfway to the Netherlands and Belgium.
This is a relatively recent development. Until the late 1950s, government lawyers feared to extend their sovereignty for fear that this would draw attention to the fact that it does not happen. There was no formal legislation enshrining Crown property below low tide. A decade after his coronation, the question was raised by the monarch himself. Following a hearing with Queen Elizabeth in 1962, the Earl of Perth, Earl of the Crown, stated that she "had already heard that the Crown estate was taking over rights to lands under the sea".
The discovery of oil and gas from the North Sea has been a catalyst as drilling companies demand clarity of ownership. In 1964, the Continental Shelf Act established the much broader boundary that remains in place.
Ownership of oil and gas on land and at sea belongs to the Crown, but since 1934, the work of exploiting it by setting royalties and badigning drilling rights is owned by the government.
Wind energy is different. In the first round in 2000, the lease of parcels of wind farms was managed by the Crown Estate. Even then, the demand was strong. The auction generated plans for 20 farms. All were confined to the 12-mile limit, because the ministers felt that the United Kingdom could not use the 1964 law to allow large structures such as offshore turbines without new legislation.
It needed more space for this source of green energy to develop. Thus, in 2002, government lawyers suggested resorting to a United Nations convention to create an "exclusive economic zone" for wind and wave energy within the continental shelf. A green paper asked for the opinion of "the most appropriate body" in which the direction of this new area should be invested. The issue was settled by the 2004 Energy Act; the exploitation rights would remain with the crown.
The auction, criticized by some energy companies as a financial drain, has already sparked calls for a reconsideration of whether the queen should have the right to demand offshore wind revenues.
"If this source of value is to quadruple, let's make sure the value stays with the public rather than being spent on remaking the royal palace," said Molly Scott Cato, spokeswoman for the Green Party for Finance.
The sovereign subsidy was increased two years ago, compared to its previous level of 15%, to fund major renovations at Buckingham Palace. It must remain at 25% for a period of 10 years, which means that the royal household should benefit directly from the money raised through the new leases.
Map
Wind power at sea is forecast to be the fastest growing source of electricity in the UK in the coming decades.
The Queen's seabeds generate 8% of the country's electricity production, but that figure could reach one-third by 2030 with the targets set by the government.
The Climate Change Committee proposed a more ambitious goal of nearly 80% offshore wind energy by 2050.
The cost of wind turbine construction has dropped and pension funds, multinational oil companies and infrastructure are now competing for a share of the market.
The Crown Estate collects royalties equal to 2% of revenues derived from the use of its seabed and has collected £ 41m of existing leases last year. With many more land already leased and under construction, these amounts will skyrocket.
The Crown Estate does not publish its forecasts. However, if the government's target of 2030 is achieved, the queen could raise more than £ 100 million a year in a decade.
Hornsea One, the largest offshore installation planned in the world, will make an important contribution to the coffers of the crown. When it will be fully operational in 2021, at a cost of £ 500 million a year for electricity bill payers, the Crown will receive £ 10 million a year.
Offshore wind is paid as a percentage of household bills. Currently, 3 pounds of each double-fuel energy bill is paid to the wind turbines, in addition to the revenues they earn on the wholesale electricity market. The Crown then takes 2% of the operator's total royalties.
The sale this year, the fourth by the crown, marks a turning point in the monetization of the royal seabed. For the first time, renewable energy companies will be asked to submit an upfront payment to obtain a license.
Calendar of offshore wind farms in the United Kingdom
Five British concessions are auctioned: Dogger Bank, South of the North Sea, East Anglia, North Wales and Sea of Ireland. Between them, they represent a capacity of 7 gigawatts. Each lease will last 60 years.
Following a selection process to identify the best proposals, short-listed projects will be invited to bid. The winners will be those offering the highest initial payment.
Disputes with bidders about conditions have already delayed the call for bids, which was originally scheduled to take place this spring. The latest details will be unveiled at a presentation to the industry on Thursday.
The preliminary format, which is likely to be refined, concerns an "option right" which will only be reduced when the wind farms are operational. This would be above the annual fee. Winning bids will also have to make a payment of 10% of the option fee each year in "rent" during the construction of the facility.
Renewable energy developers have warned that lack of transparency could lead to a "crazy" auction, which would increase energy bill costs.
An industry source said the new option payments would be factored into the overall project costs. This would be pbaded on to billers via the annual payment that renewable energy developers receive to power the network. These payments are determined by a separate auction of the grants organized by the government. Since the option fee would inflate the subsidy, it would also result in greater collection of royalties by 2% of the Crown.
"These are all sealed envelopes – and may overload customers," the source said. Energy companies are using "sophisticated game theory badysts" to determine how to bid against their competitors, he said.
"But in the end, if you have high option costs, you have higher rent. In the past, Crown Estate brought a touch of lightness during the construction of the projects – it goes of different magnitudes, "he added.
Barnaby Wharton, RenewableUK, said, "It's very important that when the Crown Estate makes its final proposals, the market is transparent so that consumers get the best value for money."
The auction mimics a similar system used in the US offshore wind market. The recent US sale, which included offers from Shell and its Norwegian rival Equinor, raised a record $ 99 million per gigawatt of production capacity. If the United Kingdom were to achieve similar prices, the Crown could receive up to £ 560 million in initial payments. This figure is higher than the total annual revenues of the Crown estate, which reached £ 477 million last year.
A spokesman for the Crown Estate said the British auction would operate differently than the United States and that it was "impossible to compare the comparable situation".
Most of Queen's revenue comes from the property, but under current arrangements, the proportion of its wealth from energy is expected to increase.
"This transition gives us a chance to create a fairer economy," said Scott Cato of the Greens. "This is a fantastic opportunity to rethink property in a way that challenges the inequality of society. When a new source of value appears, it should belong to the public, it should not belong to the Crown and the public just takes a piece of it. This is a good opportunity to raise this issue.
Members of the royal family are already being criticized for spending £ 2.4 million in taxpayer money on renovations at Frogmore Cottage, the official residence of the Duke and Duchess of Susbad.
The Crown Estate was a good guardian because it could take a long-term view and balance the needs of the government with the energy sector, environmental groups and other users of the sea, such as fishing fleets, said Huub den Rooijen, director of Energy Minerals and Infrastructure.
"Rights have been vested in us," he said. "The products of the domain of the Crown go entirely to the Treasury. It is then up to the government and parliament to determine how these funds are distributed. "
Den Rooijen said the design of the auction was tailored to the "growing large group of competent developers" now operating in offshore wind and that it would take into account many consultations with the industry. .
"The design of our proposed offer … would evaluate the technical capability of prospective bidders and the projects they propose, before using the option fee as a means of determining the project award." This approach will help to ensure that the competent bidders and the strongest possible projects present themselves for a new lease, as part of an objective, fair and transparent process. "
Source link
