The Innovation and Targeted Oil and Gas (INTOG) leasing round gives developers the opportunity to build offshore wind farms to power oil and gas installations in Scottish Waters. Developers can apply for seabeds rights to build small scale (less than 100MW) innovative offshore wind projects. They can also apply for rights for larger projects connected to oil and gas infrastructure. Projects will provide electricity and reduce the carbon emissions associated with those sites.
The launch of INTOG by Crown Estate Scotland perhaps hasn’t had the level of excitement of the recent ScotWind leasing round. After all, it is expected to deliver 4.5GW. This is nothing to be sneezed at but quite modest compared to the 25GW awarded under ScotWind. Nevertheless, INTOG could play a vital role in the success of offshore wind in Scotland.
To understand the opportunity that INTOG presents it is helpful to think about some of the challenges facing floating ScotWind projects:
- The supply chain is immature with limited technology convergence. There are also no large scale publicly declared infrastructure investments.
- Projects have long lead times with potential consenting challenges and bottlenecks, and
- Grid connection dates and costs are a significant challenge.
INTOG projects can be important as there is every chance they can be delivered before many floating ScotWind projects. This is because some INTOG projects will directly supply offshore production assets so may not need grid connections . Those that do can get earlier connections and may use existing offshore grid infrastructure.
For offshore wind projects managing risk is key. Greater risk increases cost, because suppliers charge more and the cost of finance is higher. Floating wind is currently viewed as carrying significant extra risk. No-one has built a project more than 50MW. Nor have floating construction and operational logistics been optimised. There was 20 years between the first 50MW of fixed offshore wind and the first gigawatt offshore wind project. There are lots of reasons why floating progress will be quicker but the leap to GW scale can’t happen overnight.
This is where INTOG comes in. INTOG projects can provide accelerated learning for consenting processes, floating technology, and logistics. The industry (and investors) can then become more comfortable with the risk profile of larger floating projects. The supply chain can also make investments with a better understanding of the lowest cost floating concepts.
Unlike ScotWind, bid price is the major criterion for success in INTOG. It is interesting that Crown Estate Scotland is retaining ScotWind’s Supply Chain Development Statements (SCDS). The smaller INTOG projects are more accessible to new entrants. They can thus serve to encourage local supply development at a manageable scale. INTOG SCDSs may kick-start local supply chain capability growth and facility investments. This would provide a platform for subsequent ScotWind projects to build on.
The industry will pay close attention to the results of INTOG and the welcome stimulus that it may bring.
We’re already helping the oil and gas sector to develop their offshore wind strategies. We look forward to continuing to support the ambitions of all our clients that are participating in the INTOG leasing round.