Impacts of Competitive Seabed Allocation

Impacts of Competitive Seabed Allocation

Offshore wind is an important part of the transition to green energy sources. The industry relies on access to economical seabed, which is a scarce and valuable resource controlled and managed by governments. In this paper we analyse the impacts of the fees embedded in the seabed lease agreements for the economics of offshore wind. We describe the allocation schemes for seabed including pre-qualification, fees, and method of competition for the examples of UK (England, Wales, and Northern Ireland), UK (Scotland), the United States and the Netherlands. Then, we use a discounted cash flow analysis to assess and compare the timeline and magnitude of the fees. Finally, we describe the incentive structures that these fees create for wind farm design. We show that the costs embedded in the seabed lease agreements can be extensive and have been trending upward over time. We also find that the incentive structures are varied and not necessarily aligned with societal goals.