The Crown Estate and renewables

Dermott Grimson discusses the Crown Estate’s role in renewables with Peter Cheney.

“A property company” is the best way to sum up the Crown Estate, according to Dermott Grimson. As Head of External Affairs for a unique organisation, he is increasingly involved in preparing the seabed for renewable development. The Glaswegian explains that “like any other property owner, we want to invest in our property in order to make the most of our assets and help others make something of the asset too.” Profits have totalled £1.9 billion over the last 10 years.

It generates money from property held by the Crown and its annual surplus goes to the UK Government. The Crown Estate portfolio includes virtually the whole seabed out to the 12-mile territorial limit, and it has rights to explore and exploit the natural resources of the continental shelf. However, the body is waiting for a diplomatic agreement on who owns the seabed off Northern Ireland. An answer is needed before leasing starts.

Under the Government of Ireland Act 1920, Northern Ireland was defined as the island’s six north-eastern counties. However, the Act did not set its maritime limits. As the territory of counties ends at the low water mark, the seabed off Antrim, Down and County Londonderry may technically not be part of Northern Ireland.

Article 2 in the Irish Constitution originally stated that the national territory consisted of “the whole island of Ireland, its islands and the territorial seas.” It currently gives no territorial definition. Talks are continuing between the Foreign and Commonwealth Office and Irish Department of Foreign Affairs.

“It’s not a dispute,” he comments. “There have been very fruitful discussions with colleagues in the Republic of Ireland so it’s just a matter of making sure we can get it right.”

The Crown Estate will be able to grant lease options to developers in Northern Irish waters but the Northern Ireland Executive will have the final say, as the consenting authority.

Offshore renewables have “advanced quite considerably” in recent years. He notes that Ernst & Young has consistently named the UK as the most attractive country for offshore wind development “so we see that as a strong signal that investors are interested.”

Successful bidders for Round 3 sites off Great Britain have been announced and he expects construction to start once Westminster finalises its renewables obligation banding review (consultation closes on 12 January) and publishes an offshore renewables roadmap.

The offshore renewables industry needs “long-term certainty” and he hears “encouraging” noises from the UK Government. However, to him, the real big issue is cost: “Unless the industry can get its cost down to £100 per MWh, it’s difficult to see all that’s on the stocks being delivered.”

An industry-led Offshore Wind Cost Reduction Task Force was announced in October and will report back to UK and devolved ministers in spring 2012. To feed into that work, the Crown Estate is undertaking a large research project into cost reduction, which it hopes to publish by the end of 2011.

More work needs to be done on understanding the levelised costs of offshore wind (compared to nuclear, gas or coal CCS) and he adds the sector will “undoubtedly … be an important part of the energy mix.”

Grimson is encouraged by Northern Ireland’s willingness to look beyond just what’s happening immediately off its shores. Indeed, he welcomes Harland and Wolff and Dong Energy’s development in Belfast Harbour, which will support the West of Duddon Sands wind farm (389MW). Construction is expected to start in early summer 2013 and expected to be fully completed in 2014.