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Crown Estate marine director Rob Hastings on energy challenges

11 June 2010

From setting rents for gas storage to the challenges of offshore wind, wave and CCS, the Crown Estate has a lot to wrestle with in the energy sector. Rob Hastings talks to Brendan Coyne

Rob Hastings, director of the marine estate for the Crown Estate, has a simple message for gas storage firms that are complaining publicly that rents are too high: "The notion that we are charging too much is difficult to answer because we haven't set the rents yet, we are still in negotiations. I can only guess that making their complaints public is a negotiating tactic." Hastings says natural gas storage is a free market opportunity and will live or die by what the market deems viable. "These are national assets that benefit the taxpayer; it would be inappropriate for a commercial enterprise to try to exploit that. Giving subsidies to private enterprise at a cost to the taxpayer doesn't sound right to me." Gas storage Gas storage is one of many activities in the Crown Estate's remit. It manages a portfolio worth a total of about �6 billion, most of which is property, and generates surplus revenues that are contributed to the Treasury (last year its contribution was �226�million). From the perspective of the energy sector, the strategic importance of the marine estate is huge. A recent report from the Offshore Valuation Group suggested that just a third of the UK's offshore renewable resource, if properly exploited, could deliver annual revenues of �62�billion by 2050. So while firms seeking to exploit offshore resources have their own interests, the Crown Estate must take a longer view. "The ability for us to derive an income from these offshore assets should be with us today, and in a thousand years," says Hastings. "To plan like that and protect the integrity of these assets is difficult. We spend a lot of time thinking about the best activity for a particular location. Decisions are not arbitrary." Rounds 1 and 2 extended The decision to extend Round 1 and Round 2 of the offshore wind programme, taking the potential generation capacity to 10GW, was announced last month. Could those rounds be extended any further? Hastings is pragmatic: "If there was a compelling reason to do more we would consider it, but with 48GW of development in the pipeline, we're close to what the market can deal with. But who knows what will happen in the next few years? The last couple have been interesting..." The biggest challenge posed by Round 1 and Round 2 was working out where to start. "There was no protocol for this sort of stakeholder engagement," says Hastings. "We had to work out the process of dealing with statutory advisers, the NGOs [non-governmental organisations], and groups that represent other sea users. Who did we have to talk to? Who had a statutory duty and who didn't?" After establishing who should be involved, the estate had to work out what was what. "Building a knowledge base of environmental data was challenging," says Hastings. "No one had done anything of any significance in these areas. Scoping out what we thought needed to be done took some time. What should we measure? What should we manage? It took the combined brain power of a lot of clever people." Data and decisions The knowledge acquired, however, has been valuable, particularly in Round 3 of the offshore wind programme. The Crown Estate's Marine Spatial Planning system (MaRS), a geographic information system, won the 2010 ESRI award for return on investment by helping to increase certainty for investors in Round 3. "What we have now is a significantly greater bank of knowledge than we had previously," says Hastings. Wind turbines themselves have had to be entirely reinvented. "The sector has learned the hard way that taking an onshore windfarm and putting it in the water is a very expensive way of doing things. A good chunk of the industry is doing something about it: designing bespoke turbines that wouldn't work onshore and developing purpose-built installation vessels." For its part, the Crown Estate has bought the world's largest offshore wind turbine - rated at 7.5MW - from Clipper Windpower to gain first-hand knowledge of the challenges faced by developers of wind turbines for deep water marine deployment. Meanwhile, Hastings says the days of bolting a crane onto a coastal jack-up vessel are also over. "People tried to make that work," he�says. "Effectively it didn't, but proper infrastructure is coming through now, which is very helpful." Regional support Hastings believes that massive investment and mobilisation of supply chain resources is essential, and that will demand regional co-ordination. Does he think the regional development agencies, facing a cull at the hands of the government, should remain? "The fact of the matter is that even if we mobilised all the UK's coastal resources, it probably still wouldn't be enough to support what is needed offshore over the next decade. A co-ordinated approach that allows specific regions to concentrate on what they are good at rather than competing with other regions makes sense. Focused regional support is essential. Whether that's through regional development agencies or central government, I'm quite relaxed, but the key element is co-ordination." Planning Planning could be a significant obstacle to delivering rapid development. Tight timescales and planning regimes have not, historically, gone hand-in-hand. With the government set to scrap the Infrastructure Planning Commission next year, and other planning bodies such as the Marine Management Organisation and Marine Scotland involved, there is confusion about who, exactly, will call the shots. "If anything is going to slow things up, it's planning," Hastings concedes. "We have the opportunity to be in a much better place than in the past, but there is plenty of scope for things to go wrong. It will take concentrated attention by government to make sure they don't. It is important for the government to co-ordinate the [planning] organisations to ensure they are working within the same policy framework and in the same direction. That's easy to say but difficult to do." Potentially equally difficult is the task of setting the rent for the storage of waste - carbon dioxide - on the Crown Estate's property. This is a market that does not yet exist, but Hastings says the demonstration projects that the new government is expected to set out soon will be the key to understanding whether carbon capture and storage is viable. As with natural gas storage, "the market will set the rent", says Hastings. If there is a repeat of the public negotiations on natural gas storage, that could prove interesting. Wave and tidal The Crown Estate is likely to take an incubatory role in wave and tidal power, but Hastings questions the current fragmented approach to development given capital restrictions: "There could be multiple wheels being invented at the same time here, which is not very efficient." Hastings believes developers need to be more pragmatic. "Their technology is practically worthless unless it gets to commercial-scale deployment. So, if somebody has a generic application that works, sharing it across the industry would be highly beneficial to them because investors would gain confidence and spend money to enable mass deployment. If they don't get to that stage then the whole thing has been a pointless exercise." An outline of wave and tidal deployment for consultation is expected by the end of the year. Renewables Obligation renewal With further modifications of the Renewables Obligation on the cards, Hastings is concerned that its increasing complexity could erode investor confidence in projects that are ongoing or soon to be constructed. "To change [an enabling regime they have worked to] now would be damaging. Whatever comes out of the re-evaluation has to ensure commitments through to 2014 are protected to avoid major problems with the investor community. But beyond that point, there is every reason to think about doing something different." Do we need a supergrid? Is a supergrid vital to the success of offshore wind Round 3? Not entirely, according to Hastings, but bespoke connections for individual windfarms could be a waste of money. "Less offshore wind will be deployable without [a supergrid]. By 2020 we could have 20GW in the North Sea across 40 individual farms distributed around a broad geographical area. To get the lowest cost, optimum solution, somebody needs to sit down and design this transmission system as part of the infrastructure." He says the obvious candidate for this work would be National Grid. "If you're going to connect something this big to the GB system, you have to ensure National Grid is happy with it."
Source: Karma Ockenden

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