Second Report - Floating Offshore Wind in Wales

Floating offshore wind in the Celtic Sea will not only be key to meeting the UK’s Net Zero targets, it also presents an opportunity to bring significant investment into Wales and provide high quality jobs. If first-mover advantage can be seized for Wales the economic opportunity will be exponentially greater. We heard real enthusiasm and appetite from industry to seize the opportunities of floating offshore wind in the Celtic Sea, which we agree presents a once in a lifetime opportunity for the region. This appetite and level of ambition from industry must be matched by the UK Government, which should commit to driving this opportunity forward at pace as a project of national importance.

Developers need long-term targets and a clear pipeline of projects to unlock investment. Fully delivering on the opportunities for floating offshore wind in the Celtic Sea will require a high level of coordination across government and among public bodies. Given the scale and significance of this opportunity the UK Government will need to demonstrate clear leadership and a commitment to the industry for the long-term. The future role of the Offshore Wind Champion is uncertain under the new administration but we believe there is a clear benefit to having a champion of the sector able to drive forward developments and coordinate work across government.

The UK Government must set targets for floating offshore wind beyond 2030 up to 2045. Alongside these targets it should work with The Crown Estate to provide visibility on future leasing opportunities in the Celtic Sea beyond the current leasing round and bring forward a strategy setting out how this will be delivered. The UK Government should also provide clarity on where leadership for this strategy lies within government. These targets and the strategy for achieving them should be provided prior to the conclusion of the upcoming leasing round.

Consenting bodies will face a significant ramp-up in applications from developers of floating offshore wind projects. In order to process these applications in a timely and coordinated manner and accelerate the delivery of floating offshore wind in the Celtic Sea it will be critical for these consenting bodies to be sufficiently staffed and resourced.

The UK Government should work with the Welsh Government to identify the staffing and resourcing requirements of consenting bodies necessary for the delivery of floating offshore wind at pace. Subsequent to this review, both governments should bring forward a joint plan and timetable for how these resources will be allocated and shared to meet demand. (Paragraph 25) Ensuring local supply chains benefit from floating offshore wind

We recognise that investment in local supply chains must be balanced against accelerating programme delivery, bringing costs down for consumers and compliance with international treaty obligations. However, the potential for wealth Floating Offshore Wind in Wales 29 and job creation in Wales from floating offshore wind is too great to be missed. There is a real opportunity for the region to gain first-mover advantage as a hub for the manufacture and assembly of floating offshore wind components and to export its skills and expertise into a growing global market. We welcome The Crown Estate’s requirement for developers to provide supply chain investment plans as part of their bid for a lease. However, these plans must be commitments and The Crown Estate should ensure developers are held to them.

We recommend The Crown Estate bring forward further detail on its supply chain requirements at the earliest opportunity to assist developers in preparing their bids. Alongside this it should formulate a credible mechanism for holding developers to their supply chain investment plans and ensuring these commitments are followed through.

Given the importance of ensuring local supply chains benefit from floating offshore wind it will be essential for supply chain requirements in Contracts for Difference auctions to be enforceable and brought into alignment with The Crown Estate’s leasing rounds. Contracts for Difference auction parameters must also take into account increased costs to developers arising from global economic pressures to remain internationally competitive.

The UK Government should reform future Contracts for Difference auctions for floating offshore wind to include enforceable local content requirements as a condition of the contract. These requirements should be designed to align with those in The Crown Estate’s upcoming leasing rounds. It should also re-examine the parameters for Allocation Round 5 and take action to ensure the strike price fully reflects increased costs to developers arising from global economic pressures. (Paragraph 43) Preparing ports for floating offshore wind

Developing regional port infrastructure for the manufacture and assembly of floating offshore wind components will require significant investment but will be necessary for local supply chains and jobs. The full economic benefits of floating offshore wind should go to the region and not be lost overseas. To ensure this happens the highest level of ambition should be set for regional ports to deliver all the necessary manufacturing and assembly functions of floating offshore wind.

FLOWMIS will be critical for unlocking private sector investment in Welsh ports and making them ready for floating offshore wind. Investors require certainty on the UK Government’s commitment to this funding.

The UK Government should set out a clear timeline for the allocation of FLOWMIS and commit to ensuring Welsh ports receive at least half of the available funding.

A consistent theme throughout our inquiry was the need for long-term certainty to provide confidence to the sector and unlock investment. Much of this investment is likely to go to Port Talbot and the Port of Milford Haven which are set to play a key role in the delivery of floating offshore wind in the Celtic Sea. Preparing these 30 Floating Offshore Wind in Wales ports will require significant investment and this will only be forthcoming with a credible pipeline of projects over future decades matched by a commitment from government to support the sector.

To provide ports with the confidence to make long-term investments in infrastructure The Crown Estate should set further targets for floating offshore wind in the Celtic Sea beyond its initial target of 4GW. Alongside this the UK Government should set out its future funding commitments to ports beyond the allocation of FLOWMIS. (Paragraph 61) Preparing the grid for floating offshore wind

We recognise the benefits of a grid planned strategically for the whole of Great Britain. However, the UK’s decarbonisation efforts should also be planned strategically and there are distinct opportunities that arise from ensuring floating offshore wind in the Celtic Sea connects into Wales. This is the case particularly given the heavy industry in the region and the potential opportunity to decarbonise this industry using green hydrogen produced from green energy.

Wider decarbonisation goals should be considered when planning grid infrastructure. The UK Government should continue to appraise National Grid ESO’s Holistic Network Design and follow-up exercise with this in mind and ensure opportunities for decarbonisation in Wales are not missed when decisions over where to connect floating offshore wind in the Celtic Sea are made. The UK Government should update us on work to strengthen the grid in South West Wales to accommodate future generation in the Celtic Sea.

Strategic planning of grid infrastructure will be essential for accommodating future GW targets in the Celtic Sea. National Grid ESO have stated that proposals on how to develop the network in the region will be given when more detail is known on the capacity and location of future floating offshore wind projects. Visibility of future targets in the Celtic Sea and a clear roadmap will therefore be essential for the timely planning of grid infrastructure. To accommodate these targets in time the UK Government will also need to provide anticipatory investment and seek ways to overcome delays in improving the network.

Long-term targets and a clear roadmap for delivery, as recommended elsewhere in this report, should be provided at the earliest opportunity to assist National Grid ESO in planning for improvements to grid infrastructure. Alongside this, the UK Government should continue to appraise National Grid ESO’s proposals, ensure these are fit for purpose and, where necessary, back proposals with anticipatory investment. We also recommend the UK Government continue to engage with industry and other stakeholders on finding solutions to grid infrastructure acceleration. These solutions should be sought in accordance with the target of reducing processing times by a minimum of 50% within a year. (Paragraph 73) Floating Offshore Wind in Wales 31