Sea-sons Greetings! Key Developments in the UK's CCUS and Offshore Wind Sectors

2024 has been another active year for the seabed around the UK, with developments and advances in both the CCUS (carbon capture, usage and storage) and offshore wind sectors. Making Britain a clean energy superpower was one of Labour's key manifesto ambitions and, with the establishment of GB Energy and the various other clean energy transition announcements over the last few months since coming to power, it seems the Government has remained committed to supporting the UK's clean energy system for the future.    

In this blog, we explore the key real estate, planning, and construction developments, challenges, and successes from 2024 in the CCUS and offshore wind sectors, and look ahead to what 2025 may bring.

CCUS is capturing the spirit of Christmas!

Earlier this year, in the week that Britain became the first industrialised nation to end its 150-year usage of coal, the Government announced that it was pledging almost £22bn of funding over the next 25 years for carbon capture and storage projects situated in Merseyside and Teeside. The funding is expected to create 4,000 jobs and help remove over 8.5 million tonnes of carbon emissions each year – the equivalent of taking around 4 million cars off the road.

This pledge was announced in parallel to The Crown Estate, being the managers of the seabed and much of the coastline around England, Wales and Northern Ireland, confirming in October 2024 that it had awarded an Agreement for Lease to a second Track 1 CCUS project. This Agreement for Lease, granted to global energy company Eni, relates to the first CCUS project in the UK to repurpose existing pipeline infrastructure. This follows the Agreement for Lease entered into in October 2023 with bp (as lead operator) in relation to its 'Endurance' project which is delivering the infrastructure for the transportation and storage of carbon captured from a range of emitters across Teesside and the Humber to a site below the North Sea. We were delighted to act for bp in relation to this in 2023, in what was described as a "landmark" agreement and could become one of the world's largest CCUS projects. We are also pleased to have a continuing role on the development of the Endurance project, as well as on the development of NZT Power's commercial scale gas-fired power station with carbon capture (one of the first of its kind, and destined to be an early emitter to Endurance's first low-carbon-well).

In 2023, the North Sea Transition Authority (NSTA), the regulator for carbon dioxide transport and storage, announced that it had awarded 21 carbon licences to 14 companies, and various stakeholders, including The Crown Estate, the NSTA, the Department for Energy Security and Net Zero (DESNZ), and the Offshore Petroleum Regulator for Environment and Decommissioning (OPRED) are working together to review future applications from developers for the licensing and leasing of CCUS opportunities, so stay tuned for further CCUS activity in 2025.

Offshore wind is blowing in a sea-son of cheer!

As well as focussing on advances below the seabed, the Government has also maintained focus and momentum on developments above the waves, with a pledge to quadruple offshore wind power production in the UK by the end of the decade.

Of particular note this year, The Crown Estate embarked on the second phase in its Offshore Wind Leasing Round 5. As reported in our blog, this latest leasing round is seeking to establish a new generation of floating wind farms in the Celtic Sea, with up to 4.5GW of total capacity available, and this latest phase of the process will see bidders set out further details in relation to their delivery plans and how these will support the delivery of social and economic benefits for onshore communities. This leasing round is just one element of the tender process, which is expected to conclude with the award of Agreements for Lease (for both wind farm assets and transmission infrastructure) in Summer 2025.

In parallel to the ongoing work being undertaken by The Crown Estate, the Electricity System Operator has also been carrying out a design exercise to recommend how the floating offshore projects in the Celtic Sea might be connected to the onshore network, to allow the final projects to power an estimated 4 million homes!  

CCUS and Offshore Wind: Co-locating under the mistletoe?

CCUS and offshore wind both have a significant role to play in helping the UK achieve its net zero targets, and while the seabed around England, Wales and Northern Ireland is vast, competing demands for this space for CCUS and offshore wind projects are rapidly increasing. bp and Orsted's (now resolved) dispute regarding the overlap of the UK Endurance CCS and the Hornsea 4 windfarm sites is a recent example of the challenges the co-location of offshore wind and CCUS poses. A coordinated approach to its management is therefore more vital than ever before.

It is for this reason that the Statement of Intent published this Autumn by The Crown Estate and the NSTA to confirm joint aspirations in ensuring a more sustainable and closely co-ordinated management of the seabed was welcomed.

As mentioned in the Statement of Intent, there is already an Offshore Wind and CCUS Co-location Forum (Forum) which was formed in July 2021 following a recommendation from the CCUS & Offshore Wind Overlap Study. The Forum brings together partners including The Crown Estate, the NSTA, the Carbon Capture and Storage Association and the Government to provide strategic coordination of co-location research and activity and help maximise the potential of the seabed for these two critical activities.

Part of the Forum's work is exploring what mutual beneficial opportunities arise from the colocation of these developing industries. In support of the Forum, the University of Aberdeen is currently investigating the viability of areas on the seabed in the East Irish Sea and Central North Sea for the colocation of CCUS and offshore wind, with bespoke monitoring plans for each area.

Whilst both the Statement of Intent and the Forum's work is welcomed, we wait to see how successfully the joint actions outlined in the Statement of Intent are carried out and how quickly they can identify solutions to the challenges presented by co-locating these two technologies and help make co-location in an increasingly busy sea space a reality.

Deck the halls with planning reform

The Government has recognised that for its CCUS and offshore wind (and indeed, wider infrastructure and housing) ambitions to come to fruition reform will need to be made to the planning system to speed up the consenting process. There is a consensus across all users of the system (developers, statutory advisers, NGOs, communities and Government) that the current process is not working effectively and that something needs to be done. However, there is considerably less consensus regarding what that something should be and typically inherent tension between the proposals put forward (e.g. more/less consultation and documentation). We have discussed some of the concerns we have with what has been proposed to date, along with what we would suggest instead, in a series of 'Project Nutcracker' articles over the course of the last 12 months (each available here).

2025 will be an important year to see whether the detail of the Government's eventual proposals are coherent with their laudable policy ambitions. If they're not, we'll likely find that planning does represent a constraint on the Government's CCUS and offshore wind, and wider decarbonisation, targets.

Procurin' around the subsea Christmas Tree…

Procuring offshore energy transition projects tends to be more complex than others, not least due to the use of rapidly advancing technologies and/or new processes or systems, alongside the well-documented challenges of working in the marine environment. Even where core processes or systems are not entirely new, their combination, integration or deployment with new products, or perhaps a significant scaling-up, could itself be first-of a-kind.

Technically complex projects present unique challenges from an engineering and construction procurement perspective as they might involve significantly higher capital costs, longer overall periods for completion of design and construction, potentially emerging scopes of work and risks which are only fully understood or mitigated during execution, a supply chain that might be specialist and strongly-positioned and/or in short supply (when did three offshore installation ships last come sailing by?), and performance capability that might be proven only once operating. Clients moving into energy transition from other sectors may find themselves dealing with a new or unfamiliar supply chain that has different expectations and ways of doing business (and vice versa). At the same time, suppliers and contractors are generally reassessing risk profiles and contracting arrangements in the face of varied challenging headwinds which have made closing out contracts on acceptable terms the most challenging they have been in a long time.

There is (and we expect to continue to see) increased effort in carefully structuring the terms of engagement with suppliers and contractors. There is no 'one size fits all’ solution, but the overall strategy and individual contracts needs to be sufficiently marketable to the supply chain without jeopardising project appraisals, secure delivery contracts which meet stakeholder expectations and strike the right balance between risk, reward and value for money. Smart structuring and efficient contracting arrangements are essential, and a sophisticated and adaptable approach is increasingly required.

There are various approaches across the wider spectrum of energy transition projects, including a conventional division of projects into more manageable portions (giving specialist work to specialist suppliers, or simply dividing the largest scopes amongst more suppliers), exploration of co-investment strategies with key suppliers to increase manufacturing capabilities, securing capacity at the earliest stage or commission dedicated equipment, such as installation or maintenance vessels, and being much smarter with pricing strategies (particularly for modules of work where scopes or risks cannot be priced efficiently on conventional bases).

When we reflect on the year just gone, and look ahead, the most successful projects in this space will usually see clients focussing on developing strong relationships with the supply chain, and onboarding advisors with extensive experience in complex infrastructure and a strong grasp of design and construction risks, technology licensing and performance issues, and the complexities of the energy value chain.

Come back tomorrow for Day 7 of our advent calendar, when we'll open the door on some of the wonderful pro-bono projects that we're involved with.