Policy Brief
Wind farm
Introduction
The Government has announced plans for an offshore wind farm. A consultation commenced on 20 November 2023. Responses are required by 16 February 2024. The consultation was not accompanied by an analysis of the issues, although supporting papers have subsequently been published. This brief provides some basic information to help inform the debate.
The Government’s proposal
On 17 October 2023 the Council of Ministers announced that “an offshore wind farm, with the potential to provide significant environmental and economic benefits for Jersey will be built in the southwest of the Island’s territorial waters…..the plans for a facility of up to around 1,000MW would comfortably produce enough electricity to meet the Island’s own needs, with the remainder to be exported”.
On 10 November 2023 the Government announced a consultation on the proposal. The consultation runs to 16 February 2024 after which the States Assembly will be asked to decide if -
- Jersey should pursue the opportunities arising from the development of offshore wind in the south-west of its territorial waters.
- Development of up to 1000MW should be encouraged in order to meet the needs of islanders, power our future economy and create energy for export.
- The government should bring forward appropriate policy and legislation, in 2024, to set in place a process to lease, consent, regulate and decommission a wind farm.
Key points from the proposal are reproduced below –
The proposed windfarm would generate up to around 1,000MW of low carbon electricity.
Taking into account times when it does not produce electricity (for example, when there is little or no wind), a 1,000MW wind farm would generate around 3,800MWh of renewable energy each year.
This is about 6 times the amount of electricity currently used in Jersey, and about twice as much as would be used if everything in the Island, including all heating and transport, was run on electricity. The energy that Jersey does not use would be exported to other countries.
Because wind power isn’t constant, we would still need to import some electricity to make sure that we have a consistent and stable service at all times.
The windfarm would be built in in the south-west of Jersey’s waters, next to the existing St Brieuc windfarm. Initial investigations have identified this area as benefitting from relatively shallow sites and energetic wind conditions.
A wind farm such as this will cost several billion pounds to design and build. Because of the very significant level of investment needed, and the significant risks associated with that investment, it is proposed that the wind farm should be privately funded and built by companies that have substantial experience of similar development elsewhere.
Many of these costs need to be estimated in advance but can go up or down over time. The future price of energy also has to be assessed in order to establish how profitable a scheme may be. With this approach the benefits of an offshore wind farm for Jersey come in different forms, and should be substantial.
The way that Jersey benefits from a wind farm will depend on choices taken in the coming years, but should include the following benefits -
- Energy security benefits. Jersey could enter a long-term contract to guarantee energy to the Island at certain prices. This could make local energy costs more stable in the future than they otherwise would be. In future, if access to energy becomes more contested, Jersey would benefit from knowing that it has secure access to its own energy.
- Economic benefits. A windfarm at this size would create energy that, at today’s prices, would be worth around £300m a year. Much of this energy could be exported, adding a new sector to Jersey’s economy. The wind farm should also create sustainable and high value jobs in the Island, such as in supporting its operations and maintenance.
- Income benefits. Developing a wind farm creates opportunities to raise income for the public purse. For example, profit made from the sale of energy would currently be taxed at 20%, and fees can be charged for access to the seabed.
- Environmental benefits. Jersey would secure guaranteed access to low carbon energy that our net zero transition requires. Exporting energy will also help other countries to decarbonise too.
On 20 November the Environment Minister gave more details of the proposal in a blog post. This referred to a high level feasibility study by the consultancy ITPEnergised, commissioned by Jersey Electricity. The conclusion of that study is set out below –
The conclusion of this updated report, based on the 2018 study is that Jersey continues to have significant offshore wind potential within its waters and that the development and exploitation of the resource to generate low cost reliable power for the island is both technically feasible but additionally, the economic landscape has changed dramatically in this short period of time.
The key changes that have occurred during the previous 4-5 year period is the reduction in capital costs, together with lifetime Operation & Maintenance costs. This is being driven by the increased deployment of larger more efficient turbines, leading to an overall reduction in the cost/MW installed, together with improvements in the supply chain, great maturity in the O&M Market and at a macro level, great investor confidence due to clearer policy signals.
There have been a number of new entrants into the market, with a particular growth of the Oil & Gas majors, becoming key asset developers and access the new leasing rounds. Additionally, we have seen significant consolidation in the service based markets with greater development and delivery expertise providing further efficiency through more integrated service approach.
Further analysis of the project scenarios as previously presented is recommended with the aim to identify at least one scenario that would be financially and economically viable and also both environmentally and socially responsible.
The study has a huge amount of technical analysis but little on economic viability. The conclusion included the comment: “The key changes that have occurred during the previous 4-5 year period is the reduction in capital costs”. This was indeed the case from 2015 to 2021, capital costs falling by some 40%. However, capital costs are estimated to have risen by 13% in 2022 and as will be shown later in this paper costs have increased again in 2023 resulting in some projects being pulled. Such variations are particularly significant for projects that have a long lead time. Assumptions have to be made about both costs and prices years in advance of the energy coming onstream.
On 21 November a Government report emerged entitled Economic analysis regarding the economic potential of offshore wind for Jersey. This analysis was carried out internally in June 2023. The brief report draws on and cross-refers to the ITPEnergised report. Among the points in this report are –
- A 1,000 MW wind farm would take up approximately 9% of Jersey’s marine area.
- Based on a conservative price per unit of 6P, a 1,000 MW wind farm could generate electricity worth £226 million; of which 17% could be locally consumed based on 2021 energy demand whilst the remainder could be planned export.
- During the construction phase 913 jobs could be created locally, representing a GVA boost to the economy of £60m through the construction phase.
- During the operational phase 113 direct jobs could be created in Jersey.
- Based on the 2022 wind feasibility study at 1000 MW project would generate initial tax liability of approximately £42 million.
The notes makes the point that these figures are based on 2022 cost data, that is prior to the recent increase in costs.
Jersey’s electricity supply – the current position
A Policy Centre Knowledge Centre paper Jersey’s Energy Market provides basic information on the demand for and supply of energy in Jersey. This section draws on that paper.
Electricity currently accounts for 38% of energy supply in Jersey and is largely used for heating and lighting. 58% of Jersey’s energy consumption is of petroleum products and 3% is gas.
Responsibility for supplying electricity rests with Jersey Electricity, which is partly owned by the Government of Jersey. It imports electricity from France, distributes electricity throughout the Island, maintains two back-up oil-fired power stations and is involved in initiatives to provide solar and wind power. Jersey Electricity’s Annual Report and Accounts 2022 provides comprehensive information about the company and more generally about the supply of electricity in Jersey.
Jersey obtains 95% of its electricity from France. Of this 34% is hydro electricity from the Rance Barrage and 66% is nuclear energy from the plant at Flamanville in Normandy. There is a limited amount of locally produced electricity from the Government’s energy from waste plant and some solar power units at the Queen’s Road Car Park, La Collette Power Station, Woodside Farm and Jersey Diary. The power stations at La Collette and Queen’s Road provide backup in the case of power from France being disrupted.
Three cables supply electricity from France to Jersey –
- Normandie 1 runs for 27km from Surville in Normandy to Archirondel and came onstream in 2017.
- Normandie 2 runs from Saint-Remy des Landes to Archirondel and came onstream in 2000.
- Normandie 3 runs for 19km from Periers to Armanville, then 32km undersea to Grouville and 7km underground to the South Hill switching station and came onstream in 2014.
There is also a cable between Jersey and Guernsey, enabling Guernsey to use the electricity produced in France.
The potential benefits of using wind power
The consultation suggests that the benefits to Jersey from using wind energy would include energy security, a new industry, tax revenue and environmental benefits. These issues are considered in turn.
Energy security
The consultation states that “Jersey could enter a long-term contract to guarantee energy to the Island at certain prices and that “in future, if access to energy becomes more contested, Jersey would benefit from knowing that it has secure access to its own energy”.
Wind energy is, as the name suggest, dependent on wind. When the wind stops blowing then an alternative is needed. In the UK this alternative is largely provided by natural gas. Wind energy alone could not guarantee a continuous supply of electricity. Jersey would require one or more of –
- Electricity from the current oil-fired power stations.
- An arrangement with EdF in France or another company to supply electricity when needed.
- Solar power, although, like wind power, this cannot be guaranteed.
In the longer-term, technologies may be developed that enable electricity to be stored, which could remove, or at least reduce, the need for back-up facilities. However, there is no certainty that such technologies will be developed and they cannot be assumed in any decision that Jersey may take on a wind farm.
A significant recent innovation is the development of Small Modular Reactors, producing carbon-free nuclear power. However, while they are small in relation to existing nuclear power stations, they are not small in relation to Jersey. Their cost is currently estimated at £1.8 billion. Such a reactor would require 70,000 square metres of land and is really only viable for a population about six times that of Jersey’s.
A new industry and tax revenue
If Jersey was successful in becoming a supplier of energy to other markets, then this could be a valuable new industry for the island which would increase tax revenue. But the “if” is a big “if”. There are two key points -
- Electricity can be exported only through a cable. The cables that currently connect Jersey and France could be used to export electricity to France as well as to import it. But in practice, other than Guernsey (considered in a separate section), France is the only place that Jersey could export to. To be successful Jersey would need to sell surplus electricity to France, but France would not need to buy it. This would put France in a strong negotiating position. It would be technically possible to develop a cable link direct to the UK but this would be costly (£500 million would be a reasonable estimate), and Jersey would be in the same weak negotiating position as it would be with France.
- A wind farm would probably be developed only if Jersey guaranteed to buy all the electricity that was being produced at a price fixed in advance. Jersey would do very well if that price turned out to be below the market price when the power came onstream, but equally would incur losses if the opposite was the case.
These two points are crucial and will require detailed analysis before any decision can be taken. A subsequent section of this paper provides some relevant information.
Environmental benefits
The consultation states that “Jersey would secure guaranteed access to low carbon energy that our net zero transition requires. Exporting energy will also help other countries to decarbonise too.” At first sight this is a puzzling comment as currently all Jersey’s electricity is carbon-free. This point was recognised in Jersey’s Carbon Neutral Road Map –
While access to low-carbon electricity can be maintained, switching to other forms of low-carbon generation at either the utility scale (for example wind or tidal generation) or more local sustainable generation (for example PV panels on roofs) will not provide further carbon reductions, although it could bring other benefits for energy security and (in some use cases, in particular for those generating energy) affordability.
Whether other countries could be helped to decarbonise would depend on the ability of Jersey to export its electricity, covered previously.
A separate environmental issue is that the wind farm would be very visible from the south and west coasts of Jersey, which would no doubt attract some critics. The construction of the wind farm would also require the use of land in Jersey, which would have environmental implications.
The relationship with Guernsey
Guernsey currently obtains its electricity from France but via Jersey, that is there is no cable directly connecting Guernsey and France. Guernsey Electricity and Jersey Electricity currently import electricity through a joint venture, Channel Island Electricity Grid, which owns and operates the cables to France. The Grid negotiates multi-year contracts with the French company EdF to secure electricity through the cables with some element of fixed pricing.
If Jersey produces its own electricity, then clearly Guernsey would be a potential market, and in any event the existing contractual arrangements would need to be renegotiated.
In September 2023 the Guernsey States of Deliberation agreed a new Electricity Strategy for Guernsey, a very detailed document, developed in partnership with Siemens. The strategy includes additional cables, on-island renewables in the form of solar power, and offshore renewables. Like Jersey, Guernsey is concerned with energy security, which in its case means removing the total reliance on a cable from Jersey through having a direct connection to France –
All options for interconnection have been explored, including an additional subsea cable to France through Jersey, to France directly and direct to the UK. However, the modelling showed that from both a cost and technical perspective, a direct interconnector with France was the best option. Additional interconnection through Jersey would require the network there to be upgraded to allow for substantially higher loads to be transferred through to Guernsey. A subsea cable direct to France would also provide Guernsey with additional security as it would be connected to a different part of the French network than the existing cable is.
While Guernsey would no doubt be interested in any arrangement with Jersey that was to its commercial advantage, it does not want to be reliant on Jersey. If Jersey in effect went its own way with a wind farm, then Guernsey would probably want to have a choice of buying carbon-free electricity from Jersey or directly from France.
The viability of the wind farm proposal
Going ahead with a wind farm would be a major project for Jersey with significant potential benefits but also substantial risks. Two facts illustrate the extent of the risks –
- The Government’s consultation states that “a wind farm such as this will cost several billion pounds to design and build”.
- The UK current has 14 GWh of wind farm capacity with a plan (unlikely to be realised) of 50GWh by 2030. The USA has a more modest plan (also not likely to be realised) of 30GWh by 2030. Jersey’s proposal is for 1GWh. This is six times what the Island needs. Even with the UK’s 50GWh Jersey would therefore be planning for wind power proportionately 16 times more than the UK and 100 times more than the USA.
In addition to these points Jersey has no expertise in respect of such projects.
The risk is recognised in the consultation, with the mitigation also being described –
Because of the very significant level of investment needed, and the significant risks associated with that investment, it is proposed that the wind farm should be privately funded and built by companies that have substantial experience of similar development elsewhere.
Wind farms are generally privately funded and there is a limited number of companies with the capability of constructing a wind firm of the size envisaged in the government proposal. But such companies also want to mitigate risks. They do this by requiring the promoter to guarantee to buy the electricity at a fixed price. The promoter (the Government of Jersey in this case) is therefore taking the risk of the fixed price being above the market price. The company is taking the risk of its costs being higher than planned and also of the contractor going out of business.
The consultation includes the following –
Many of these costs need to be estimated in advance but can go up or down over time. The future price of energy also has to be assessed in order to establish how profitable a scheme may be. With this approach the benefits of an offshore wind farm for Jersey come in different forms, and should be substantial.
This indicates a poor understanding of the nature of the market. The future price of energy is not something that can be “assessed” as if this is an administrative task. Experts try to forecast the price, generally unsuccessfully, and at the least there is a wide range of possible future prices. And it does not follow that any “assessment” will lead to a profit and it is certainly not the case that with the “approach” the benefits to Jersey will be “substantial”. The following paragraph usefully illustrates these points.
The market price of wind power has fallen substantially in recent years – from £120 a megawatt hour in 2015 to £40 in 2023 – a two thirds reduction. At the same time costs have risen substantially. These two trends have had the predicted market impact, that is a sharp reduction in the development of wind farms. Significant developments in 2023 include –
- The Swedish developer Vattenfall spent years developing plans for almost 140 turbines across a 725km-squared patch of the North Sea, each one up to 350 metres high and with blades spanning up to 300 metres wide. In July 2023 it stopped the project, surging costs making it unviable. Vattenfall estimated the cost of building offshore wind farms had climbed 40% in the previous 12 months. In December 2023 Vattenhall sold the project to its competitor RWE, which intends to seek to secure a contract with the UK Government in the next auction round in 2024.
- The Danish developer Ørsted has pulled two offshore projects in New Jersey and will write off $5 billion as a result. More than half of US wind power contracts have been cancelled or are in danger of being cancelled and the US 2030 offshore wind target is regarded as being impossible to meet.
- In September, there were no bids in the UK Government’s offshore wind auction. As a result the UK Government has had to increase the maximum price it is prepared to pay by 66%.
These developments illustrate just how risky the projects are – and the bigger the project the greater the risk. The “experts” in the construction companies failed to forecast costs and prices accurately and it has cost them billions. The UK government experts failed to forecast demand even a few months ahead and has had to increase its maximum price by two thirds.
Next steps
As the Government’s consultation makes clear there will be further consultations in due course. Those consultations will need to provide detailed analysis of the points raised in this Brief, in particular –
- What facilities will be required on-Island for the construction of the wind farm?
- Is it envisaged that Jersey would adopt the normal practice of agreeing in advance to buy all of the electricity produced by the wind farm at a fixed price?
- A sensitivity analysis of the potential profit/loss for different market prices.
- A realistic assessment of the market power of Jersey being able to sell surplus electricity.
- An analysis of the implications for the current arrangements with Guernsey, taking into account Guernsey’s new electricity strategy.
- An assessment of the alternative sources of energy for when wind power is not sufficient.
- An assessment of the cost of being the promoter, in particular conducting the auction or negotiating with one company.
Consultation response
On 18 March 2024 the Government published the Offshore Wind Consultation Report. This explained the consultation process and set out the results.
Answers to the online consultation were summarised as follows –
- 81% of respondents considered the potential of having greater energy security due to being able to agree prices over the longer term a very important or fairly important possible benefit.
- 74% of respondents considered the potential of creating enough energy to export, which could in turn help grow Jersey's economy and create good jobs as a very important or fairly important possible benefit.
- 71% of respondents considered the potential of additional income for the public purse, such as new tax revenues, as a very important or fairly important possible benefit.
- 76% of respondents considered the potential of securing access to low carbon energy and helping other countries reduce their fossil fuel use as a very important or fairly important possible benefit.
- 52% of respondents indicated a preferred funding model. A private public partnership was proposed by 33%, mainly private by 22% and solely private by 20%.
- The things that particularly excited respondents about the proposed development of offshore wind were production of renewable energy, energy independence, taking action on climate change, income generated and new jobs for the island.
- The things that most concerned people were environmental concerns especially relating to the impact on wildlife, cost and funding of the project, lack of trust in government, visual impact and speed of construction.
- Respondents were asked in one sentence to summarise their current opinion about developing a wind farm. 72% of responses were positive, 23% were negative and 5% were neither positive nor negative.
The response document includes some of the detailed responses from relevant organisations and a full analysis of the online responses.
Further information
The Global Wind Report 2023, published by the Global Wind Energy Council provides a great deal of relevant information.
The Electricity Strategy for Guernsey is a detailed 200-page document with analysis much of which is relevant to Jersey. (Guernsey, like Jersey, has an unfortunate habit of not publishing agreed strategy documents; rather the document can be found only in a proposition to be debated.)
Offshore wind feasibility study, a high level feasibility study of the wind farm proposal by the consultancy ITPEnergised, commissioned by Jersey Electricity.