Offshore Wind

STATES OF JERSEY

OFFSHORE WIND

Lodged au Greffe on 17th October 2023 by the Council of Ministers

Earliest date for debate: 28th November 2023

STATES GREFFE

2023  P.82

PROPOSITION

THE STATES are asked to decide whether they are of opinion

1. to agree that Jersey should pursue the opportunities arising from the development of an offshore wind farm in the south west of its territorial waters;
2. to agree that development of up to around 1000MW in provision should be encouraged in order to meet the needs of Islanders, to power the Island's future economy and to create energy for export; and
3. to request the Council of Ministers to bring forward appropriate policy and legislation before the end of 2024 to set in place a process to lease, provide consent for, regulate and safely decommission a wind farm.

COUNCIL OF MINISTERS

REPORT

Summary – the Jersey opportunity

In 2022, the States Assembly agreed a Carbon Neutral Roadmap to achieve net zero emissions by 2050 and in recognition of this, became the first Crown Dependency to secure an extension of the Paris Agreement. These steps reflect the ambitions of islanders as expressed both in extensive public engagement and by the randomly selected Citizens Assembly, and of successive States Assemblies, for Jersey to embrace cleaner and more sustainable everyday technologies, and to play its part in responding to the climate emergency.

Our Carbon Neutral Roadmap requires long-term and secure access to low carbon electricity, and recognises the opportunity to achieve this by developing renewable energy in Jersey's waters.

This potential has been understood for some years, and was an important consideration in securing the transfer of the island's foreshore and seabed from the Crown in 2015. Initial pre-feasibility work in 2018 identified that development of offshore wind was technically feasible, with Jersey benefitting from relatively shallow sites and energetic wind conditions'.

An updated study undertaken in 2022 found that, additionally, the economic landscape has changed dramatically in this short period of time', with much change resulting from the substantial progress and increased investment seen globally, and in particular by many north-western European countries such as the UK and France. It is these positive shifts in both capital costs and operation and maintenance costs, driven by use of larger turbines, supply chain improvements and greater investor confidence, that make this the right time for Jersey to seek to bring forward a project.

At the same time, understanding of the future economic outlook for the island has also progressed. The Future Economy Programme now presents a detailed understanding of a series of related challenges which, whilst not unique to Jersey, do require a unique response; one provides a sustainable path to future economic growth that respects Jersey's ecological and socio-cultural limits.

It is expected that development of offshore wind as identified in this report can present very significant opportunities for Jersey. These include:

• Environmental benefits – locking in the access to low carbon energy that our net zero transition requires;

• Fiscal and economic benefits – creating a new energy export sector, bringing attractive, high value jobs to the island, and new tax revenues to support public services; and

• Strategic and social benefits – greater energy security and sovereignty, greater protection from energy price volatility, and an enhanced reputation as a forward looking and ambitious jurisdiction.

In this light, taking steps to develop Jersey's own offshore wind array appears to be an exciting opportunity that is firmly in the interests of the island.

Ministers recognise though, that islanders will expect to have their say on the issues, and for any decision to progress such a substantial infrastructure scheme to be carefully considered by States Members at each key stage along the way.

Accordingly, this proposition is intended to establish at the earliest stage, a clear process for  a  robust  debate  on  the  principle  of,  and  preferred  approach  to,  developing  a windfarm. The process as recommended provides for a debate in early 2024, in order that it can be fully informed by feedback from a substantial period of public engagement, by insight from global industry and other successful wind energy projects, and by further detailed policy studies.

Beyond this initial in principle debate, the later stages described in this report would provide States members the opportunity for extensive scrutiny and further consideration of  the  commercial  leasing  arrangements  and,  once  the  detailed  technical  design, economic appraisals and environmental impact assessment have been provided by a developer, of the subsequent application for development consent.

If the States Assembly is of the opinion to support this exciting opportunity, ministers will quickly bring forward proposals for the legal and regulatory frameworks necessary to lease and access the seabed, and to consent, regulate and safely decommission the necessary infrastructure. Ministers will also continue their joint fact finding and close on-going dialogue with counterparts in the Bailiwick of Guernsey, to understand and explore any shared opportunities that might arise.

At all stages, this work will progress with maximum rigour and transparency, in order that ministers, working with the States Assembly, can secure an ambitious, sustainable and decisive outcome.

Strategic context

The potential to develop offshore wind is well established in Jersey's strategic planning frameworks and can help deliver on a number of long-term goals that the island has previously identified.

Carbon Neutral Roadmap

Jersey's Carbon Neutral Roadmap (CNR1) establishes a pathway to net zero by 2050, with ambitious interim targets in 2030 and 2035, and programmes to support energy transition across multiple sectors.

The strategic policies in the CNR, together with reserved policies on energy security and affordability from Pathway 2050, also establish the island's long-term energy strategy. In summary, this is to: progress with rapid electrification of all suitable sectors and technologies, supported by the use of renewable liquid fuels (particularly in the near term) and consideration of alternative energy sources, particularly for marine and air travel, over the longer-term.

Our pathway to net zero relies on securing ongoing access to low carbon electricity. This is currently contractually secured by Jersey Electricity. Locking-in access to low carbon electricity over the long-term is vital to delivering our obligations under the Paris Agreement. Accordingly, Strategic Policy 2 of the CNR commits government to:

1https://www.gov.je/SiteCollectionDocuments/Environment%20and%20greener%20living/R%20Carbon%20Neutral% 20Roadmap%2020220525%20JB.pdf

examine the options for utility scale renewable energy generation, to ensure a diverse, safe and resilient supply of energy to meet the Island's future needs.'

In addition to securing low carbon energy, offshore wind could also make a direct contribution to the CNR's wider emissions reduction targets, for example as a potential source of income to support the long-term costs of transitioning to low carbon transport and heating.

Bridging Island Plan

Policy ME5 of the Bridging Island Plan (BIP[2]), adopted in 2022, also provides broad policy support for the development of utility-scale offshore renewable energy proposals, where proposals provide a viable commercial case for a project of an environmentally and socially acceptable scale. It provides a framework for considering such proposals, as set out below.

Whilst the Planning and Building Law (2002) does provide a legal basis to consent development in Jersey's territorial waters, detailed consideration suggests it doesn't provide a sufficiently robust framework for the regulation and decommissioning of such activity. Accordingly, ministers propose to bring forward a new dedicated regulatory and consenting route in law, for consideration by the States Assembly in 2024.

 Policy ME5 of the Bridging Island Plan Future Economy Programme

Following publication of an Outline Economic Strategy in May 2022, the Future Economy Programme (FEP) has now established a Strategy for Sustainable Economic Development, and an aligned delivery framework.

Together, these strategic plans build on an economic history in which the island has consistently punched above its weight, with a per capita GVA of £55,0003, ranking

Jersey among the top 20 economies globally. However, significant challenges are also identified.

Firstly, overall productivity is declining. For the last two decades Jersey's economy has only managed to continue to grow through inward migration. This has meant that living standards for islanders are being impacted as average real earnings have stagnated.

Secondly, like other developed economies, Jersey faces demographic shifts, with the average age of our population is increasing whilst birth rates are declining. By 2040, there will be an increased demand on public services (particularly healthcare), but also fewer workers to contribute to the tax revenue that funds these services. If we do nothing, this would likely mean relying on raising taxes and/or reducing public services, or increased user pays charges; ultimately leading to a lower quality of life for all islanders.

The Future Economy Programme's purpose is to combat these challenges by supporting economic growth and ultimately to ensure that islanders in 2040 enjoy a better standard of living than now.

The Future Economy Delivery Framework recognises that renewable energy is an important part of achieving Jersey's net zero commitment, and that it also presents an opportunity for economic growth. Accordingly, the FEP has identified the development of offshore wind as an opportunity within its second workstream, to Develop New Sectors and Growth Enablers. and sets out timescales that are consistent with those identified in this report.

Draft Marine Spatial Plan

The draft Marine Spatial Plan will provide an overarching strategic framework setting the approach for the development of a range of tools, including land use planning, marine resource management and fishing regulation.

If adopted, following consultation, it will contribute to the strategic direction of future iterations of the Island Plan and other related documents and, will inform decision- making across all topics relating to the marine environment. The breadth and the integrated nature of the draft plan enables complex issues to be addressed efficiently and effectively.

The development of a Marine Spatial Plan was identified as a Strategic Proposal of the Bridging Island Plan, recognising that the marine environment is a complex ecosystem where a range of activities and interests occur which extend beyond the sphere of the planning process and the regulation of development activity.

The draft plan is expected to establish a priority to support the principle of utility scale offshore  wind  generation  in  the  south-western  part  of  the  Bailiwick.  This  would encourage windfarm design to be informed by best practice in marine conservation; an understanding  of  additional  economic  benefits,  for  example  commercial  seaweed production; implications for search and rescue operations; and steps that can be taken

3 Based on internal analysis of Statistics Jersey and World Economic Outlook (April 2023) - GDP per capita, current prices (imf.org).

to minimise adverse impacts on visual and cultural heritage. It will recognise that any new consenting framework for offshore renewables should address the wind farm itself as well as associated undersea cables and onshore facilities.

Environmental considerations

International research is ongoing to understand the environmental risks and benefits of wind turbines, such how they can be designed to maximise habitat creation and support fish stocks in surrounding waters, to minimise bird strikes, and/or to integrate other commercial uses such as seaweed farming. This includes minimising impacts during all lifecycle phases including building, operation and decommissioning.

The findings of such research will continue to be fed into the design and development of Jersey's offshore wind farm, alongside necessary consideration of our existing obligations under both local and international agreements[3] and close engagement and dialogue with the island's fishing and sailing communities, and others.

A robust and comprehensive Environmental Impact Assessment, based on accurate local data, developed to recognised standards and reflecting the latest international research, will be required under the proposed new consenting route, and will be subject to public and expert scrutiny ahead of any subsequent grant of consent. Effective mitigations will be required as conditions of any such consent.

Process and approach

Ministers are proposing that the development of offshore wind should be privately funded and designed and delivered by a consortium with substantial experience of similar development elsewhere.

This approach is considered to be most likely to deliver a viable scheme that is progressed to robust and internationally recognised standards. Any opportunity for either the public of Jersey or the government to invest directly in the scheme will be kept under review and would be subject to detailed appraisal and, in the case of government investment, would be subject to appropriate consideration by the States Assembly.

Following this approach requires three phases of work:

• PHASE 1 – in-principle consideration

• PHASE 2 – leasing, and

• PHASE 3 – Consenting

Throughout each of these phases government will continue to seek input from islanders and the States Assembly, and feedback from offshore wind developers, neighbouring jurisdictions and local businesses, in order to best shape how the project develops.

PHASE1 - in principle consideration

This phase includes four related processes. In chronological order these are:

1. A  statement  to  the  States  Assembly  setting  out  ministers'  initial considerations and outlining the intended process (as set out in this report);
2. A public engagement phase during which islanders will have a chance to understand more about the proposals and have their say;
3. An industry engagement phase from mid-November in which government will  hold  a  structured  series  of  without  prejudice  conversations  with potential developers, power purchasers, project advisors and investors; and
4. Consideration by the States Assembly of this proposition, informed by outputs from the above processes and further project development work.

The public engagement phase will cover a 14 week period from early November 2023 to  early  February  2024.  This  work  will  be  informed  by  and  consistent  with  the Government Engagement Framework5, and will include:

• a consultation, informed by both a public briefing document and the available technical evidence and consisting of paper and online surveys, distributed widely in a range of languages and with free text and fixed choice questions;

• a programme of public engagement meetings to help islanders and stakeholders understand the issues and ask questions, ahead of completing the survey;

• publication of pictures indicating what a windfarm might look like from the Jersey coast; and

• a range of communications and marketing activities to increase awareness and encourage people to have their say.

A  consultation  responses  will  be  collated  into a summary  document  that will  be published ahead of the proposed debate of this proposition.

PHASE 2 - leasing

Leasing of seabed rights presents the first commercial stage for the project. Because of the scale of investment needed to put together a development consent application, the leasing process for offshore wind (in most jurisdictions) is staged between:

• an initial competitive tender process to secure an option for lease, usually based on a financial value offered for the development site option and a price per unit for energy that would subsequently be generated. At this stage, payments are reserved and the purchaser retains the option not to lease the site; and

• a  subsequent  lease  purchase  contract,  which  is  put  in  place  once  the development  consents,  supply  chain,  power  purchase  agreement  and investments are in place. This stage can unlock payment for the rights to the site, but any leasing payments attributable to the energy that is generated are usually deferred until the windfarm is operational.

This staged approach does two important things:

• it provides confidence, at an early stage and through a range of technical and financial due diligence stages, that there is a pool of credible bidders for the opportunity; and

5 Government Engagement framework

• it provides confidence to a successful bidder that they have a legal right to the development site (which is the basis on which investment is then secured) before they invest further in preparing the development consent application.

At  present,  Standing  Order  168  provides  the  procedural  framework  for  land transactions, and law officers have advised that it would also apply to leasing of the seabed.

Substantial appraisal and due diligence processes will be required ahead of any leasing decision and further information on the phasing, timing and scoring of the application for lease will be set out in due course. Having considered the optimum approach in more detail, it may be that ministers seek support from the Assembly to establish a bespoke process to ensure strategic alignment and best value are secured from this stage.

PHASE 3 - consenting

Once a development consortium have secured the option for lease, they will begin the extensive and detailed work necessary to seek a full development consent that extends to construction, operation and decommissioning. This work will include steps to:

• undertake extensive surveys, informed by statutory guidance, to understand a broad range of impacts and their resulting effects on the existing human, physical and natural environment at the site and, from this information, prepare an Environmental Impact Assessment;

• undertake their detailed scheme and build design, confirming their proposals for the exact size, location and nature of turbines they will use, as well as associated sub-station and cabling infrastructure;

• secure supply chain options based on these designs and plan construction logistics;

• negotiate power purchase agreements; and

• based  on  the  above,  arrange  development  financing  and  finalise  their commercial proposition.

At this point an application for consent can be submitted. The process through which that application will be considered, and subsequent provisions for the regulation of construction, operation and decommissioning put in place, will be set out in a new dedicated  consenting  law  that  ministers  propose  to  bring  to  the  Assembly  for consideration in 2024. The process established in this law will embody the principles of openness,  transparency  and  rigorous  decision-making  and  will  fully  embrace  our internal commitments and the need to consult closely with neighbouring jurisdictions.

Following an award of consent, a lease purchase contract would be put in place, following  which,  subject  to  meeting  any  pre-commencement  conditions,  the construction phase can begin.

It is important to note that ownership of the commercial interest can change hands at various stages of this process, provided any binding constraints put in place are met. For example, consortium members may be bought or sold; or an applicant may choose to sell their interest in the scheme at any point.

Timescales

The broad intended timescales that derive from this approach are set out in the table below.

Feasibility, technology and economic potential

An  initial  assessment  of  the  feasibility  developing  offshore  wind  locally  was commissioned by Government in 2018 and concluded that real opportunities with Jersey benefitting from relatively shallow sites and energetic wind conditions'. This report subsequently informed the relevant policies in the Bridging Island Plan.

The work was updated at the request of Jersey Electricity in 2022. The updated study found  the  same  good  underlying  conditions  but  that,  additionally,  the  economic landscape has changed dramatically in this short period of time', creating a much viable opportunity. This work also provides:

• a review of relevant technology and infrastructure;

• an overview of environmental and social impacts of offshore wind;

• a high-level economic appraisal including assessment of potential capital and operating costs and an estimated levelised cost of energy (LCOE);

• a description of both utility scale and community scale offshore wind concepts, including  assessment  of  wind  speed  data,  seabed  conditions  and  marine environment constraints in order to recommend optimum locations; and

• consideration of options for integrating hydrogen as part of an offshore wind scheme or wider island energy system.

Technology and economic potential

A series of reports exploring energy systems and fuel mix options were commissioned to inform the development of both the Bridging Island Plan[4] and the Carbon Neutral Roadmap[5], and have subsequently informed this work. Previous studies have also explored the potential of tidal power generation in Jersey[6].

More  recent  work,  which  will  be  published  to  inform  the  States  Assembly's consideration  of  this  proposition,  was  commissioned  to  assess  both  the  energy generation and economic potentials of different renewable technologies.

A multi-criteria analysis, which assessed each technology against the five missions established in the Outline Economic Strategy published in 2022, is summarised in the table below, and concludes that the greatest potential currently lies in offshore wind.

This work also considers Jersey's current and likely future energy demand profiles and the potential economic value of a range of different renewable energy scenarios.

From this work it is clear that the actual economic value of any scheme would depend both on prevailing market conditions (in particular the price per unit secured) and future choices about approaches about a range of issues over the construction and operation phases of the wind farm.

High-level assessments based on the current price for electricity generated on-island suggest the overall value of generated electricity to be around £300m per annum.

Key assumptions

Members will recognise that, by following a commercially led development, there are several significant decisions that can impact on the design and delivery of a wind farm, such as the size of turbines used or the price and end purchaser of the electricity produced, where final proposals will not be matters of government policy and will not be known until a detailed consenting application is submitted and published.

The consenting process will provide a backstop through which to ensure that any development proposal can be refused where it is felt to be unacceptable either in whole or in part.

However, a successful scheme also requires that key assumptions are set out well in advance and tested through engagement with islanders and scrutinised by the States Assembly.

Drawing on work to date ministers recommend that the following key assumptions should guide the next stages of the project. These assumptions can be updated as more information becomes known and can be reflected in and tested by the scoring method used to assess tenders during the leasing phase, and given weight as considerations under the proposed new consenting law.

9 In practice, the intermittent nature of wind generation means that without substantial innovation and investment in currently emergent storage technologies, wind energy would need to be paired with imported electricity to ensure a consistent supply. Thus it is assumed that the Island will always retain an import capability via sub-sea cable from the European mainland

Financial and staffing implications

The safe and timely development of offshore wind generation would be the largest infrastructure project undertaken in Jersey for many years, and will require significant and sustained investment by government to create the policy and legal frameworks to consent development, and to regulate and assure the operations.

To date, in-year project, research and public engagement costs have been met from existing Cabinet Office and Department of the Economy budgets. In addition, officers in the Cabinet Office Strategy and Innovation Directorate have taken on the formal project management of the work, and on-going input is being provided by a range of officers, particularly from the Department for Infrastructure and Environment, Ministry of External Relations, and Treasury and Exchequer.

In line with the draft Government Plan 2024-27, project costs of up to around £500,000 for 2024 are expected to be met from resources in the Climate Emergency Fund. This can be achieved without any reduction in planned investment in agreed Carbon Neutral Roadmap policies. These costs are intended to secure additional resource, including external resource, in areas including: legal advice in respect of seabed leasing and other consenting  matters;  technical  environmental  studies  and  data  gathering;  public engagement, communications and marketing; cost-benefit appraisal of policy options and trade-offs; further research and project development; energy systems design and investment advice; and due diligence of tendered submissions.

Financial and staffing implications will kept under on-going review, and project costs for subsequent years will be set out in the Government Plan in the usual way.

Conclusion

In summary, it is expected that development of offshore wind as identified in this report can present very significant opportunities for Jersey. These include:

• Environmental benefits – locking in the access to low carbon energy that our net zero transition requires;

• Fiscal and economic benefits – creating a new energy export sector, bringing attractive, high value jobs to the island, and new tax revenues to support public services; and

• Strategic and social benefits – greater energy security and sovereignty, greater protection from energy price volatility, and an enhanced reputation as a forward looking and ambitious jurisdiction

In this light, taking steps to develop Jersey's own offshore wind array appears as an exciting opportunity that is firmly in the interests of the island. Ministers recognise though,  that  islanders  will  expect  any  decision  to  progress  such  a  substantial infrastructure scheme to be carefully considered by States Members at each key stage along the way, and will expect to also have their say on the issues.

Accordingly, this proposition is intended to establish at the earliest stage, a clear procedure for a robust debate on the principle of, and preferred approach to, developing a windfarm, informed by feedback for a substantial period of public engagement and further detailed policy studies.

Later stages, as described in this report, will allow for extensive scrutiny and further consideration of the commercial leasing arrangements and, once a detailed technical design, economic appraisal and associated environmental impact assessments have been provided, of the application for development consent.

If the States Assembly is of the opinion to support this exciting opportunity, ministers will quickly bring forward proposals for the legal and regulatory frameworks necessary to  lease  appropriate  access  to  the  seabed  and  to  consent,  regulate  and  safely decommission the necessary infrastructure. At all stages, this work will progress with maximum rigour and transparency, and will ensure all steps are taken to secure an ambitious, sustainable and decisive outcome.

Appendix A – Extract from offshore wind feasibility report showing preferred locations for development (ITPEnergised, 2022)