The Queen and the Treasury of the UK are reportedly expected to receive windfall of nearly £9bn from offshore windfarms over next decade, as an auction of seabed plots has allured runaway bids from prominent energy companies, including the oil giant BP. These companies are apparently looking forward to building offshore windfarms along the coast of Wales and England.
According to the credible sources, the first auction of licenses of the crown estate’s seabed in over a decade is estimated to generate revenues of over £879m per year for the Queen’s property manager, for as far as 10 years. In addition, it will help in developing six new offshore windfarms and providing clean electricity to over 7 million homes.
Based on existing rules, the crown estate will collect the money and hand it over to the Treasury before 25% is returned to the royal household as the sovereign grant, according to which the Queen accepts a quarter of crown estate’s earnings. This implies that the royal household will receive around £220m a year and its share in the deal could increase to £2bn over next decade. The Treasury, on the other hand, is estimated to receive £659m a year.
Reportedly, the option fees to be paid by the bid winner will more than double the profits made by the Queen and Treasury, which during the last financial year had recorded profits of £345m.
BP along with its partner EnBW, a German utility, are expected to pay £462m a year towards the option for developing two offshore windfarms in Irish Sea, with a capacity to power over 3.4m households with clean energy across the UK.
BP has claimed that the company will avoid the payment of option fee for a maximum term of 10 years by making a final decision on investing in the windfarm project within four years and producing electricity from it after seven. Given that, the rent due to the crown estate would drop to 2% of the project’s annual turnover.
In this regard, Head of BP’s renewable energy business, Dev Sanyal, has stated that through the offshore projects it can make returns on investment of around 8% to 10%.