Developers are an entrepreneurial bunch. The best of them are calculating risk-takers that break away from the mainstream in hunt of big ticket deals.
This makes the announcement by the UK’s Crown Estate earlier this week look curious. The UK-based property business is on the lookout for a developer to take on the task of bringing the Blyth Offshore Wind Demonstrator project online by 2017. The site received planning consent for a 99MW scheme last November.
In theory, this announcement should fire the starting gun for developers to start sharpening their pencils and submitting their project tenders and bids.
After all, the best sites rarely get an airing like this. They’re snapped up far earlier in the development cycle when there is far less fanfare or active marketing.
So what’s different here? Why is this project being so actively marketed?
Perhaps this is because initial interest behind the scenes has been muted, at best. It is clear that developers have not been quick to take this site off the market.
This lethargy from developers may be due to the proposed locations of turbines. Only five of the sites are in shallow seas and the majority in far deeper waters. The nature of the site makes it a more difficult prospect to develop than usual.
There is also the desire for developers to use Blyth to test new of turbines and other kit, in keeping with the site’s proposed use for testing and development. That alone requires some deft management of internal stakeholders, quite apart from the complexities it adds to future cabling connections and the grid.
However, perhaps the most interesting element is what this lack of interest thus far tells us about the difference between the opportunity on offer and developer ambitions. For developers, their ambitions are focused on revenue generation and a move towards greater profitability. This means focusing on project that can be developed and rolled out at scale, rather than speculative research projects.
Only by focusing on replicable schemes can developers maximise margins, build out the supply chain, and provide a commercially-focused platform through which to introduce new technologies and drive down industry costs.
Demonstrator sites have already played an important role in the early-stage development in the industry, and few people question their past value.
But, by their very nature, demonstrator schemes are also difficult to handle, come with added complexities, and require significant hands-on support. Many developers have already privately acknowledged that this makes the Blyth initiative and interesting but challenging proposition.
While providing on-site contractor support could be compelling, it takes far more operational and financial commitment to take on the overall development risk.
That’s not to say a developer won’t be found — we think one will. Just don't be surprised if we see new market entrants, perhaps even from Asia, take a look.
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