The Queen and the Treasury will receive an offshore windfarm windfall of almost £9bn over the next decade, after a major auction of seabed plots attracted runaway bids from energy companies including the oil company BP.
The crown estate’s first auction of its seabed licences in a decade will earn the Queen’s property manager £879m a year, for up to 10 years, and clear the way for six new offshore windfarms and enough clean electricity generation for more than 7m homes.
The windfall will more than double the profits made by the crown estate, which reported a net revenue of £345m for the last financial year, after it received record-breaking bids from energy companies hoping to build offshore windfarms off the coast of England and Wales.
The most lucrative bids were made by BP and its partner, Germany utility EnBW, for two offshore windfarm licences with a total capacity of 3 giga-watts in the Irish Sea. The seabed licences are worth £462m a year to the crown estate, or £4bn over the 10 years it usually takes to develop these projects. However, BP claims it will be able to make a final investment decision on the project in four years, and begin generating electricity after seven.
The developers will effectively pay the Ccrown estate “rent” on the option to develop the area each year until the project can agree to a permanent lease. This money will be handed to the Treasury before 25% is returned to the royal household in the form of the sovereign grant, meaning the Queen will directly benefit from the UK’s renewable energy boom.
The sovereign grant was increased in 2017, from its previous level of 15%, to pay for extensive renovations at Buckingham Palace. It will stay at 25% at least until the next five-year review in 2021-22.
The renewable energy arm of Germany’s RWE was another big winner in the auction after scooping up licences for two offshore windfarms in the Dogger Bank area off the coast of North Yorkshire.
The size of the crown estate’s windfall has reignited calls for the profits of the offshore wind industry to be channelled into a “green sovereign wealth fund” that could invest in more green energy projects or local communities.
The Green party co-leader, Jonathan Bartley, said the initial capital from a renewable windfall could be invested “for future generations, similar to what we’ve seen the likes of Alaska and Norway do in the past with their oil wealth”.
“The boom in value of the right to develop offshore wind is so welcome – a signal that the transition away from fossil fuels is happening at speed. But we need to ensure that the value of this national resource is shared fairly and invested for all our futures,” he said.
The crown estate had hoped to avoid a “runaway” auction by overhauling the auction rules in 2019, but industry players have said the changes did not go far enough and allowed for “bonkers” prices that could inflate the cost of the UK meeting its climate targets.
Anne-Marie Trevelyan, the energy minister, said the crown estate’s latest leasing round would help power 7m homes and assist the in UK eliminating its contribution to carbon emissions by 2050 while “creating thousands of new jobs and ensuring Britain builds back greener”.