‘You’re in my spot!’ – BP and Ørsted’s UK saga continues as Hornsea Four DCO decision looms

Grant Shapps, the UK Secretary of State for Business, Energy and Industrial Strategy (BEIS), has less than a month to sign off on a decision on Ørsted’s Hornsea Four offshore wind farm, which might not be an easy task as the Danish renewable energy developer and BP are still at odds over an area where their offshore wind and carbon capture and storage (CCS) project sites overlap.

In this article:

• The Ørsted-BP impasse
• Interface Agreement and exclusion zone caught between boats and wind turbines
• The Crown Estate and Secretary of State caught between a rock and a hard place

Ørsted submitted the application for a development consent order (DCO) for the 2.6 GW offshore wind farm to the Planning Inspectorate in September 2021. The examination of the application began in February 2022 and the Planning Inspectorate issued a Recommendation Report on 22 November, initiating a three-month period in which the Secretary of State is to issue a decision. 

Ørsted’s filing of the DCO application also initiated a back-and-forth with BP, the operator of the licence for the Northern Endurance Partnership (NEP) offshore carbon capture and storage project as the two project sites share an area of some 110 square kilometres, deemed the Overlap Zone.

Back in 2013, the Hornsea Four and the Northern Endurance Partnership (NEP) projects – then with Smart Wind Limited behind Hornsea Four and National Grid Twenty Nine Limited (now Carbon Sentinel Limited) behind NEP – entered into an Interface Agreement to coordinate their activities and manage conflicts in the overlapping area.

At the beginning of last year, shortly after the examination period started for the Hornsea Four DCO application, Ørsted and BP submitted position statements to the Planning Inspectorate with regard to their projects, which brought to light their disagreement over the protective provisions in the draft Development Consent Order (DCO) for the benefit of the carbon store licensee of BP’s Endurance Store project.

Ørsted said that BP was trying to force exclusion with its proposed protective provisions that would prevent the development of wind infrastructure in the overlapping seabed area and disapply the Interface Agreement. BP argued that Ørsted’s proposed mitigation measures for co-existence in the overlap zone were “unspecified and undeliverable”, and requested a revised assessment of the impacts of Hornsea Four on the carbon storage project.

For BP, proposed measures involving not using vessels for monitoring operations at its carbon storage site – which in the case of wind turbines being installed in the overlapping area are said to pose a collision risk – are a no-go and are deemed by the company to have a negative impact on the project. For Ørsted, the overlap zone represents some 25 per cent of the developable area for Hornsea Four and the developer said a reduction in the number of turbines would mean a loss of 630 MW to 675 MW of generation capacity.

BP proposed an exclusion zone for its Endurance Store project, part of the Net Zero Teeside (NZT) project, and both part of the NEP development, to be realised and operated without impact, while Ørsted claimed physical co-existence was possible. The companies’ standpoints remain, generally, the same, even after several further submissions to the Secretary of State and the Planning Inspectorate since the beginning of last year, for both Hornsea Four and NZT project, which is currently undergoing examination for a DCO for onshore elements of the wider NEP project.

According to the latest filings from Ørsted, after the developer filed a submission in the examination for BP’s NZT project in June 2022 and The Crown Estate said disapplying the Interface Agreement required their consent, BP retracted its submission looking to disapply the agreement entirely through an article in NZT’s Development Consent Order (DCO). Instead, the CCS project developer requested that it provides compensation to Ørsted under the Interface Agreement liability, with BP’s liability to Hornsea Four applicable only after the NZT project receives the DCO.

Nevertheless, according to BP’s filing, The Crown Estate is not discarding the possibility to disapply parts of the Interface Agreement but it has been waiting to get more details on the matter to inform its decision based on the recommendations of the Planning Inspectorate, the progress of discussions between BP and Ørsted between now and then, and the position of the Secretary of State.

Looking at the latest submissions for Hornsea Four, BP and Ørsted have not been able to reach significant progress in their discussions and the Secretary of State is facing a mammoth task before announcing his decision.

On 16 December, the Secretary of State requested more information and input from both developers, The Crown Estate, the Environmental Agency, and other stakeholders in Hornsea Four, and additionally referred Ørsted to BP’s submission from 8 December 2022 for comment.

What the Secretary of State asked the companies to shed more light on are the three key areas they disagree on: the application of an exclusion area and notification area, whether the interface agreement should be retained or disapplied, and the period after which the provisions for the benefit of the Endurance Store project licensee would fall away.

In its response on 13 January, Ørsted retained its position that BP was forcing exclusion and that the co-existence of the two projects was possible.

The Hornsea Four developer argues that there should not be an exclusion area, or a notification area, imposed by the Secretary of State, maintaining that co-existence between the 2.6 GW offshore wind farm and the Endurance Store project remains a viable option.

According to Ørsted, the protective provisions it proposes would allow for ongoing discussions to find a technical solution to the issue of co-existence. These discussions are proposed within practical timescales to allow for optimising the wind farm layout if BP cannot demonstrate sufficient progress of the offshore applications relating to the Endurance CO2 Store, which are yet to be submitted, the offshore wind developer said.

The compensation due under the Interface Agreement is a contractual matter, which bp has tried to conflate into a planning matter. To use a DCO in this manner would amount to an abuse of process”.

– Ørsted; Applicant’s Response to RFI dated 16 December

On the matter of the Interface Agreement, Ørsted maintains its position to keep the agreement as it is, saying its provisions set the appropriate mechanism for assessing compensation.

“[These] provisions should not be set aside because bp consider that the terms and aims of that agreement are not in their commercial interests. This is particularly relevant in light of the subsequent Deed of Adherence that bp entered into on 10th February 2021. The compensation due under the Interface Agreement is a contractual matter, which bp has tried to conflate into a planning matter. To use a DCO in this manner would amount to an abuse of process”, Ørsted says in its response to the Secretary of State.

Regarding the period for the provisions to the benefit of BP’s project, the offshore wind farm developer said the timescale of four months was appropriate as it provides the company with the opportunity to optimise the layout of the wind farm “rather than designing the layout to exclude the area on the premise that it might be utilised for carbon capture and storage”.

Here, Ørsted said that there was uncertainty around BP’s project as to the extent of the overlap area required for carbon capture, and further noted the slow progress of the CCUS-related offshore applications. The Secretary of State should weigh this against the opportunity to maximise the capacity of Hornsea Four and its importance in terms of the contribution to decarbonisation, the developer said.

“It is of course open to the Secretary of State to extend this time period when deciding whether to grant the DCO, although any such longer period should not put at risk the Applicant’s ability to compete in future CFD auction rounds, nor subsequently put at risk the ability to construct and energise Hornsea Four by 2030“, Ørsted stated.