Cost pressure in the offshore wind sector ‘could drive up disputes’

Disputes could be set to grow in offshore wind projects, say Charlie Lightfoot (partner) and Rachael Cresswell (associate) in Jenner & Block’s International Arbitration Practice.

In an article in the January issue of New Power Report the authors say that growing maturity in offshore wind is being matched by growing ambition on projects and cost reductions. But with a drive towards reduced or even no government subsidies and increasing competition, participants are facing cost pressure to win tenders, resulting in increased pressure elsewhere in the supply chain.

The authors say that some features of the offshore wind industry render it particularly susceptible to disputes. These include:

  • The sheer number of parties involved (partly as a result of the legal framework in the UK, and partly because of the complex and cutting-edge nature of many projects). These include manufacturers, developers, installers, operators, investors, insurers, regulators, government, advisors, consumers and local, environmental and other industry interest groups
  • The need for numerous areas of niche expertise at both the development and operational stages (which feeds into the involvement of numerous parties)
  • The fact that it is an industry in its infancy, with methodologies and new technologies in a state of rapid development and a paucity of significant operational experience
  • A regulatory regime that is still relatively young and susceptible to uncertainty regarding allocations of risk and when recourse to the regulator will be available.

The trend towards larger projects situated further offshore will entail longer power cables (and potentially, more difficult installation conditions) and therefore a greater risk of problems. Deeper waters could also imply greater risks elsewhere, for example in relation to foundation solutions.

The authors go on to explore potential issues and remedies in more detail.

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Further reading

Ofgem allows Ofto compensation after ‘exceptional’ cable outage at Walney 2

Ofgem rejects claim for compensation from two Oftos after cable defect outages

Ofto performance: Off the shore, on the money? As Ofgem prepares to announce a shortlist of bidders to take ownership of the Burbo Bank Extension connection, Janet Wood takes a look at what the new owner can expect

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