UK bets on offshore content boon

Offshore wind developers in the UK may be required to submit a “supply-chain plan” demonstrating how their project will encourage a local supply chain before applying for a Contract for Difference (CfD), its government has announced.

While it remains unclear how – or even if – a mooted project might be affected by a lack of local content, the new government demand represents a major shift for the UK, which has become the world’s largest offshore wind market without yet sparking a manufacturing boom.

In announcing the government’s long-awaited Offshore Wind Industrial Strategy today, Business Secretary Vince Cable said that he would expect to see “something approaching” 70% of the content used in offshore wind farms coming from the UK, a similar local-content level to the declining offshore hydrocarbons sector.

Coming anywhere near that level would represent a step change for the UK offshore wind industry. UK engineering body EEF quickly pointed out that the figure currently stands at about 30%.

Germany and France have both been more successful in luring offshore wind-turbine manufacturers – the latter without a single turbine in the water.

The UK government nevertheless indicated that its approach will remain focused more on carrot than stick, with its “Industrial Strategy” encompassing a range of mostly modest support schemes for the industry, some of them established previously.

There will be an “expansion of the scope” of an existing funding scheme to support port and coastal infrastructure development in England, although no further details were given.

The Regional Growth Fund will stump up £20m ($30m) to create a new “manufacturing advisory service”, known as GROW: Offshore Wind, to foster the domestic supply chain. It has the mission of making the UK supply chain more competitive by offering “tailored support” from specialist bodies – including industry body RenewableUK, Grant Thornton and the Advanced Manufacturing Research Centre – to focus domestic companies on innovation in the offshore wind sector.

Some £46m will be ploughed over five years into the previously announced Offshore Renewable Energy Catapult Centre, which is in the process of ramping up its efforts in Glasgow.

Additionally, a new “Offshore Wind Investment Organisation” – to be run by UK Trade and Investment – will be established to further facilitate inward investment.

To many, the scale of the commitments announced will seem pale compared to the intensity of language coming from UK Deputy Prime Minister Nick Clegg, who was joined today in inaugurating Centrica’s 270MW Lincs project by his Liberal Democrat colleague, Energy Secretary Ed Davey.

“This strategy will help keep Britain as the world leader in one of the most important industries of the 21st century,” Clegg says.

“As an island nation, and with our weather, the UK is ideally placed to make the most of offshore wind energy,” he says. “You could say it was a technology designed for us.”

Some in the industry will feel a tension between Clegg’s remarks and the recent revelation that the central scenario which the government used in formulating its Electricity Market Reform package sees just 18GW of offshore wind capacity by 2030.

Previously, that had been the target for a decade earlier.

While welcoming the strategy and the government’s strident enthusiasm for creating jobs in the sector, the industry was nevertheless careful to note that strategies alone will not carry the sector past the finishing line.

“These endorsements from the very top of government show that ministers get the significance of the opportunity within our grasp,” says Maria McCaffery, chief executive of  RenewableUK.

“But,” McCaffery adds, “there’s still a danger that the industrial opportunity could be wrested from us by our European competitors if the government sends mixed messages on its commitment to renewables.”

RenewableUK was given significant new official roles within the Industrial Strategy, including publishing timescales of the pipeline of projects and forging closer ties with the oil and gas sector.

Northern seas renewables industry alliance Norstec called the publication of the government’s strategy “a major landmark.” Norstec Chairman Julian Brown says “What is happening in the UK is just part of a bigger European picture. This requires effective industry and government co-operation which is why it’s great to see the UK Government backing our important sector.” 

In many respects, the UK government has little choice but to embrace offshore wind. Primary energy production in the country is less half of where it was in 1999, with oil and gas output both down by roughly two-thirds during that period, recent figures show.

Meanwhile, overall installed capacity of renewables rose 27% last year.