News from the Frontline (February 2011)
Our 'Sputnik moment'?
UK missing out on offshore wind jobs
Dear colleague
This is the third in my occasional update on the lessons from my experience of delivering renewable energy on the ground for those whose meetings are in Whitehall rather than on Dartmoor. It draws on my experience of moving from the national policy world to the frontline of delivery of renewable energy, demand reduction and low carbon jobs as chief executive of Regen.
If you have enough in your inbox already please say so.
For those of you that haven't come across us, Regen is the independent centre of expertise on renewable energy - based in the south west of England. We work to catalyse pioneering renewable energy projects with thriving local supply chains.
One of our key programmes, building on our pioneering work on Wave Hub, is working with companies, ports and the wind farm developers to develop a thriving supply chain in offshore renewables
You can find out more here or by attending the offshore wind supply chain event we are running with partners on 15 February at Twickenham Rugby stadium (see here for details). The lessons of that programme are stark:
Britain leads the way in offshore wind deployment - but not the jobs
As we struggle to emerge from a savage recession, renewable energy has exciting potential to drive growth and create jobs. The greatest area of investment in renewable energy in the next decade will be in offshore wind - estimated at £75 billion and creating 75,000 jobs by 2020. This is a comparable investment profile to that of north sea oil in the 70s.
The UK now has more offshore wind in operation than the rest of the world together - including the current largest wind farm in the world - Vantenfall's 300 MW Thanet Wind Farm off the south east coast. Our massive 'Round 3' plans dwarf those of other countries - we currently have the potential to develop over 46 GW of capacity.
This should be a golden opportunity to build a world-leading sector - but it isn't quite working out like that. There are some excellent UK companies winning contracts - but the economic benefits of this huge investment are largely going overseas. The Thanet wind farm had just 20% UK 'value' (more information here).
The utilities developing offshore wind energy and the 'tier 1' manufacturers are international companies with established supply chains. Offshore wind farms built to date have stuck to these supply chains and their existing relationships, providing few opportunities for new UK entrants to break into the market. Furthermore, with the supply chain dominated by a few international companies there seems to be very little pressure to reduce installation costs, which have almost doubled and are still stubbornly stuck at over €3.5 million per MW of capacity installed (see E&Y report here).
To quote Dr Robert Gross, head of technology and policy assessment at UKERC and author of a recent report on offshore wind (download here):
"In effect UK consumers are subsidising Danish and German wind energy companies."
Failure to develop UK jobs will undermine the offshore wind programme
What government and developers do not seem to yet grasp is that failure to provide economic benefit locally and across the UK is not only a lost opportunity, but will undermine the whole programme.
Locally, there is considerable development on-shore including sub-stations, cabling etc. Local authorities are already making clear that planning permission for these will be much harder without local economic benefit - adding delay and cost. This was a major issue slowing the Thames Array, and it contributed to the decision of Shell to pull out.
Nationally, as the costs rise, consumers are going to wake up at some point to the fact that their bills are 'subsiding German and Danish jobs'.
We have the skills & expertise
The range of technology and services required for offshore wind is huge, from making components to providing vessels and delivering support services.
As ever, the UK is particularly strong in services such as consultancy, legal and project management - as companies such as Garrad Hassan, the world leading renewables consultancy, demonstrate.
However, it would be wrong to conclude this is the only area we can compete in. For example the world-leading aerospace sector around Bristol has highly-relevant advanced manufacturing and composite expertise. We also have an extensive marine engineering and offshore capability from our oil and gas industry. Regen's offshore renewables supply chain directory gives an insight into our expertise (download here).
An active strategy is required
The government has moved to attract wind turbine manufacturers such as Siemens to the UK with its funding for developing ports for offshore renewables. This is important, but to really gain the economic value, we need more support for the smaller players. There are three key ways the government could help - none are expensive:
- Put much more pressure on offshore wind farm developers to develop local and UK supply chains. This does not mean breaking EU law or imposing extra costs, but sending a clear message.
- Ensure there is an active programme, at a local level, to support the development of a thriving supply chain. With the end of RDAs there is an imminent risk that the momentum is lost.
- Organise a more coherent programme of support for innovation. This would help bring down deployment costs as well as develop UK technology and know-how.
If people have found this useful, future 'news' will look at lessons from other delivery programmes we run, including woodfuel and solar PV.
All feedback/comments welcome.
Best wishes
Merlin
Merlin Hyman
Chief executive
Regen SW
'Your independent centre of sustainable energy expertise'
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