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Conference Report: Offshore supply chain - Make the weakest link stronger to go deeper

The supply chain and availability of installation vessels have been identified as the biggest challenges to constructing the next generation of offshore wind farms in deeper waters and further out to sea.

Delegates at a January conference in London on the future of offshore, hosted by Windpower Monthly, expressed doubts about the ability of key elements in the supply chain to meet the demand from Europe's offshore wind developers. Of equal concern was whether enough vessels would be available to install foundations, turbines and cables. Foundation design and the question of how Europe's ambitious offshore programme should be financed also ranked high among the perceived challenges facing offshore construction.

Some 100GW of offshore wind projects are under development or planned in northern European waters. Malcolm Garrity, head of offshore wind at Senergy Alternative Energy, claimed that one of the misnomers of earlier so-called offshore wind farms is that they are, in fact, near shore. But now the industry is moving from an average water depth of 20 metres to 80 metres, while the distance to shore is increasing from between one to 12 nautical miles at present to up to 62 nautical miles. "It is truly an offshore environment," said Garrity.

This will require "true offshore technology", said Adrian Fox, supply chain manager of UK seabed landlord the Crown Estate. "We won't be able to build complex wind farms based on onshore machines. We've got to have proper offshore turbines out there in those conditions."

While offshore wind is today dominated by two major turbine suppliers - Siemens and Vestas - Fox predicted that a dozen suppliers would be active in the European offshore market from 2015. Fox was similarly upbeat about the prospects for supply of installation vessels. Offshore engineering firms A2Sea, GustoMSC and MPI Offshore, as well as developer RWE have ordered new ships to be built, all designed for deeper waters and capable of heavier lifting, he said.

The conference was just one of a number of events held in the weeks after the Crown Estate revealed the nine developers selected under the third round of UK offshore wind development. This could see 32GW of offshore wind farms in nine zones around Britain. How to ensure that the UK secures a fair share of the economic benefit from offshore development was a hot topic of discussion.

In mid-February, advisory body the Carbon Trust organised a debate on the subject. Coincidentally, it fell on the same day that Liberal Democrat party leader Nick Clegg denounced as a "scandal" the award of 90% of the £1.75 billion in contracts for the London Array wind farm in the outer Thames estuary to foreign companies. Unveiling his party's manifesto pledge to invest £400 million in upgrading disused shipyards to enable the production of offshore wind turbines, Clegg said: "Expanding offshore wind will create jobs but unless we act now, these jobs won't be British jobs."

Speaking at the debate, Rob Hastings, the Crown Estate's director of the marine estate, said: "We will not get the build rate we need if there is not UK content." He estimated that £800 million needs to be invested in developing parts of the UK supply chain, particularly ports, to enable them to attract offshore development business and manufacturing. This will mostly be private investment.

"We don't have an option. We have to have turbines manufactured in the UK; we have to have cable manufacturing," Hastings said. "We have the capacity to do these things. It needs co-ordination and it needs facilitation and it may need some seedcorn capital from the government," he said, referring to financing for development of business concepts.

There is some £170 million of government cash available to be spent on precisely this sort of project, Hastings said. He predicted that at least one global turbine supplier would establish a factory in the UK within five years.

Bruce Valpy, director at consultants BVG Associates, also noted at the Carbon Trust event that the government and regional development agencies are putting a lot of effort into attracting major turbine manufacturers to the UK. Their presence will be key to unlocking the supply chain for manufacture of castings, bearings and all the other components that make up a wind turbine.

But it is not a level playing field, Valpy cautioned. British ports that are hoping to attract business - including manufacture - are private enterprises. They are competing with ports on the continent that are municipally or regionally owned and so can afford to take a bigger view when weighing the cost of incentives to attract manufacturing against the jobs created. An example is Bremerhaven on Germany's north-west coast, where turbine manufacturers and component suppliers have been encouraged to set up shop alongside research and development facilities. "There is room for government and other support to level the playing field. Then UK businesses will have a good chance to succeed," said Valpy.

The UK should not be intimidated by the success of Bremerhaven, maintained Gordon Edge, director of economics and markets at RenewableUK - formerly known as the British Wind Energy Association. "They have invested a lot and they can make 1000MW of turbines a year," he said. "But we are talking about four, five, six or seven gigawatts a year. The factories that will make those turbines and those cables have not yet been built. The opportunities are here in the UK. We have potentially got the facilities in a number of different spots around the UK to make it happen. We need to have the vision and the investment."

UK supply chain

Between January and March, the Crown Estate and regional development agencies hosted 12 information days for potential supply chain companies on the opportunities offered by the UK's offshore wind sector. The numbers associated with offshore wind development in the UK are impressive: the 47GW of potential offshore wind capacity under development and planned in the UK could in theory supply 30% of all UK electricity - single-handedly meeting renewable electricity's share of the country's 2020 legally binding EU commitment of 15% of energy from renewables. It could create up to 70,000 jobs by 2020, although some estimates are more conservative, at over 50,000. This would demand some £100 billion of total investment. Round 3 alone will require between 5,000 and 10,000 turbines to be installed at a rate of three turbines per day, 365 days a year over six years. According to Tom Delay, chief executive of the Carbon Trust, it presents an enormous challenge as well as an enormous opportunity. "It is broadly akin to building the Eurotunnel every year for the next ten years," he said at a February debate organised by the Carbon Trust.

At current installation costs, the 32GW planned under the UK's third round of offshore development will require more than £75 billion of investment, giving a return of around just 8%, said Delay, adding: "That is not going to attract the kind of investment required to make this a reality." The Trust has identified two areas that could bring total costs down by £30 billion. The first is a simpler regulatory regime easier for investors in offshore wind; this includes improving grid access and the permitting process and making the best offshore wind locations available to developers. This would reduce overall costs by a staggering £16 billion, said Delay. "This is too big a number to walk away from," he added. "It really is worth making quite a few changes and taking difficult decisions to achieve that outcome." The second area of cost reduction is through technical improvements, which could save a further £14 billion. Taken together, these measures would boost returns on investment from 8% to 18%. In reality, nobody has ever achieved full cost reduction in any industry on this scale, Delay added. "But if we can get even part of that cost reduction we will move rapidly into a situation where major capital flows will come into this sector."

Many ports around the UK can share in the potential bonanza offered by the wind programme, according to Fox from the Crown Estate. It is not just about "super hubs" where a number of supply chain companies will be clustered around one or two major manufacturers and port facilities. "There is also a lot of opportunity for fabrication around some of the industrial harbours, such as Teesside and Tyneside," he said. Interest was keen among ports companies at the Crown Estate's supply chain event in Gatwick, which focused on opportunities presented by the two offshore wind zones off the south coast of England, where the view was heard that there is ample space for manufacturing.

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