United Kingdom

United Kingdom

Analysis: UK government memos reveal tense Siemens talks over Hull

UK: A Freedom of Information request to the UK government by Windpower Monthly over Green Port Hull negotiations has lifted the lid on difficult talks with Siemens.

Left to Right: Siemens' Offshore CEO Michael Hannibal, Energy secretary Ed Davey, Siemens UK chief executive Juergen Maier
Left to Right: Siemens' Offshore CEO Michael Hannibal, Energy secretary Ed Davey, Siemens UK chief executive Juergen Maier

Big ambitious plans are easy to announce, but harder to carry out.

Five years ago GE, Siemens, Vestas and Gamesa were among the OEMs planning to invest multi-millions in building UK offshore manufacturing plants.

In the event only market leader Siemens made good on its promise when it committed to the creation of Green Port Hull in north-east England.

This originally comprised an assembly and blade manufacturing plant at Alexandra Dock and Paull respectively (the blade plant was later pulled into Alexandra Dock). It will be the first major wind turbine manufacturing plant in the country.

On the surface, if there was a match to be made it was between the world's biggest offshore manufacturer and the country with the largest capacity. However, despite a memorandum of understanding in January 2011, the final investment decision dragged on through to 2014. It was largely blamed on "market uncertainty" and the government's new energy legislation.

In September 2013, the then-deputy prime minister Nick Clegg was able to announce the "chances are high" the plant would go ahead. Yet only two months before, according to documents released following a Freedom of Information request by Windpower Monthly, the whole £160 million investment appeared to have been on a knife edge.

There was a flurry of communications between the UK government's Department of Energy and Climate Change (Decc) and Siemens UK, with Siemens UK also trying to push the deal through its German head office.

The emails and memos from Siemens UK and Decc reveal how closely the two were working together. This even amounted to advice on drafting the press communications and Q&A answers at the press conference for Siemens' final investment decision in March last year.

For example, Decc's Office for Renewable Energy Deployment told Siemens to reiterate Alexandra Port and Paull were separate plants "for state aid reasons". There was also advice on using general numbers on employment figures. In one memo to Siemens an unnamed government civil servant wrote: "Can we say '300 construction jobs' (Again we never really get held to account on this kind of number) — what matters is consistency'."

However in 2013, the greatest difficulties appeared as negotiations came to a head. A flurry of emails between Decc and Siemens shows how hard the government wanted a company to invest.

This was highlighted in email exchanges between Decc chief executive for renewables, Hugh McNeal, and Siemens UK. It followed an offer outlining possible subsidies from UK energy minister Ed Davey. On 11, 12 and 15 of July, McNeal asked Siemens UK whether intervention from the UK government to lobby the German board would be helpful, which Siemens rejected each time.

On 12 July, McNeal wrote: "Has the position changed re: advice on lobbying board members this week? We are preparing if we need to but some are asking whether we should put calls in diaries today which [we] are resisting. I assume our advice is still that this would not be helpful."

Siemens UK hints at some frustrations with the offer. In response it wrote: "Further calls will not be helpful and just increase the chances of another misunderstanding. I appreciate the offers are all with good intent."

Siemens UK declined to give details about the "misunderstanding". But it issued a statement and said its relationship with the government was "constructive". It added: "There were many iterations and discussions held between the two parties. There were times where we asked Decc to let us digest the latest information and allow time for management reviews to take place. This is a normal business process."

The plant is now well underway. However, the man behind it, then energy minister Ed Davey, has left the government and lost his seat as an MP. There are concerns about how much the government will invest in offshore wind now there is a Conservative majority running the country.

In February last year, a letter from Davey and business minister Vince Cable (who also left the government in similar circumstances to Davey) to Siemens made promises about the future of the market. Talking about the Energy Bill it said: "In addition to more than 10GW these plans aim to ensure is deployed by 2020 we have shown that if costs fall to around £100/MWh by the middle of the next decade, deployment of up to 41GW by 2030 is possible in UK waters." At the official launch a month later the government said 2020 installations would be "up to" 14GW.

Interestingly, there was one final bullet point to this memo that perhaps underlies why Siemens have gone through with the Green Port Hull. It simply says: "Awards of CFDs have been linked to 'detailed supply chain plans' [their quotes]".

The line can be interpreted in a number of ways  but it is not stretching the imagination too far to consider it a veiled assurance of a local sourcing strategy. If the UK's offshore market goes into decline, then expect Siemens to be in first place for an offshore turbine supply deal.

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