The UK has a "once-in-a-generation opportunity to benefit from its world-leading position" in the wind power industry. The words come from a RenewableUK report – called 'Building an Industry' and published last year – and are intended to serve as a call for investment in the UK's manufacturing base to support the wind industry. The burning question is whether that call has been heeded.
There is no doubt that the importance of wind power has been fully recognised in the UK, and the evidence is there in the number of projects slated for development. In March, consent was granted to the £3-billion Beatrice offshore wind farm operated by SSE Renewables and Repsol Nuevas Energias; DONG Energy is working on the Burbo Bank Extension offshore project; in April, the Department of Energy and Climate Change (DECC) awarded an investment contract for Dudgeon Offshore Wind Farm, owned by Statoil and Statkraft; and many more are planned further down the line.
To support these projects, and the others that will no doubt form part of the nation's future energy strategy, investment in capacity to produce turbines, towers, blades and other components is essential. Those investment decisions could have a significant impact on the industry, not least in terms of jobs, and according to RenewableUK, they cannot be put off for too long.
"The speed of investment is important. If you look at the projects that will be built out from 2016 onwards, then the decision of where the turbines are manufactured will have to be made soon," says Rhys Thomas, director of renewables delivery at RenewableUK. "The good news is that investment is coming in – Siemens is one of the companies that has made an announcement – because specific orders have come in from customers."
The announcement to which Thomas refers is the decision by Siemens to invest £160 million in the development of a facility in Hull to manufacture 6MW offshore turbines. The Green Port Hull manufacturing plant, which will receive an additional £150m from Associated British Ports, could create up to 1,000 jobs. Construction will commence towards the end of the year at two sites in Yorkshire – Hull and Paull – and the facilities will start to produce the next-generation turbines and rotor blades for Round 3 offshore wind farms from 2016.
The investment by Siemens is a huge vote of confidence in UK wind, and has spurred further interest among other equipment suppliers, such as South Korean tower manufacturer CS Wind Corporation, which may also invest in facilities in Hull, potentially creating another 350 jobs. Meanwhile, April saw renewed speculation that French group Alstom could invest in production facilities in the UK if it is convinced that the volume of expansion in wind capacity will continue to increase. The company may invest in the next two years, depending on whether the UK goes ahead with its offshore plans through to 2020.
"We also have to consider that manufacturing includes towers and blades, not just the turbines. Decisions on where those components are manufactured will have to happen in the near term, and they will have to meet the orders that come through. When our 'Building an Industry' report was published, the strike prices for renewable energy had not been decided, but, now that they have, we will see further investment," says Thomas.
"The publication of strike prices has led to orders being placed, and UK projects are now declaring preferred suppliers."
At the end of last year, the UK Government continued its support of offshore wind, hydropower and geothermal energy projects when the DECC confirmed the strike prices on offer to renewable energy developers between 2014 and 2019, which could deliver up to £40 billion of new investment and add a further 2GW of offshore wind capacity by 2020. Offshore wind strike prices were held steady at £140/MWh for 2018-19, despite expectation that they would be cut to £135/MWh as had previously been planned. The move is intended to help ensure that the UK meets its 2020 target of producing 30% of its energy from renewable sources, and the announcement is intended to provide more certainty to investors along the entire supply chain.
Energy and Climate Change Secretary Ed Davey said at the time that the move would spur record levels of investment in green energy by 2020, and confirmed that a total of 16 renewable energy projects, including 12 offshore wind farms, would be invited to apply for contracts under the new regime. The initial response was positive, with companies such as DONG expressing confidence in its ability to progress with plans for investment. Since then, Siemens and others have come forward with plans to develop the manufacturing base in the UK.
"The announcement by Siemens is very welcome, but there are other opportunities out there and we are awaiting investment decisions from other manufacturers. With Alstom looking at UK sites there is more to play for, but overall I would say that, since last summer, there have been positive signs," says Thomas.
"There is a healthy project pipeline in the UK. We have seen some investment trimmed or halted, but the number of projects going into the planning system has risen dramatically over the last year. As they come through, activity in the manufacturing sector will rise," he adds.
In the near term, the outlook is very positive, but RenewableUK wants to see more certainty about the long-term agenda.
"We want more certainty beyond 2020. The decision on carbon targets for the UK has been deferred beyond 2016, but we want that decision to be made earlier in order to build confidence in the market for the long term. The European Union has set targets out to 2030, so we want the UK to set its own binding target for 2030. This is a long-term industry and the top-tier manufacturers look at how customers are placing orders to enable decisions on investment in facilities," says Thomas.
"Also, lower down the chain, the suppliers of tier-2 and tier-3 components want clarity on the long-term messaging for the industry in order to build confidence," he adds.
Confidence is king
The response to the publication of strike prices highlights how important it is for the industry to have confidence in the future of offshore wind development in the UK. Siemens, for example, had been looking at plans for a UK turbine manufacturing facility for four years before making a firm commitment, and it had expressed concerns about the possible scaling back of planned expansions in capacity.
Now the pipeline looks healthy enough to give developers the confidence they required; that positivity needs to be further extended into the UK's manufacturing base. For its part, RenewableUK is a partner in the Grow Offshore Wind programme, through which it reaches out to the SMEs in the manufacturing supply chain. Its goal is to give those companies the certainty they require to invest in or relocate facilities.
"We publish a project timeline each year in order to represent a realistic position based on the information from the developers we represent. It is important not to overheat the expectations of the supply chain. We cannot just target the higher-end expectations, which could ultimately lower confidence if the industry does not deliver," says Thomas.
The way to address any uncertainty in the supply chain is to ensure that decision-makers have as much accurate information as possible.
"One thing that has changed is that we are seeing more information exchange, so people are able to more easily learn about the opportunities that are out there. The UK Government's offshore wind industry strategy, which was developed in partnership with the Offshore Wind Industry Council, ensures that people can learn about the projects and the procurement plans for specific developments," Thomas explains.
"At our conferences, too, we will have developers talking about their plans, so as projects move forward they have the chance to talk to the industry about what they will need. Previously, the industry was less specific about its requirements, and we have always been keen to increase the specificity of data in order to inform investment decisions. I'm very optimistic that things are moving in the right direction."
