4C Offshore – Supply Chain Information

A brief history

Back in 2002 the UK Government introduced an obligation for electricity suppliers to source their energy from renewable sources which evolved into an attractive incentive for developers to build offshore windfarms – this obligation was replaced by a competitive auction style framework where winners receive greater certainty on the price for the electricity they generate

The UK now has the largest fully operational offshore wind generation capability in the world, with only China likely to surpass this in the near future. For over 12 years, 4C Offshore has studied the supply chain serving this industry, providing analysis of offshore winds developers, suppliers and other stakeholders to our clients.

In general terms, we see that whilst the UK has a proven track record of successful project delivery, it is unable to provide a robust home-grown supply chain.

Project developers and the supply chain

Of the top 10 UK offshore wind project developers, only SSE is headquartered in the UK, yet developers such as Ørsted (Danish), Vattenfall (Swedish), Iberdrola (Spanish) and Innogy (German) thrived through the conflicting political landscape, economic uncertainty and changes to support mechanisms for offshore wind.

A supply chain emerged, which was led by the prime contractors (Tier 1). These provided the key skills, major services and major components which included turbine manufacturers, engineering services, construction companies, cable suppliers, the foundation and tower manufacturers, and the major component installers.

The UK fared a little better here, but to date the UK has failed to develop a single turbine or attract a manufacturer to manufacture turbines here. The UK is highly reliant on a non-UK based supply chain for turbines, construction vessels, towers, installers, cables and much more.

Could things be starting to improve?

Ports have fallen short of the investment needed to embrace the sector. Large items such as towers and foundations can be shipped directly to site from ports such as Esbjerg, Denmark, and Vlissingen in the Netherlands. Many UK ports lack quayside space or strengthened quays, so become staging ports or O&M ports.

Could this be changing? Siemens Gamesa have announced plans to expand its blade manufacturing plant by 41,000 square metres, £75M in government investment has been pledged towards a new port on the Humber and construction should also begin to upgrade two ports with new infrastructure.

SeAH Wind Ltd will receive funding towards a new £117 million monopile foundation factory at the Able Marine Energy Park. GRI Renewable Industries is planning a £78 million investment in an offshore wind turbine tower factory and on Teesside, GE Renewable Energy plans to build a new offshore wind blade factory, with support of £20M government investment.

Will such initiatives be enough? – consider the following

Demand for offshore wind is increasing. The UK Government has promised an additional 28GW to be built by 2030. The European Union is following suit, set to increase offshore wind capacity from an overall 12GW to at least 60GW by 2030 and to 300GW by 2050.

Technology is rapidly evolving. Almost every component is under scrutiny and targeted for improvement. Turbines are becoming larger; towers taller and less benign seabed conditions are in the mix. For example, an 8.4MW offshore turbine located off the coast of Aberdeen is 191 metres tall, yet new projects are looking to turbines such as the Siemens Gamesa 14/15 megawatt model with a 222-metre rotor diameter.

GE and Vestas are also offering models of similar size. Suitable installation vessels are in short supply, providing opportunity for new vessel designs. Further, new engineering and new specialisms are required for floating wind turbines envisaged for deeper waters.

Demand for electricity soaring. Drivers such as climate change, population growth and electrification are pushing demand for energy transition to go faster than predicted. Even new energy solutions themselves are increasing demand. To create ‘green’ hydrogen to use as heavy transportation fuel, you need electrolysis, therefore more ‘green’ electricity.

Will demand outstrip supply?

To meet demand, the European Union is considering an overarching strategy that could mirror the aerospace industry. The EU have instigated an initiative to promote a pan-European supply chain and, as part of this strategy, upgrade port infrastructure. This follows on from the earlier announcement that the European Union has provided an investment commitment of nearly €800 billion through to 2050 to meet renewable objectives.

To avoid breaking current state aid guidelines with such a strategy the EU has factored in a revision of them. Does this imply that in order to scale up component manufacturing (example – turbine manufacturing), each major component becomes the domain of a single state or assigned to a regional cluster. If the strategy delivers economies of scale, supply chains in smaller countries are disadvantaged.

There is no doubt there is huge opportunity, but without the ambition and investment from UK based companies, they will not get the benefits, and given the market potential that is worth a lot.

Industry actors outside of the UK have invested and benefitted from the UK offshore wind opportunity, deservedly so. UK companies should embrace the same opportunity and continue to strengthen the offshore wind supply chain.

4C Offshore Limited – a TGS company

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