When Joe Biden unveiled plans this year to develop an American offshore wind industry, unions this side of the Atlantic looked on with envy. Setting a target of 30 gigawatts of offshore wind by 2030, from almost nothing today, the Biden administration said it expected this to deliver “one to two new US factories for each major windfarm component including wind turbine nacelles, blades, towers, foundations and subsea cables”.
Britain, by contrast, is already the world’s biggest offshore wind market, with more than 10 gigawatts built over the past two decades and a target of 40 gigawatts by 2030. Yet when it comes to those big turbine components, it has barely a handful of factories to its name.
“I absolutely applaud [Biden’s] ambition and I think it’s a level of ambition we could really do with here,” said Sue Ferns of the trade union Prospect. “Although we’ve had a couple of recent announcements about manufacturing capacity in the UK, we need a holistic industrial strategy. We’re so far behind some of the other European countries who’ve been investing in their supply chains for years.”
Britain has no factory to produce nacelles, the boxes at the centre of the turbine that contain the generating equipment; most are made in Germany and Denmark. A small number of offshore turbine towers and foundations have been made in the UK but the vast majority come from overseas, whether Europe, the Middle East or Far East. Some cabling within wind farms is produced in Britain, but those linking them to shore are generally made abroad.
The main success story is blades: the Danish wind turbine manufacturer Vestas has been making offshore blades on the Isle of Wight since 2015, while the German-Spanish group Siemens Gamesa opened a factory in Hull in 2016. The two sites have made blades for about 700 of around 2,300 turbines that are spinning in UK waters. Yet still less than 30p in every £1 of capital investment in UK offshore wind farms is estimated to be spent in Britain.
Kwasi Kwarteng, the business secretary, is attempting to improve this. With offshore wind central to the government’s future power plans, he told The Times it was his “own personal mission as business secretary to ensure we are fully capturing the economic benefits in the UK in a way we haven’t always done in the past”. The government wants to move “onshore manufacturing to the UK, attract a wave of private investment and create thousands of good-quality, long-term jobs in our industrial heartlands as we build back better from the pandemic”.
Business department projections suggest that the UK share of capital expenditure could reach 50p in the £1 by 2030. It says the sector could support 60,000 jobs by 2030 — more than double present levels, estimated at 15,000 direct and 11,000 indirect jobs.
To achieve this, the government is attempting to tackle the two main issues that the industry blames for the historically low share of manufacturing in the UK. The first is that the government’s primary focus to date has been on cost reduction. Seven years ago projects were handed contracts guaranteeing that consumers would pay £150 per megawatt-hour for their electricity — requiring hundreds of millions of pounds in subsidies every year. Competitions were introduced with the cheapest projects winning, helping to drive costs down over subsequent auctions to less than £40 per megawatt-hour in 2019, which may not require any subsidy at all.
“That reduction is absolutely incredible and it was what the government was striving to achieve, to make the case that green energy was affordable energy,” said Melanie Onn, the deputy chief executive of Renewable UK. However, “supply chain growth has ended up not being a priority”. Ferns said the “relentless driving down of cost” through the subsidy auctions has resulted in “manufacturing being done elsewhere because it’s cheaper”. Developers “try to cut out costs that are not absolutely essential to the particular contract [they’re] bidding for, so skills development becomes a casualty”.
The government this month confirmed plans to address this by making developers set out more detailed supply chain commitments as a prerequisite for the next round of subsidy contracts. Developers could be stripped of their contracts if they fail to deliver on their promises. Kwarteng said the changes would “align offshore wind developers’ plans more closely with our domestic priorities to deliver supply chain investment”.
The other key issue thwarting UK manufacturing has been physical limitations in port facilities. Onn said the challenge had only grown as the industry pursued cost savings by developing taller, more powerful turbines: the latest models have blades more than 100 metres long. “Ports are busy and full, space is at a premium and the cost of the land is high,” she said.
Governments elsewhere moved early to upgrade their ports, said Mary Thorogood of Vestas. “In Denmark we have Esjberg, which saw the opportunity 15-odd years ago and invested in their local harbour. Also Cuxhaven in Germany [and] Vlissingen in the Netherlands all have these really huge port sites where you can locate the blades next to the towers, next to the pre-assembly. In the UK we just don’t have many ports of that scale.” The few UK ports that could fit the bill “still require a lot of investment in, for example, strengthening the quay so we can have these really heavy components on it”.
The government is investing up to £160 million in port facilities to try to tackle these issues. The first funding of up to £95 million was awarded in March to the Humber and Teesside, helping to clinch the prize of a new GE Renewables blade factory in Teesside that will create up to 2,250 jobs. It will make at least some of the blades for SSE and Equinor’s project to build the world’s largest offshore wind farm at Dogger Bank. Kwarteng said that the new ports will “put the UK in pole position to land new offshore wind investors” and “will together house up to seven manufacturers”.
Another of these could be Vestas, which has said it is looking to open a blade manufacturing site in the northeast, subject to its customers securing subsidy contracts in the next auction. It is also planning to expand its Isle of Wight facility to produce its latest model of larger turbines.
Hopes are high that Britain can finally secure significant roles making other components. The BiFab yard in Fife, which fell into administration after losing out on contracts to make foundations for an SSE project and others off Scotland, has been revived. Turbine towers are a particular focus, with Vestas and GE eyeing potential UK suppliers; a proposed manufacturing site at Nigg on the Cromarty Firth could supply Dogger Bank.
Alistair Phillips-Davies, the chief executive of SSE, said one benefit of such manufacturing jobs was that they were often in “remote and far-flung parts of the UK”. He said it was not clear whether British manufacturers could compete on cost on all components, citing a “very complex global market”, but that SSE was in talks to secure more UK suppliers. “We’ve got a world-leading industry in terms of offshore wind,” he said. “What we want to do is build a world-leading supply chain here as well.”
New jobs for rig workers
After 27 years in the oil and gas industry, most of them working two-week stints on the Claymore Alpha platform in the North Sea, Alan Paul was made redundant in November 2015 after oil prices crashed and he declined to accept a move to three-week stints offshore.
As an industrial electrician, he found he was able to get a job servicing onshore wind turbines in Scotland. “Because I’ve got a multiskilled electrical mechanical background, I was able to just move across with a bit of training,” he said.
He then joined SSE in 2017 to work on the Beatrice offshore wind farm, where the 52-year-old is now a control room team leader based in his home town of Wick. “On a normal generation day we’re looking at generating power for 450,000 homes,” he says. “Renewables is a new industry that’s on the go, it’s the way forward.”
While Paul counts among an estimated 26,000 people employed in the UK’s offshore wind industry, he is also an example of the kind of ongoing work that is not captured within figures for the UK’s low share of capital expenditure. Including such operations and maintenance jobs, “lifetime” UK content for recent projects is nearer 50 per cent.
Melanie Onn of Renewable UK says there should be recognition of the “certainty and security in long-term jobs” provided by such work.
Paul says more of his former colleagues in oil and gas are interested in following his lead. “There are a lot of guys my age looking to get back onshore — they’ve had enough of being away from home,” he says. With so many wind farms now being built, “the opportunities are going to come”.
The scramble for the seabed is raising fears of a bubble
As Britain pursues its offshore wind targets the biggest names in energy are piling in, with oil giants BP and Total joining established renewables groups such as Orsted and Iberdrola.
Competition between rival offshore wind developers has been credited with helping to drive down costs to date, forcing companies to undercut each other by agreeing to deliver electricity at ever cheaper prices through government auctions of subsidy contracts.
Now, though, there are fears that competition is so fierce it could be counterproductive — after a hugely oversubscribed Crown Estate auction of seabed leases in February saw developers pay record high prices, sparking talk of a renewable energy “bubble”.
The highest prices were paid by BP and its partner EnBW, which have committed to pay £1.8 billion over four years before they begin building two projects in the Irish Sea. Prices paid by companies including RWE and Total for North Sea leases were slightly lower, but still many times higher than in previous leasing rounds. The question is whether and how developers can recoup these higher costs.
Melanie Onn, deputy chief executive of Renewable UK, said it is possible the new entrants may “take a bit of a hit” on their seabed lease spending. This is disputed by BP, which is adamant it did not overpay, that the Irish Sea projects will be cheaper to build than those in the North Sea, and that it can make targeted returns. Renewable UK said the high fees were a result of too few leases being made available by the Crown Estate and warned there was also a risk that higher costs would feed through to higher prices.
Whether it’s developers or consumers who ultimately take the hit for the high leasing costs will depend on how the government designs future auctions for subsidy contracts and how many projects are ready to compete in them.
Keith Anderson, the chief executive of Scottish Power, said the simplest way to keep prices low was “to increase the quantity of sites that we put through [seabed] leasing rounds and the quantity of sites that go to auction rounds [for subsidies]”. Another concern is whether developers seeking to recoup high leasing costs will also be willing to plough extra cash into developing the UK supply chain.
“Quite clearly some challenges have been created by [the Crown Estate auction],” Anderson said. “One nice simple way of helping to mitigate the impacts is to put most of that money back into the sector: put it into infrastructure that encourages investment and supply chain development.”
Dan Labbad, the chief executive of the Crown Estate, said it had to take into account “multiple uses of the seabed . . . biodiversity considerations and environmental considerations”. Further leases would be offered through the upcoming Crown Estate Scotland leasing round, he said, and it was “doing everything practically possible to move forward as quickly as we can” on further rounds in England and Wales. This includes plans to award leases for floating offshore wind farms, which can be built in deeper waters.