UK Offshore Wind

Overview on the industry status, recent developments,
actions for attracting investments and reducing costs

The UK will have to face several challenges over the next twenty years. The country will have to deal with the increasing global competition for resources responding to the demand of reducing its carbon footprint, minimising increases in energy bills, substituting an important proportion of its electricity generation capacity and improving the security of energy supply. A way to solve these issues would be to set a portfolio using a range of different renewable and low-carbon energy production technologies. What balance should be used in this approach is still an argument of discussion; however, as suggested in the Building an industry 2013 report by RenewableUK and BVG Associates, offshore wind is certain to be a key technology in the future if there would be improvements in the cost of energy. (RenewableUK, 2013)

Offshore Wind in figures

The first commercial offshore wind project in the UK was installed in 2003, and the amount of capacity installed has increased every year since then. The State of the Industry Report 2012 by RenewableUK, suggests that post-2016 renewable electricity’s share is expected to overtake nuclear, with wind becoming the biggest contributor of electricity in the UK after natural gas in 2020. Industry projections see a total of around 8GW of capacity installed by 2016 and around 18GW installed by 2020, by which point offshore wind will supply between 18 and 20 per cent of the UK’s electricity annually. This trend is unique to the UK compared with other countries: the UK has been the world leader in offshore wind since October 2008, with as much capacity already installed as the rest of the world combined. (RenewableUK, 2012)

The Offshore Wind Project Timelines report by RenewableUK recounts that half way through the 2013, the UK has 3.32 GW of offshore wind capacity in operation, which power more than 2 million homes per annum. In the first three months of 2012/13, Greater Gabbard has gone operational, and at 504 MW it is almost equal to the 2011/12 deployment figure (indeed, over the course of 2011/12, 517 MW was deployed offshore). Greater Gabbard claimed the title of “world’s largest offshore wind farm”, before passing on that honour to London Array with its 630 MW. (RenewableUK, 2013)

Alongside these operational projects, a further 1.52 GW is under construction around UK waters, with ports in areas such as Barrow, Belfast, Lowestoft, Merseyside, Grimsby, Teesside and Mostyn busy as installation and operating bases for existing projects and the next tranche of offshore wind capacity. In addition, 2.21 GW has planning approval, 6.41 GW are in the planning process and 36.06 GW are in development. (RenewableUK, 2013)

Employment growth in the sector has been substantial since the numbers were first sourced in 2008 and now stands at around 4,000 full time employees. (RenewableUK, 2013)

Looking ahead to the near future

The Building and Industry 2013 report warns about a forecast dip in activity that is expected in the short term, and that makes UK to face a new challenge. This drop is expected to happen in 2013 and 2014 after a period of strong progress for the offshore wind industry, and a year-on-year growth in annual installation. This trend is mainly caused by the lack of project consents that were granted from 2009 to the summer of 2012. However, the Crown Estate made an attempt to fill this demand gap launching the ‘extensions’ initiative in 2010. This provided additional capacity licences for Round 1 and 2 projects, with the assumption that these could be more rapidly deployed. Unfortunately, these have not progressed as quickly as expected due to consenting requirements and industry priorities, therefore they will add capacity after 2015 than during the anticipated slow-down probably. (RenewableUK, 2013)

Meanwhile, as suggested by the report, it is expected a forecast increase in activity outside the UK in 2013 and 2014 to balance the short-term dip in UK demand. The slow-down in UK comes at an important stage in the development of the offshore wind supply chain: major investment decisions in research and development, infrastructure, and manufacturing facilities will need to be made in the near future to support companies that are ready to meet the demands of the European market (in fact, once a company have committed to developing a facility it is also likely that it will seek to focus future investment in this location). Indeed, in Europe there has been strong progress during the last years: Denmark is now approaching one gigawatt of installed capacity; Germany currently has approximately 500MW of installed capacity and is now expecting rapid acceleration. Furthermore, The Netherlands, Belgium and Sweden have also all installed commercial-scale offshore wind projects. At present, large opportunities still remain for the UK as the majority of components and services are still being supplied from the Continent. Therefore, decisions made at this point will have a major influence on the future shape of the industry. (RenewableUK, 2013)

Industry feedback is that the measures set out in the Energy Bill, published in December 2012 and which focuses on setting decarbonisation targets for the UK and reforming the electricity market, are likely to give greater confidence about the medium-term stability of the market. Given the short-term delays, however, it is felt that its progress through the legislative process must be maintained to give the supply chain renewed confidence in the market beyond 2014. Such action is required to avoid the risk that suppliers choose to delay investment or decide to focus investment in their existing locations elsewhere on the Continent. (RenewableUK, 2013)

Fig. 1 - Past and forecast European installed offshore wind capacity from 2004 to 2014 (RenewableUK, 2013)

Development Challenges

There are a number of challenges to overcome to ensure that offshore wind fulfils its potential. Possibly the most important challenge is cost: there is potential for significant cost reduction, which also provides an opportunity for the UK to develop an area of competitiveness in a growing global industry, and ensures costs for bill-payers are minimised. That is why, in the UK Renewable Energy Roadmap (July 2011) the Government established an industry-led task force to produce a path and action plan to get the cost of energy down to £100/MWh by 2020. The Offshore Wind Cost Reduction Task Force (CRTF) published a final report in June 2012. The CRTF concluded that offshore wind can reach £100/MWh by 2020, based on the evidence gathered and assuming their recommendations about supply chain, innovation, contracting strategies, planning and consenting, finance and grid and electricity transmission infrastructures are followed. Moreover, the Roadmap stated that if costs could be reduced in this way, there was potential for up to 18GW of offshore wind to be installed in the UK by 2020. (RenewableUK, 2012)

A longer-term vision

The UK Government has so far expressed its ambition for offshore wind mainly in terms of its ability to provide sufficient generating capacity to meet its renewable energy targets in 2020. Following the Building an industry report, this is a relatively short-term horizon for companies that are planning to invest significant resources in infrastructure, tooling and new products. Other governments, such as that of Germany, have stated 2030 targets to give investors an indication of the extent of their ambitions. To solve these concerns, the UK Government and industry need to agree on a long term vision for offshore wind that will give industry confidence to invest in the technology and facilities that will be critical to bringing down the cost of offshore wind. (RenewableUK, 2013)

Written by Silvia Orlando for the European Energy Centre

References

RenewableUK, 2012. Offshore Wind Cost Reduction Task Force Report. [Online]
Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/66776/5584-offshore-wind-cost-reduction-task-force-report.pdf

RenewableUK, 2012. Wind: State of the Industry 2012. [Online]
Available at: http://www.renewableuk.com/en/publications/reports.cfm/SOI2012

RenewableUK, 2013. Building an Industry 2013. [Online]
Available at: http://www.renewableuk.com/en/publications/index.cfm/BAI2013

RenewableUK, 2013. Offshore Wind. [Online]
Available at: http://www.renewableuk.com/en/renewable-energy/wind-energy/offshore-wind/
[Accessed 28 October 2013].

RenewableUK, 2013. Offshore Wind Project TImelines. [Online]
Available at: http://www.renewableuk.com/en/publications/index.cfm/offshore-wind-Project-timelines-2013

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