Economic impact study details opportunity for UK offshore renewables
A study on the potential economic value of offshore wind to the UK economy has produced an up-to-date understanding of what is viewed as a worthwhile area of investment for sustainable development and growth.
The study ‘Generating Energy and Prosperity’ is produced by the Offshore Renewable Energy Catapult (ORE Catapult) whose chief executive Andrew Jamieson points out that a number of detailed and valuable reports have considered the cost of delivering renewable offshore energy of the past couple of years.
He considers however that understanding of the potential economic value is not so up-to-date and therefore worth investment now to develop and grow sustainable industries. The report considers two different eventual capacity scenarios for offshore wind (8GW and 15GW by the end of 2020) and for marine energy an installed capacity scenario of around 100MW by the same time. A gradual and an accelerated growth path reflecting existing market conditions were built into the study.
Mr Jamieson concludes his foreword with the belief that the UK has the opportunity to be the strategic knowledge base for the global offshore renewable industry. When considering the document it is worth mentioning that it was produced prior to Siemens confirming their setting up of a manufacturing plant at Hull.
GROWTH AND JOBS
ORE Catapult worked with the Fraser of Allander Institute at Strathclyde University and BVG Associates for the study which makes the point that the UK has more than double the installed offshore wind capacity of any other nation, with ambitious targets for both offshore wind and marine energy. Established economic tools were used to model resultant economy-wide Gross Value Add (GVA) and job creation figures.
The offshore wind best case scenario (15GW accelerated growth) where UK companies seize the opportunities and innovate collaboratively sees potential of almost £6.7bn in 2020, supporting 34,000 direct jobs and 150,000 jobs in total. The gradual growth 8GW path installed in 2020 sees £2.3bn potential GVA with 12,000 direct and 50,000 total jobs created. Breaking down the £6.7bn figure, areas of greatest opportunity are seen as turbine manufacturing (£2.1bn) and O&M (£1.4bn). It is considered that accumulation of know-how will provide an exportable service industry similar to that achieved by the oil and gas industry over recent decades. The authors consider O&M will make the biggest contribution to offshore wind GVA as installation growth slows and OPEX takes up an increasing proportion. The relative immaturity of wave and tidal technologies results in smaller figures, the study not anticipating large scale commercial wave technology deployment by 2020 but recognises a potential £110m GVA principally from tidal stream demonstration projects.
Only around 40% of lifetime costs of currently operational UK offshore windfarms will be spent domestically, mainly because most large components are imported. Supporting development of the UK’s supply chain will significantly enhance the share of value retained in the country. Of the six major supply chain segments (turbines, foundations, cables, electrical systems, installation and O&M) the UK’s strengths are mainly in the latter four.
The domination of countries including Denmark and Germany in turbine supply is down to their enjoying long-term and stable industrial support for wind energy, benefitting from early growth in offshore wind. While the UK has a residual heavy engineering capacity it is starting from a lower base than some of its competitors, foundations having been mostly imported. Most offshore substations have been built in the UK indicating a strong high voltage sector, partly due to experience of building offshore oil and gas platforms. As mentioned, O&M is a strong area for the UK, about three quarters of this expenditure for UK windfarms spent domestically. The study explores a tipping point with the supply chain where economic value to the UK begins to increase at a much greater rate with more substantial returns on investments. It is considered this tipping point will be surpassed at 15GW, having been reached at between 10GW and 15GW.
There are no integrated European manufacturing and installation facilities for offshore wind turbines, something considered vital for cost reduction. While high profile, nacelle assembly is a relatively small part of the cost: tower and blade manufacture considered the biggest prize for the UK, (of relevance considering the Siemens decision). Another relevant comment is that investment decisions will depend on the size of available markets that can be supplied from a new facility. Investment in one UK turbine assembly facility is expected with the 8GW scenario for both domestic and export markets.
The 15GW scenario sees in addition, a significant proportion of UK project blades made within the UK and a second turbine manufacturer investing in a nacelle assembly facility. Industrial east coast ports are identified as benefiting from subsequent increases in GVA. Foundation manufacturing in the UK is identified as an area of demand, provided suppliers can compete on cost and quality. Investment plans are already in place, some companies upgrading facilities previously active in offshore oil and gas. It is considered one third of foundations (large monopiles and jackets) are likely to be made in the UK from 2018 under the 8GW scenario. The share remains the same in the 15GW scenario, investment in new or existing facilities being brought forward.
With the accelerated growth path, concrete gravity-base foundations are expected to demonstrate cost reductions at some sites enabling investment in a new UK factory. Taking UK Round 3 Zones as an example, the sheer size of the zones, along with variables including water depths and distances offshore indicate requirements for a mix of foundation types. Thornton Bank off the Belgium coast is an example of a windfarm adopting both gravity-base and jacket foundations.
The ORE Catapult aims to play a key role in unlocking opportunities from innovative foundation designs, including through supporting design, testing and demonstration of new concepts, also supporting standardisation and development of new manufacturing techniques. They also intend to work with others helping unlock strategic investment in facilities including for alternative foundation types such as gravity bases which have potential to provide both cost savings and increased UK benefit.
CABLE AND ELECTRICAL
Cables may be unseen but are an important part of the offshore wind scene. In the 8GW scenario, the UK continues to maintain its healthy share of the array cable market. Existing facilities for both array and export cables are likely to be sufficient to meet demand. In the 15GW scenario however, supply of export cables is constrained. With long lead times for new factories, additional capacity is most likely to be added at existing factories as it is less of a risk. On the accelerated growth path, efforts to lower the risks to UK investments lead to a new export cable facility in the UK. As a result under this scenario, UK GVA from cable supply rises to over £200m in 2020. The report adds that the ORE Catapult is working to support standardisation of cable designs and facilitate R&D in polymeric cables rated above 400kV for both offshore wind and interconnector HVDC projects. They are also supporting development of fault detection and condition monitoring equipment specifically for the offshore wind sector.
Electrical systems are another important area for UK. In the 8GW scenario, most substations continue to be supplied from the UK, but using imported large components. In this scenario there are no UK HVDC projects before 2020 but there will be some export of equipment from a UK centre of excellence. In the 15GW scenario, UK-based companies maintain their market share and in the accelerated growth path, an HVDC platform, with a mass over 10,000 tonnes is built in the UK for the domestic market contributing to £600m GVA in 2020. The ORE Catapult sees power transmission as a significant area of cost reduction that is overlooked: they aim again to support standardisation of electrical systems and substation design whilst promoting innovation in HVDC networks.
The turbine installation sector is experiencing significant growth on the back of potential within Europe as a whole in the short to medium-term, and globally in the longer-term. Large vessel operators with modern fleets and strong track records are already present in the UK and have made significant new investments in vessels, particularly for turbine installation. New vessels lower installation costs but the significant investment in this area in recent years is seen as creating a potential over-supply, which makes it more difficult for UK-based companies to increase their market share through further investment.
Therefore, under both gradual growth paths, UK companies maintain their market share while under the accelerated growth paths, enhanced capability enables UK companies to grow their market share. This results in £1.2bn UK GVA from installation under the 15GW scenario. This will mainly be delivered by companies supplying services at or near the main windfarm installation base or where there is a strong offshore engineering capability. While this is primarily based around the UK east coast in East Anglia, north-east England and Scotland there are also significant facilities in other UK industrial ports.
The ORE Catapult aims to maximise the technological competitiveness of UK engineering companies, through new or standardised strategies for component handling and installation. This may range from simple items such as sea-fastenings, to the most advanced installation techniques which improve installation times, reduces weather downtime and minimise external impacts. UK companies are already making a difference here and the ORE Catapult considers they can further enhance their competitiveness.
As more and more windfarms move from the construction phase into full commissioning with the need to address the long-term O&M phase, this sector is one now seeing interesting developments in such areas as finding efficient and safe means of accessing individual turbines for the maintenance teams. The report states that much of the O&M for UK projects will continue to be based locally, providing long-term jobs in the area local to the windfarm. With the growth of the UK turbine supply chain, replacements will increasingly be supplied from the UK but the impact will mainly come after 2020 when UK companies will have a role to play in refurbishing and remanufacturing older turbine fleets.
For projects further from land than those in operation in the UK, O&M logistics can be shaped by UK companies’ existing experience of working offshore. The GVA from O&M in the accelerated growth path of the 15GW scenario increases to £1.4bn in 2020 compared with £900m in the 8GW scenario. The ORE Catapult report they are working to increase the range of working conditions offshore, improve the efficiency of crew access for maintenance and standardise strategies for component replacement and turbine access. They also aim to facilitate the move to condition-based (rather than time-based) maintenance of turbines though the introduction of new sensor technologies, many of which will be developed by UK SMEs.
By Peter Barker
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