The “Saudi Arabia of offshore wind”?
To create a job rich offshore wind manufacturing industry, the approaches taken by governments in Denmark, Germany and France provide clear lessons for this country. According to the ippr, policy certainty over a series of years created the stable environment for their wind industries to grow, giving developers and suppliers alike the ability to plan for the long term. But just 3,200 people work in the UK’s offshore wind industry now, contrast 25,000 in Denmark. None of the turbines installed in our coastal waters were made here. Contrast that none of Denmark’s were made anywhere else. The government’s offshore wind strategy is due out this month. We could create ten times the number of jobs we have now. But “greater ministerial activism” at this crucial stage is the necessary condition for UK manufacturing success.
As a windy island set in shallow waters, Britain has a natural advantage in developing this technology which other countries do not enjoy. As the graph shows, from ippr’s excellent study, Pump up the volume, official output projections show the offshore wind sector flatlining after 2020. This is the “killer fact” underlying why manufacturers are reluctant to invest here. As a result, the total UK content of wind projects bumps along at 10% for London Array, 20% for Thanet and 48% for E.ON’s Scroby Sands project.
To build a strong domestic offshore wind industry, the government should focus on six areas of policy:
- An appropriate framework with clear ambition after 2020 – the official projectiona above shows the cliff that industry faces from 2021.
- Smart procurement policy to incentivise local content at reasonable cost.
- Greater ministerial activism.
- Upgrades to crucial infrastructure like ports and the grid.
- A coordinated and well-funded innovation strategy.
- Greater focus on skills.
The policy framework set by government is the critical path. The ippr believes that the UK government should adopt a 2030 ‘clean energy’ target. The House of Lords still has an opportunity to amend the Energy Bill to this effect. But if that fails, an incoming government should adopt the target immediately in order to provide certainty beyond 2020.
The UK government should also advocate for a new EU renewables target for 2030, a move that the Energy Secretary has opposed. Failing that, it should support a low-carbon power target that is consistent with a decarbonisation of the sector to 50gCO2/KWh by 2030. This would provide industry with the sense of ambition and certainty needed to bring down the cost and secure a domestic supply chain.
Lastly, the Treasury’s Levy Control Framework (which determines the contribution of energy consumers towards new energy investment) should be extended well into the 2020s to pay for this low carbon investment. However, this would be, for the Treasury, an unaccustomed move towards long term decision making.
Britain is already the world-leader in the exploitation of offshore wind. By June 2013, the UK had an installed offshore wind capacity of over 3.3GW – three-quarters of Europe’s additional capacity.
Yet there are inherent contradictions in the government’s approach to renewable power. The first lies in the stated ambition of goverment ministers. In interviews with industry, positive government rhetoric on offshore wind from the prime minister and energy secretary Ed Davey has contrasted with the chancellors’ ambition for the UK to become a ‘gas hub’. The second contradiction is that the government has been unwilling to provide any certainty beyond 2020 for its offshore wind ambition.