Report: Supply chain constraints could undermine delivery of UK’s offshore wind ambitions

Image: Orsted. Pictured: Hornsea 2

Commissioned by the Government’s Department for Energy Security and Net-Zero (DESNZ) and published by Baringa, the report warns that Britain will need to increase its coordination of supply chains if it is to achieve its vision of hosting 50GW of installed offshore wind capacity by 2030.

This target is included in the Energy Act, which received Royal Assent late last year.

The report warns that there is a ‘high’ or ‘medium-high’ risk of capacity constraints in supply chains for eight key types of components for offshore wind farms and related transmission infrastructure this decade.

These include vessels, export cables and floating foundations for next-generation floating wind farms. Such projects can be placed in deeper waters and host taller, more powerful turbines, and are now eligible to receive ring-fenced funding through the Contracts for Difference (CfD) auction process.

The report hints at the benefits of growing a UK-based manufacturing base for these components, stating: “the size of floating foundations means they are slow and costly  to tow, and vulnerable to weather-related disruptions, so local fabrication is desirable… [and] would also contribute to the industrialization and commercialization of the technology, therefore enabling greater reduction[s] in costs for developers.”

No key components for offshore wind farms are classed as having a ‘low’ or ‘medium-low’ risk to supply chain disruptions from capacity constraints.

The report highlights that British offshore wind projects are “heavily dependent on securing a financially viable CfD offer”.

At the most recent CfD auction round, in September 2023, no successful bids were made for offshore wind prices. Developers criticised the Government for failing to account for skyrocketing supply chain costs.

In response, the maximum strike price for the next round has been increased by up to 66% depending on project type. DESNZ has also set out plans to begin paying developers premiums for ‘non-price factors’ such as growing local supply chains and skills bases.

Planning and connection woes

Today’s new analysis concludes that supply chain constraintss, while they do exist for solar and onshore wind, are “most severe” for offshore wind and offshore transmissions.

“For onshore wind and grid-scale solar PV, securing planning consent and grid connections arguably outweigh supply chain issues as constraints,” the report summarises.

This is partly because onshore renewables do not require as many components, such as complex foundations, installation vessels and converter stations, like offshore wind farms do.

The UK Government is currently working with Ofgem, National Grid and the National Infrastructure Commission (NIC) to streamline the planning permission for renewable energy projects large enough to be deemed ‘nationally significant’’. Such projects have seen timescales increase by around two-thirds since 2012.

Collaboration and trials are also underway to help unlock the planning process and free up the grid for smaller arrays.

According to previous Centrica research, there are some 371GW of renewables and battery project in the connections queue across the UK.

The UK Government is aiming for the nation to host 70GW of solar capacity by 2035, up from around 14.5GW at present. It has no set target for scaling onshore wind which, until recently, had been subjected to a de-facto ban.

Industrial Growth Plan

In related news, industry body RenewableUK has published an Industrial Growth Plan for the offshore wind sector. It claims that full delivery of the plan could facilitate the deployment of 5GW of offshore wind each year.

As with the DESNZ-commissioned report, this Plan identifies supply chain constraints as the key barrier to growing the sector. It points out opportunities for the UK to grow its domestic manufacturing base for components such as turbine blades, turbine towers, fixed and floating foundations and cables. Such parts could then be exported, generating an additional economic boost and positioning the UK as a global leader in offshore wind manufacturing. The UK could also export services, vessels and skills.

The plan envisages mobilising nearly £3bn of funding nationwide, with private finance doing the heavy lifting. It touts returns of more than £8 for every £1 invested.

RenewableUK estimates that British offshore wind already employs 32,000 people but sees the potential for 10,000 additional jobs to be created by 2035.

The plan has the support of the Offshore Wind Industry Council, The Crown Estate and Crown Estate Scotland and several businesses in the offshore wind value chain including Siemens Gamesa.

RenewableUK’s chief executive Dan McGrail called the plan “the deepest dive ever into the offshore wind supply chain”. He claimed that it “charts a clear course for us to ensure that we seize that massive economic opportunity”.

“By using this as a blueprint to work closely with all our partners in the sector, we can triple the size of that supply chain, ramp up our offshore wind capacity significantly and secure a huge increase in jobs, all within the next ten years,” McGrail said.