Weak policy threatening UK offshore wind industry says think-tank

The development of the UK’s offshore wind market is at risk because of “weak and unclear signals from government on the long-term future of renewable energy”, according to a report out today.

Leading think-tank the Institute for Public Policy Research warns that Britain could end up in a “worst-of-all-worlds” scenario of “high costs combined with low pay-offs in the form of jobs and trade”.

This, says the IPPR, “would fail our climate challenge, our jobs challenge, and our rebalancing challenge”.

The report, ‘Pump up the volume: Bringing down costs and increasing jobs in the offshore wind sector’, comes just days after Prime Minister opened London Array (pictured right), the largest offshore wind farm in the world.

Cameron said at the launch that “London Array shows you can build large scale renewable energy projects right here in Britain… because when it comes to clean energy, the UK has one of the clearest investment climates globally”.

Today’s IPPR report would agree with the first part of that statement but not with the latter. The report states that the UK’s geographical position as a windswept island and its industrial traditions give offshore wind “enormous potential, both domestically and as an export sector”.

Both the existing government and its predecessor talked up the role of offshore wind in diversifying the UK’s energy mix and bringing down its carbon emissions. The IPPR agrees that the sector offers golden opportunities to create a jobs boom in manufacturing, construction and maintenance and to help rebalance the economy, both spatially – by creating growth in the northern regions of the UK, where the greatest offshore potential lies – and in terms of balance of trade.

But the IPPR warns that there are two significant challenges. Firstly, offshore wind is currently more expensive than other low-carbon technologies such as onshore wind and nuclear; and secondly, it states British workers only produce around a third of the components in the offshore supply chain, “reducing significantly the local value of the sector”.

Crucially, says the report, there are no turbine manufacturers in the UK, and turbines make up around 50 per cent of the capital costs of a new wind farm. Many of the turbines operating in the country at the moment were made in Denmark of Germany.

“Developing a strong supply chain that includes all major aspects of the manufacturing and construction process is crucial to maximising the local value of the offshore wind sector, while achieving scale is crucial to bringing down the long-term costs of the energy it produces,” say report authors Will Straw and Clare McNeil.

However they stress that “both forms of investment are being hampered by a lack of clarity and certainty around the government's long-term commitment to wind power as a key part of the energy mix”.

The report states that there is a lack of clarity around the government’s ambitions both leading up to 2020 and beyond.

It highlights that in 2011, the Department of Energy and Climate Change in its UK Renewable Energy Roadmap said that “up to 18 GW of offshore could be deployed by 2020 ... with over 40 GW possible by 2030”.

But last year DECC set out another path, targeting 11.5 GW by 2020 and 16 GW by 2030. The IPPR points out that government advisory group, the Committee on Climate Change, believes that this latter scenario “would imply unacceptable costs” and puts at risk the UK’s 2050 decarbonisation target.

This lack of clarity is alarming both developers and suppliers, says the IPPR, and it stresses that “an alternative pathway is possible, if the government can bring together an industrial strategy for the sector predicated on a combination of ‘carrots and sticks’. The industry should be given the clarity that it needs and which has been provided in other countries.”

In its report, the think-tank draws up a list of six action points it believes the government needs to address: clear ambition and policy certainty; procurement policy; ministerial activism; critical infrastructure such as ports and the grid; innovation and skills.

The report suggests that the UK looks to some of its European neighbours for examples to follow and highlights “early adopter” Denmark, Germany, which is Europe’s leading offshore market, and France, which IPPR states “has grabbed the economic opportunity this new industry presents to create domestic jobs, long before the foundations for a single offshore turbine have been laid”.

The report has been welcomed by trade group RenewableUK. Its director of external affairs, Jennifer Webber, said if the government adopted the IPPR’s recommendations, it would stimulate the healthy growth of the offshore wind industry not just for the rest of this decade, but also in the decade which follows”.  

She added that the UK had to ensure that it reaped “the full manufacturing benefits by bringing big offshore turbine factories to ports around the UK rather than seeing them sited elsewhere in Europe”.

“Clear targets stimulate confidence, and the further they stretch into the future, the greater the sense of trust generated,” said Webber. “Meanwhile, the offshore wind industry will continue to build on the steps we are already taking to drive down costs significantly”.

Oliver McMillen, head of policy at utility SSE – which operates three offshore wind farms in the UK (Greater Gabbard, Galloper and Walney) – said Britain does indeed have “huge potential to be a world leader in offshore wind and enjoy all of the economic benefits that come with that”.

But he added: The IPPR is right that this potential cannot be realised without investment at scale, which will help build the supply chain and ultimately bring down costs. A stable, long-term policy framework is critical to this and we strongly agree that a 2030 decarbonisation target, alongside robust, investable support mechanisms, can help outline the trajectory and give investors the certainty they need."

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