China's role in Scotland’s offshore wind supply chain poses a dilemma - Jeremy Grant

Can Scotland ​hit energy transition targets without Chinese involvement, asks Jeremy Grant

It’s been a big week for renewable energy in Scotland.

First, a £100 million loan from Scottish and UK development banks was given to develop a port at Ardesier in the Highlands for assembly of offshore wind farms. Then ground was broken at Port of Nigg for a subsea cable factory. Plans were also unveiled for green hydrogen production at Grangemouth.

What do these have in common? Foreign investment. Ardesier is backed by Texas-based private equity firm Quantum Capital Group, the Nigg factory involves £350m from Sumitomo Electric of Japan, while German energy group RWE is behind the hydrogen project.

An employee works on a wind turbine tower at a factory in Lianyungang, in China's eastern Jiangsu province (Picture: STR/AFP via Getty Images)

Contrary to some of the economically illiterate analysis I’ve read recently, foreign investment is good for the build-out of renewables and creates jobs.

This new investment comes at a time of wars in Europe and the Middle East, which are fracturing geopolitical alignments that have been in place for decades. The world has suddenly become a more dangerous place. It therefore matters which foreign investors are involved in your critical energy infrastructure.

This is why a question was recently raised in the House of Commons about whether plans by China’s Mingyang Smart Energy, the world’s largest maker of offshore wind turbines, to build a factory in Scotland should be reviewed on security grounds.

At issue is that fact that electronics and data in a turbine are ultimately controlled by the company that made them, not the wind farm developer (like those involved in the ScotWind projects in the North Sea). There are also concerns about alleged unfair subsidising by China of its renewables sector, undermining European turbine manufacturers Vestas and Siemens-Gamesa.

Jeremy Grant is a freelance writer and editor, and was a journalist at the Financial Times and Reuters for 25 years

Yet the issue of Chinese involvement in the UK’s offshore wind supply chain is more nuanced. There are two unavoidable truths here.

One is that China’s wind turbine manufacturers are deeply embedded in the global supply chain – one undergoing its own version of globalisation due to the huge amount of activity involved.

The other is that inflationary pressures mean developers have no choice but to consider cost. Mingyang not only has an industry recognised track record as a manufacturer but is also highly competitive, including offering generous financing. The prospect of a new wind turbine factory creating jobs in Scotland will have natural appeal to policymakers on “just transition” grounds, even as it may alarm Vestas and Siemens-Gamesa.

Jonathan Cole, chief executive of offshore wind developer Corio Generation, told a renewables conference in Glasgow: “If you look at the amount of deployment needed in renewable energy to hit energy transition targets and the current capability of the supply chain, by about 2026/27 every region of the world except China has a shortage of critical components. So, if we extract China from the supply chain what we’re actually going to do is delay the energy transition and make it more expensive. And that’s not in our national interest.”

There are no easy answers. But whether to allow a deepening of China’s role in Scotland’s energy transition is turning into a significant policy dilemma facing the Scottish and UK governments.

Jeremy Grant is a freelance writer and editor, and was a journalist at the Financial Times and Reuters for 25 years