The deal, in my view, provides a very welcome policy commitment and responds to the opportunities which have been coming from ever-lower development costs, increased activity and a strong pipeline with further leasing rounds to come. The next generation of offshore wind projects will come on-stream in the late 2020s and early 2030s – when the targets in this deal are set to be met – which makes it a vital time for government and industry alike to have published this joint outlook.
The government has reaffirmed its support for the Contracts for Difference (CfD) subsidy regime, for research and development funding to increase UK competitiveness and further reduce costs, and for policies to support the export of UK expertise around the world. It seems clear that offshore wind is now firmly embedded as a key element of UK government energy and industrial policies.
The sector has been attracting global interest and the opportunities for investment will only grow as activity progresses so impressively over the next few years. The UK already hosts the world’s largest offshore wind farm, Walney Extension off the coast of Cumbria, and even larger projects are under construction. The cost of these has fallen considerably over the past two years, with subsidies awarded under the UK’s competitive CfD scheme falling by over 50 per cent during that time.
The sector deal sets out plans to construct 30 gigawatts of UK offshore wind generating capacity by 2030, or one-fifth of projected total global wind capacity. Among the industry commitments is a target of 60 per cent lifetime UK involvement in UK projects, up from the current 50 per cent target, to include more UK involvement at the capital expenditure phase.
Offshore wind companies have also committed to £250 million of investment, to deliver increased productivity and competitiveness in the UK supply chain and support innovative products in areas such as robotics, advanced manufacturing, floating wind and larger turbines.
The deal targets a fivefold increase in offshore wind-related exports by 2030, to £2.6 billion annually, and proposes support for smaller companies seeking to export for the first time. The government also pledged £4m to enable British businesses to share expertise globally and enable countries such as Indonesia, Vietnam and Pakistan to transition from coal power.
It aims to more than double the number of women entering the industry to 33 per cent by 2030, with a goal of reaching 40 per cent; proposes new apprenticeship targets; and pledges to work with further education institutions to build essential skills. An Offshore Energy Passport, recognised outside of the UK, will be developed to enable offshore wind workers to transfer their expertise to other offshore renewables sectors and the oil and gas industry. These proposals could triple highly-skilled jobs in the sector to 27,000 by 2030.
The government has re-stated its commitment to the CfD programme for offshore wind, providing up to £557m support to the industry into the 2020s through two-yearly auctions. These auctions will deliver between one and two gigawatts of offshore wind each year in the next decade, depending on the price achieved during the auction process.
Overall, the deal has been warmly welcomed by the offshore wind industry, which is moving forward with a strong sense of optimism.
- Alan Cook, partner and specialist in renewable energy projects at Pinsent Masons