Opportunities over next decade for local suppliers in wind farm supply chain - Tomas Karger and Robbie Gauld
In particular, there are a number of ongoing programmes in the UK relating to renewable energy projects. In Scotland, for example, the Crown Estate Scotland has launched the ScotWind programme for leasing areas of the seabed around Scotland for wind farm developments.
Applicants through ScotWind were required to submit a Supply Chain Development Statement (SCDS) specifying the location of supply chain activities across various stages of their project. The government had indicated that applicants should keep their supply chain local where possible, but the location of the supply chain did not form part of the scoring criteria for assessing applications.
Earlier this year, 17 projects were selected (from 74 applications) with a number of large oil and gas companies awarded projects. Initial indications suggest a multi-billion pound supply chain investment in Scotland. Two of the largest ScotWind projects were awarded to bp and Shell, which are looked at in some detail below.
Alongside partner EnBW, a German-based energy company, bp has secured rights to develop an offshore wind farm off the east coast of Scotland with potential generating capacity of 2.9GW – enough to power more than 3 million homes. Additionally, bp plans to make Aberdeen its global operations and maintenance centre of excellence for offshore wind.
Positively for the north east, this is believed to be worth up to £40m annually to the Aberdeen economy and will possibly create over 100 jobs. The project will support up to £10bn of investment in offshore wind development, bp/EnBW have indicated - boosting supply chain and infrastructure, and enhancing skills and education, research and innovation.
The SCDS submitted by bp/EnBW estimated that as part of their project, £1.2bn would be spent within the Scottish supply chain, with an ambition to increase this investment to £2.3bn.
Furthermore, bp/EnBW estimated £1.1bn would be spent in the rest of the UK, with a target to increase this to £1.4bn. However, despite bp/EnBW’s ambitions to increase their spending within the UK supply chain, they currently say £4.8bn will be spent outside the UK.
This means bp/EnBW are committed to having 32 per cent of the supply chain in the UK, and within that, 17 per cent in Scotland. There may be several reasons why a large part of the overall spending is outside the UK; one may be a lack of infrastructure in the UK necessary to meet the supply-chain demands.
The largest spend during the project is in the manufacturing and fabrication stage. Here, 73 per cent of the spending is estimated to be outside of the UK – and only 11 per cent in Scotland. Only in the operation stage do bp/EnBW estimate spending the most in Scotland, with 36% of total spend in Scotland. In any event, as the successful ScotWind applicants start to develop their projects, it will be interesting to see how UK suppliers look to take advantage of a potential gap in the UK offshore wind market.
Also, Shell has partnered with Scottish Power Renewables (SPR) to develop two floating offshore wind farms off the east and north-east coast of Scotland. The SCDSs submitted by Shell/SPR for the two wind farm projects estimate that 41 per cent of the supply chain for the overall project will be based in Scotland, and 12 per cent in the rest of the UK. As with the bp/EnBW project, the largest spend is during the manufacturing and fabrication stage. However, Shell/SPR have estimated that a large part (35 per cent) of this stage in the project will be based in Scotland.
Over the next decade or so as these projects come to fruition there will be an opportunity for local suppliers to secure their place in a developing supply chain. For example, companies that can offer innovative solutions to industry problems and provide these to the successful ScotWind applicants may be able to protect their position in the market, and potentially increase their market share of a lucrative transition to wind power in Scotland, and around the world.
Tomas Karger is an Associate & Robbie Gauld is a European Patent Attorney, Marks & Clerk
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