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UK 'needs better supply chain' to reduce offshore wind cost

The UK needs a better supply chain to help reduce the cost of offshore wind electricity, which has doubled since 2005, researchers said today.

A new report by the UK Energy Research Centre (UKERC) said that a lack of manufacturing competition, planning and supply chain constraints and rising material prices had increased the capital costs of offshore farms to more than £3m per megawatt.

Costs are made higher because around 80 per cent of the value of offshore wind farms comes from overseas, leaving them particularly susceptible to the falling strength of the pound.

EU governments have created a more nurturing environment for offshore wind

Although costs rose in all sectors of the electricity industry, the report said that offshore wind had seen particular difficulties and increases had been much larger than for onshore wind.

Speaking at a press conference, report author Dr Robert Gross of Imperial College London said that costs would likely fall by 20 per cent over the next 15 years but that the industry should be cautious in its optimism.

‘We do expect costs to come down gradually and there’s a kind of tendency for all of the proponents of the various technologies to cling to their early beliefs in the face of reality,’ he said. ‘Policy needs to place firm downward pressure on costs.’

He added that other EU governments had created a more nurturing environment for the offshore wind sector, leaving the UK a decade behind its neighbours in its renewables capability.

‘There’s more of a general culture of collaboration with industry and working with the engineering sector that’s been absent in the UK for the past two decades,’ he told The Engineer. ‘Their absolute levels of financing for R&D [research and development] are higher as well. These have grown in the UK under Labour but are still small under the scale of the challenge.’

Competition among turbine manufacturers was hampered by the relatively small demand for offshore wind from Britain, said Gross, noting that the exit of Danish company Vestas had left Siemens as the only company in the market for a considerable amount of time.

Although higher levels of state funding were a very big ask in the current economic climate, the investment required to reach government aims for offshore wind were beyond the balance sheets of utility companies, he added.

In engineering terms, however, it was perfectly feasible and innovative finance schemes would be needed to encourage more businesses into the country and to fund UK innovators, according to Gross.

‘For example, the UK’s Renewables Obligation is less attractive and more risky to investors than the feed-in tariffs they have in Germany, which have given the country an early lead,’ he said.

The Renewables Obligation requires energy suppliers to source an increasing proportion of electricity from renewable sources and charges them where they fail to meet the target. Feed-in tariffs are set prices paid for electricity according to its source.

The report also noted the need for investment in the UK’s ports, calling them ‘inadequate for the task’. Gross added: ‘Ports in countries such as Germany and Denmark tend to be municipally owned rather than private such as in the UK and so they tend to operate more strategically.’

Tom Foulkes, director general of the Institution of Civil Engineers (ICE), welcomed the report, saying the sector needed ‘massive development in a relatively narrow timeframe’.

He said: ‘Government will need to provide clear leadership, ensuring the regulatory framework and fiscal mechanisms are fit for purpose and the supply chain is developed concurrently to make the UK a hub for offshore design and manufacturing.’

Huge turbines that dwarf today’s devices could be the future for offshore wind. Click here to read more (subscription required).

Readers' comments (5)

  • The government needs to set up and create big manufacturing companies just like Rover and BAE and BA or the little start up companies will just be bought out by again and again by big greedy American companies who just shut down the factories n transfer the jobs after a few years.
    We have to take a leaf out of China`s n India book and not allow home grown firms to be taken over untill they are big enough to compete with the big boys, only then would it be fair game.

    For instance a start up british electric van maker just been taken over a by a us company and it just stiffles the chance to create big british companies n jobs that come with it to usa or any other country.This must stop asap

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  • Maybe the costs are high - but this is the least expensive way we have of generating renewable electricity (i.e. not burning fossil fuels).

    We are going to have to source the other 94% of our energy in a renewable way sooner or later (there is already a law in place saying 80% of our energy must be zero carbon emitting by 2050) and it is not going to be as cheap as present day energy. If we don't bother, energy will still get more expensive as fossil fuels become more difficult to extract.

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  • The obvious question is why we are not looking at much more efficient systems than wind farms. Geothermal is a much cheaper and better proposition at it is controllable and uses standard generation hardware. Wind and solar are at the mercy of the elements, and are not efficient, and extremely expensive, where as geothermal is not.

    This shows how uneducated political intervention dictates such projects, despite all the experts claiming geothermal is a better proposition.

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  • I agree with Mark. Its about time our politicians woke up and nurtured home grown companies like all other leading Nations. Might sound like protectionism (dirty word I know) but, everyone else does it. That most free & open market the USA is one of the worst! Unless attitudes change we will always (and increasingly in vain) be begging other nations to set up manufacturing here.

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  • The veil seems to have been ripped away on the underlying economics of wind power. If the energy produced is three times that of conventional power and has to be backed up by thermal or other sources then this suggests the whole concept is a massive distortion. The availability of grants and other hidden support has created a monster that at best only generates at full load for a tiny proportion of time.

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