Wednesday, July 10, 2013

15,000 jobs at risk as official support for offshore wind wavers

The launch of the London Array last week saw David Cameron praising offshore wind: but will it deliver British jobs?
The launch of the London Array last week saw David Cameron praising offshore wind: but will it deliver British jobs?
Britain is not making the most of its opportunity to become the ‘Saudi Arabia of offshore wind’, according to a new report from the think tank IPPR, putting up to 15,000 jobs at risk.

The report, entitled Pump Up The Volume, says the British Isles have ideal building conditions for offshore wind, with large areas of sovereign seabed in shallow waters and close to shore.

However, it warns that the Government is not making sufficient effort to bring down costs and secure British jobs.

Offshore wind is currently more expensive than unabated gas, onshore wind or nuclear. By 2020, the cost is expected to have fallen rapidly, but it will still be more expensive than those three technologies.

Only a small proportion of offshore wind farm components are built in the UK, varying from 10% for London Array Offshore wind farm, opened last week by David Cameron, 20% for Thanet Offshore wind farm, 48% for E.ON’s Scroby Sands development, 50% for Vattenfall’s Ormonde project and 32% for E.ON’s Robin Rigg development.

These figures do not include operational and maintenance costs, which are inherently local in nature and accumulate over the lifetime of a wind farm.

IPPR argues that the levels of British workers' contributions to offshore wind will need to increase in order to realise the economic benefits of the sector in terms of jobs and growth and to maintain political commitment.

Vince Cable's business department consulted earlier this year on the feasibility of achieving the Offshore Wind Developers Forum’s vision of 50% local content.

Observing that the Government has backtracked on its ambition to secure 18GW offshore wind by 2020 and expects instead just 4.4GW to come online between 2020 and 2030, the report points out that up to 15,000 jobs could consequently be lost that would otherwise have been created.

“The UK's current policy trajectory could see it achieving a ‘worst of all worlds’ outcome: low volume, low jobs, and high costs," said Will Straw, Associate Director at IPPR, launching the report.

Pointing out that there are cost reductions to be obtained from working at scale, he added: "Unless Britain 'pumps up the volume' there is little prospect of either bringing down the costs of offshore wind or creating domestic jobs. 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’".

He also reiterated the need for a 2030 decarbonisation target, which would give the industry "the long-term clarity that it needs, and which has been provided in other countries".

Instead, he said, "developers must be expected to drive down costs with a subsidy regime that reduces the strike price over time".

He also added that "developers and suppliers should do more to provide apprenticeships and sponsor university and FE courses” to meet the skills gap.

The report recommends that in order to build a strong domestic offshore wind supply chain, the Government needs to attract at least two turbine manufacturers, preferably more, to build factories. This "would be a major boost, as these companies are able to attract a cluster of other companies further down the supply chain (as is the case in Denmark)".

It must also, the report argues, continue to support and build upon the country's existing strengths in the supply chain, building on its expertise in both the onshore wind and the North Sea oil and gas industry, and should support export opportunities for British firms. A new EU renewables target would help create export markets to 2030.

On the issue of reduced ambition for offshore wind, DECC clearly stated in the 2011 UK Renewable Energy Roadmap that "up to 18GW of offshore wind could be deployed by 2020 ... with over 40GW possible by 2030".

In June of this year, however, they appeared to change their ambition by announcing that the subsidy regime would allow for just 8–16GW by 2020.

DECC’s ‘central scenario’, published last October, sets out a much less ambitious path, leading to just 11.5GW by 2020 and 16GW by 2030.

The government's watchdog, the Committee on Climate Change, believes that this latter scenario "would imply unacceptable costs and risks of achieving the 2050 [decarbonisation] target".

Both developers and suppliers are concerned. The industry argues that several ports need to be upgraded to provide construction and assembly facilities for the supply chain, but the port owners will not do so unless they are given government reassurances.

Meanwhile, in relation to the grid, the lack of a costing of risk allocation between the developers and the transmission operators could result in offshore wind being more expensive than it needs to be.

DECC has not yet responded to the report.

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