Economic Opportunities – Supply Chain
The Offshore Wind Sector Deal set a target of 60% lifetime UK content in domestic projects (up from the current 50%), and a commitment to increase UK content in the capital expenditure (CapEx) phase.
Scottish Ministers are fully committed to ensuring that Scotland’s supply chain benefits from this commitment by the sector. This means working with the sector, and particularly developers, original equipment manufacturers, tier 1 contractors and industry representatives, to ensure not only that this target is delivered, but that the benefits and effects of doing so are demonstrated and felt in areas across Scotland, maintaining the strong social licence which the sector has enjoyed.
As part of this process, we held an Offshore Wind Supply Chain Summit to consider options designed to increase the relatively low levels of Scottish content in projects to date, particularly during the CapEx phase.
The Summit concluded with a number of actions designed to establish a positive way forward for Scotland’s supply chain. These were:
- An examination by the Scottish Government of the levers and regulatory instruments at its disposal to encourage developers to utilise the Scottish supply chain more widely;
- An assessment by the UK Government of current contracting practices in the offshore wind sector, and ways in which the CfD process could be restructured to promote the local supply chain; and
- An undertaking by the sector to conduct a strengths and capabilities assessment of the foundations sector in the UK via the Offshore Wind Growth Partnership (OWGP).
These options are still being explored and evaluated at the time of publishing this document. However, the Scottish and UK Governments have committed to hosting a follow up summit early in 2020 to set out our conclusions and ambitions in this area, and to ensure that our indigenous supply chain can maximise the benefit from developing Scotland’s tremendous wind regime and where there is opportunity to do so attract inward investment.
Nevertheless, our supply chain companies must continually reflect on their performance to ensure that they remain competitive in a challenging offshore wind sector. They must also ensure that they are able to present innovative and compelling tenders to the Engineering, Procurement, Construction and Installation (EPCI) contractors and look to explore collaborative opportunities to present the strongest bids possible within their respective specialisms. The Scottish Government is keen to welcome new entrants into the market, as well as supporting established players.
We are also keen to explore how best to increase Scotland’s success in winning orders for projects outside Scotland’s waters, to leverage the wider pipeline of projects to deliver economies of scale in the Scottish supply chain.
Floating Wind Opportunity
There is huge economic opportunity attached to floating offshore wind – Crown Estate Scotland’s Macroeconomic Benefits of Floating Offshore Wind report  suggests that the UK floating offshore wind market has potential to support 17,000 jobs and £33.6 billion of Gross Value Added (GVA), with particular potential for deployment in Scotland’s 462,000 km2 of waters, much of which are more than 60m in depth. Globally, the market is set to grow to at least 4 GW of capacity by 2030 and 55 GW by 2050, offering an export opportunity to Scotland ‘s supply chain which is estimated at around £550 million per annum by 2050.
The expertise gained through over 40 years of experience gained from oil and gas sector operations in Scottish waters, means Scotland is well placed to capitalise on this opportunity, and this is expanded upon further in the Innovation section of this document. We have an abundance of offshore skills and the capabilities necessary to manufacture specialised components such as moorings, chains and anchors.
As we transition to a net zero economy, it will be increasingly important that these skills can be seamlessly transferred to our growing renewables sector – retaining, and growing, the economic value of our energy industry. However, taking full advantage of the floating wind opportunity will – as well as a more targeted and effective approach through the CfD – require significant investment in critical infrastructure such as fabrication yards, ports and harbours.
The economic benefit of this technology will arise from achieving early mover advantage. This means that the Scottish supply chain must be fully prepared, with the capability and capacity required to deliver floating offshore wind at commercial scale and this also requires action on the part of UK Ministers to provide a commercially attractive environment for the sector to flourish here and to capture the market lead.
Scotland’s Energy Strategy sets out internationalisation as a key area, and one that will contribute to sustainable economic growth as we transition to a net zero economy.
Offshore wind has rapidly become one of the UK’s lowest cost renewable sources
at scale, and the resulting international market for this technology is growing at an unparalleled pace. In 2018, the global offshore wind industry installed over 5.6 GW of capacity, whilst the global development pipeline (as of 31 December 2018) was 272 GW.
We are world leaders in offshore wind innovation, and our oil and gas expertise means that we are as well placed as any country to address the engineering and manufacturing challenges presented by offshore wind and to remain at the forefront of floating wind technology
Scotland has already established strong collaborative relationships with California and New Jersey in the USA. Both of these states, are seeking to rapidly build out large scale offshore wind projects. However, due to gaps in the existing domestic supply chain more established Scottish companies through expertise in subsea engineering, environmental planning, consenting and project management can help achieve those ambitions.
The Scottish Government, along with our Enterprise Agencies, will continue to engage with international partners – strengthening existing relationships and seeking out new opportunities for our offshore wind industry to flourish in the global market.
13. What areas of the Scottish supply chain do we excel at, and what could we do better?
14. Where are the new areas that Scotland can develop and exploit a competitive supply chain advantage?
15. What are the main challenges a company faces when tendering for a contract?
16. Subject to procurement law, what more should government and its agencies do to assist the supply chain secure contracts?