Generating jobs and exports

Concerns about costs and fears of a potential skills shortage are combining to create uncertainty around the impact of the offshore wind sector on the UK economy, writes Felicia Jackson

Critics of offshore wind claim it is vastly expensive and unproven, but supporters say it has the long-term potential to stabilise UK electricity costs, create tens of thousands of jobs and boost exports.

Compared to the opportunity that the offshore wind sector provides, the scale of the challenge has been overplayed, according to Nick Medic, director of offshore wind at RenewableUK, and offshore wind could act as a long-term hedge against future volatility of fossil fuel prices.

As the UK imports half its gas and three quarters of its coal, diversifying the energy portfolio to include a domestic fuel source makes good sense.

In addition, forecasts suggest the offshore wind industry could provide 70,000 jobs by 2020. Martin Grant, chief executive of energy at consultancy Atkins, argues that, with the buoyancy of the oil and gas market and demand for maritime skills, these jobs will not be replacements but new jobs ranging along the east coast, from Kent to Scotland.

To enable the industry to fulfil this promise, private investors must be persuaded to back what are still high-risk projects. The challenge lies in understanding the industry’s potential to create jobs and a new UK manufacturing base.

The potential for the export of expertise is robust. Francois Hollande, the new French president, has voiced support for increasing renewables; Germany’s retreat from nuclear power is leading to an increase in offshore wind deployment in German waters; and there is growing interest from Asia.

The challenge lies in understanding the industry’s potential to create jobs and a new UK manufacturing base

The UK Government hopes that the experience of creating a robust domestic offshore wind sector will translate into sales in other markets.

According to Arnaud Bouillé, director of environmental finance at Ernst & Young, the important question is where value will be created. Research by the Boston Consulting Group says that, of the approximately £3 million per megawatt cost of offshore wind, 40 per cent comes from turbines (currently predominantly manufactured in Germany and Denmark), 30 per cent goes to foundations, cabling and other infrastructure, and the remaining 30 per cent to support services.

Companies like Atkins Global are retraining engineers from other sectors to enable them to move into offshore wind, while RenewableUK has launched a similar programme.

Mr Grant believes market intervention will be necessary to make the offshore wind industry a success. He says: “The best thing you can do is provide stability and consistency for planning of the long-term economic case.”

There are signs that the Government is having some success. The first quarter of 2012 saw Germany’s Siemens, Gamesa of Spain and Danish group Vestas announce manufacturing sites in the UK.

Doosan of South Korea, however, pulled a £170-million investment in Glasgow, due to falling confidence in the market. The question whether the UK can develop an industrial base to drive development of the supply chain is one of market volume, timing and certainty – and that means consistent support from Whitehall if the UK is to achieve its goals.