There are not many industries that can lay claim to cost reductions of circa 60% in the space of a few years and boast of multi-billion-dollar export opportunities, but the UK’s offshore wind industry can.
Much of the talk in the industry now is about supply chain opportunities, and rightly so, but you don’t get a cost reduction of 60% without suppliers somewhere coming under pressure, sometimes extreme pressure. Usually this applies most to those in the lower tiers of the chain.
Earlier this year the Offshore Wind Industry Council (OWIC) launched a full-scale review of the UK supply chain as part of its vision for 2030. The review will be led by independent expert Martin Whitmarsh, former McLaren Group chief executive and Formula One team principal. He will work with supply chain companies to encourage existing suppliers to increase their capability in the offshore wind sector and to introduce the significant business opportunities to new enterprises.
“I want the UK’s offshore wind supply chain to be in pole position in this increasingly competitive global market. Increasing supply chain productivity will directly lead to lower costs and enable UK companies to seize new opportunities across the globe,” said Mr Whitmarsh, noting that a key part of the review is looking at how SMEs can join this growing industry, making sure they understand what industry needs and routes into the sector.
Improving productivity across the supply chain will have positive knock-on effects throughout the UK, reducing the cost of offshore wind even further, benefiting domestic and industrial consumers, and helping to support other industries as companies across the value chain become more competitive.
However, the big prize is in the export market, where the UK has an ambition to grow the export value of offshore wind goods and services five-fold by 2030, by which time half of the revenue for UK suppliers in the sector could come from exports. This is a lucrative opportunity that UK companies obviously want to be involved in. The outcome of the review will be a Supply Chain Development Plan for the industry, with deliverable opportunities and suggestions on how the UK can increase productivity and value at every stage. It is expected to be completed in Q3 2018.
Speaking to Ørsted's Hornsea Project One project manager Duncan Clark recently, he emphasised how transformative offshore wind projects can be for companies and their own suppliers. He highlighted Wilton Engineering on Teeside, which has a significant level of involvement in the transition pieces for Hornsea One, whose own suppliers will also be benefiting from the company’s success.
One might be forgiven for thinking that everything is rosy in the supply chain, but cost reduction on the scale that has been achieved is putting a lot of companies under tremendous pressure. That much was evident from several of the presentations at the All-Energy 2018 conference in Glasgow in early May.
On the one hand, cost reduction is creating opportunities, but competition has become intense, particularly in the lower tiers of the supply chain. As OWJ reported recently, it is essential that the way the industry continues to grow is sustainable for everyone. “We don’t want to break the bottom of the supply chain,” said one well-known figure.
It is essential to find ways to keep the supply chain sustainable as it goes for growth and ensure that we don’t squeeze the lower tiers of the supply chain too much. We need to allow companies in the lower tiers to catch up and become more productive, so let’s hope Mr Whitmarsh hears from suppliers about some of the challenges they face, as well as the undoubted opportunities.