Leader of the pack

Will Sharkey, EIC

July 1, 2016

The UK oil and gas industry is eyeing opportunities in the offshore wind industry, says the EIC’s Will Sharkey.

Image from iStock.

The UK has developed a project portfolio of unrivaled offshore wind capacity. With over 5GW already in operation and installed capacity expected to double by 2020, the UK is considered the global leader in offshore wind development. As a result, UK oil and gas companies are increasingly turning their attention to the cross-sector supply chain opportunities offered by this growing industry.

Many of the technologies for offshore wind development have already been proven in the oil and gas industry. UK expertise in offshore wind cable-laying, operations and maintenance and offshore platform construction, for example, is based on historical strengths in the oil and gas sector. Expertise, therefore, exists, but its availability to the offshore wind industry depends on a down cycle oil and gas industry that has traditionally operated with margins higher than offshore wind.

The UK government has pledged to support a further 4GW of offshore wind through future contracts for difference (CfD) auction rounds. This support will be capped initially at US$143 (£105)/MWh, before dropping to $116 (£85)/MWh for projects commissioned by 2026. Through technological innovation, competition and the deployment of larger, more efficient turbines, UK offshore wind costs are falling fast and the industry is confident that cost reduction targets will be met.

To bring about further cost reduction and minimize development processes, both government and industry are encouraging the engagement of the offshore oil and gas supply chain in upcoming offshore wind projects. As offshore wind farms grow in size and are further from shore in greater water depths, oil and gas companies are well placed to limit risk and drive innovation. By way of example, Statoil is currently developing the world’s largest floating wind farm at Buchan Deep, off the coast of Scotland. Having been granted a seabed lease in May 2016, the Hywind pilot project will feature five 6MW turbines anchored to the seabed in waters up to 120m deep. The scheme will showcase the feasibility and cost efficiency of floating wind in deep sea areas.

The table demonstrates the high volume of offshore wind projects that are at different stages of development in the UK. Opportunities across the supply chain are available in the domestic market and, as the technology becomes industrialized across Europe, UK suppliers can profit from extensive export opportunities. By targeting governmental support, JDR Cables, for example, has successfully diversified from its core market of supplying umbilical cables to the oil and gas sector and achieved notable success in the UK offshore wind market. Having been awarded contracts for projects including Race Bank, Galloper and Rampion, JDR Cables has expanded to European markets and has secured orders to export to projects including Veja Mate, Sandbank and Nordsee One in the German North Sea.

Offshore wind project developers and tier one contractors recognize that innovation is key for driving cost reduction. Open to new market entrants, the offshore wind industry acknowledges that it can learn from oil and gas best practices. For oil and gas suppliers seeking to diversify, the sector presents significant opportunity.

UK offshore wind pipeline through to 2020

Project Developer Capacity (MW) Project Stage Expected start-up year

Burbo Bank Extension

DONG Energy

258 Major contracts awarded (subcontracting opportunities)  2017

Blyth Offshore Wind Demonstration Site

EDF Energy Renewables 41.5

Major contracts awarded (subcontracting opportunities)

2017

Rampion

E.ON Climate & Renewables

400 Major contracts awarded (subcontracting opportunities)  2018

Race Bank

DONG Energy 588 Major contracts awarded (subcontracting opportunities) 2018

Walney Extension

DONG Energy 660 Major contracts awarded (subcontracting opportunities)  2019

East Anglia ONE

ScottishPower Renewables 714 Contracts begin awarded 2019

Beatrice

Beatrice Offshore Wind Ltd. (SSE, SDIC Power & Copenhagen Infrastructure Partners) 664 Contracts being awarded 2019

Neart na Gaoithe

Mainstream Renewable Power 450 CfD terminated 2020

Hornsea Project ONE

DONG Energy 1200 Contracts being awarded 2020

Triton Knoll

RWE Innogy & Statkraft  900 Early stage development - CfD bid expected  2020

Will Sharkey is the sector analyst for renewables at the EIC. His remit covers the UK, Europe, the Indian Subcontinent and Sub-Saharan Africa. Will holds an MA in geography from the University of Edinburgh. Prior to joining the EIC, he worked for the tropical forest think tank Global Canopy Programme.