The UK small wind system manufacturing industry is robust but at risk. As other countries’ governments wake up to the potential benefits of a domestic small wind industry, the UK industry cannot afford to be complacent and government must engage with it to capitalise on a sound base as the global market expands. Dennis Frize reports.
Wind Week 2009, an event celebrating wind energy technology organised by the British Wind Energy Association (BWEA), took place in the UK between June 13 and 21. Supporters championed wind power applications, with events organised across the country. Wind Week coincided with Global Wind Day on June 15, marked by thunderstorms and poor weather throughout the UK, emphasising the point made by BWEA’s chief executive Maria McCaffery, that ”We are at a crucial stage in the development of wind energy in the UK. Wind Week 2009 is an opportunity for everyone to find out the truth about this amazing free, clean energy that blows through the UK in abundance.” It is a poignant time to recognise the UK’s small wind system (SWS) industry, manufacturers and distributors of small wind energy conversion systems, using blades up to 15m in diameter, at heights of up to 40m and electricity generation capacity up to 100KW.
Twenty years ago, British companies led the world in research at this scale of renewable energy generation.
Like many other stories of British ingenuity, this success can be traced to a few individuals who pioneered what is now a robust SWS manufacturing sector. By 2009, there are 18 SWS turbine manufacturers operating in the UK providing 1,880 jobs (see box) and five or six of these are considered to be among the top 10 SWS turbine manufacturers in the world.
But there is a growing possibility that this position could be lost. Industry insiders are concerned that SWS companies must avoid suffering the same fate as the UK large wind turbine manufacturing base which petered out after a promising start in the 1980s. The recent BWEA Small Wind Systems UK market report shows that these manufacturers are doing pretty well both domestically and internationally. Domestic manufacturers currently hold an 82% revenue share of the UK market (a market worth £13.5m in 2008) and export over 50% of their output to more than 100 countries worldwide.
The UK SWS industry is currently the world’s third most important SWS manufacturing base, having only recently been overtaken by the US and China’s manufacturing capabilities. As was seen with Large Wind Turbine manufacturing (see TM, May 2009) the UK enjoyed an early research-leadership position, but just as the industry is set to boom — providing projects that should commence with government funding approved in this year’s Budget are not derailed by planning constraints — there are no native UK large wind turbine manufacturers left to meet this demand.
Those large wind turbine manufacturers that operated here have had severe difficulties with the British system, namely the planning process for new wind farms which effectively put an end to large wind turbine manufacture in the UK. Even the Danish owned Vestas Isle of White manufacturing site is set to close down, the company citing the domestic planning process which effectively has inhibited the creation of a UK onshore wind market which Vestas was positioned to supply.
Big plans to benefit foreigners and UK
According to targets set by the UK Government, by 2015 15% of electricity will be generated from renewable sources. BWEA estimates that 35 GW is the necessary contribution wind power must make in order to reach the Government’s greenhouse gas reduction target. There are currently just over 200 operational wind farms in the UK, with 2,500 turbines generating just over 3GW of installed capacity. A further 2GW worth of schemes are currently under construction, 7GW have planning consent and some 8GW are waiting approval. These projects will up UK wind power generation to 20GW and even though 15 GW short of BWEA’s estimated requirement they nonetheless represent the largest — and quickest — conversion to renewal energy production undertaken to date.
The London Array, envisioned as the UK’s flagship project, when completed will have 341 turbines contributing 1 sole GW but still represents the world’s largest offshore wind farm project.
David Sharman, managing director of SWS manufacturer Ampair, says: “The value capture of these large offshore wind projects announced in the budget for the British tax payer is very low.” In effect, with no domestic large turbine manufacturers — and only one UK owned electricity producer — the onus is on foreign-owned companies, almost single-handedly, to realise the government’s wind vision.
Consequently, any state investment is likely to be fulfilled by non-domestic energy providers. In managing wind farms on or in UK waters, and by using imported wind turbines, the UK’s offshore wind capabilities are essentially analogous to that of a developing country selling its offshore oil resources. Given that offshore production costs approximately twice that of onshore projects, and coupled with the global demand for wind power systems continuing to rise sharply, Britain now finds itself competing for these projects to be built in the UK.
Whilst the energy price spike may have made these plans viable at one time, the current squeeze in finance and lower general demand remains a significant cause for concern. Such is demonstrated by the London Array’s flagship project partners’ difficulties in securing firm financial backing, with both German-owned EON and Danish partner Dong Energy as yet uncommitted to providing the £3bn needed to build it.
It is widely thought that the Government must make the UK wind market more attractive in order to attract foreign investment. Perhaps unintentionally, however, such a deficit may well actually have a positive impact on the UK’s SWS manufacturing industry. Given that SWS is treated by planners as comparable to Big wind, the up-coming Low Carbon Industrial Strategy will thus address the primary challenge faced by UK-based SWS manufacturers; the creation of a domestic market.
Wanted: Clear industrial strategy
The problem SWS manufacturers in the UK face is compiled of three main issues, says Alex Murray, small wind systems manager at BWEA:
1 The UK planning process is out of date SWS planning policy is the same as large wind systems. Most infrastructure projects normally have a 16 week maximum planning and approval period — 70% of non-wind farm project decisions meet the deadline; with wind projects only 5% of decisions are made within this timescale
2 Wind on-grid applications are not competitively priced A feed-in tariff is needed to make this commercially viable. In effect it’s a subsidy to make electricity derived from wind competitive.
3 The UK is very well placed to dictate the certification process With a little support, the UK industry could set the standard for the US, France, Ireland, Germany, Spain and the rest of the world.
EEF, the manufacturers’ organisation’s energy adviser, Roger Salomone, corroborates the same points and adds: “The noises coming from BIS, Department of Business, Innovations and Skills (formerly known as BERR) are very positive with regards to the Low Carbon Industrial Strategy to be published in early July. It seems that the policymakers are intent on actual delivery rather than reiterating vacuous visions that don’t actually mean anything on the ground. For SWS in particular, this strategy could be the ‘make or break’ turning point: if the obstacles are not removed and an actionable industrial strategy formulated, this market is likely to become someone else’s success story.
SWS manufacturers have not relied on the policymakers.
In fact, despite the lack of government support they have managed to largely serve the domestic market and generate substantial export orders. The current problem for them is the same one facing many other manufacturers in the UK; there is little access to finance. Financing any substantial order is still proving very difficult and banks, like the Government in the past have seen renewables as too risky. This risk aversion, although addressed by BIS’s (BERR) Export Guarantee, first requires the exporter to identify a bank that is willing to provide finance before the guarantee can be made. In the current climate this is easier said than done.
Mandelson’s pledge to support Should the Low Carbon Industrial Strategy help SWS manufacturers overcome the obstacles they face, the good news is that these manufacturers are in a very good position to maximise value capture for any contribution by the taxpayer. A feed-in tariff and the relaxation of the planning process would release the domestic SWS market, which is essential for any emerging industry.
This is demonstrated clearly by Spain’s big wind system success. With a strong and growing domestic market, observers say even multiple increase in demand could be serviced by the spare engineering capacity in the automotive, aerospace and marine supply chains — in theory. It remains to be seen whether such skills would be transferrable in a short to medium timescale. The smaller size of SWS turbines, compared to large wind turbines, means that the existing distribution network can easily handle UK and export orders from around the world.
In a speech delivered by the then business secretary, Lord Mandelson, last month on the politics of climate change, he said that: “where appropriate, government will intervene in the market to generate demand,” and he expressed his belief that “government has a responsibility to ensure that UK-based companies are equipped to compete for the new demand created by government climate change policies.” A recent global study released by the American Wind Energy Association (AWEA) highlighted significant international growth in demand for small wind technology.
Its author, AWEA’s Ron Stimmel, said: “The UK currently exports more small wind systems than any other country in the world and has a great potential domestic market.
In the US, the world’s largest small wind market, the federal government recently enacted a long term financial incentive for small wind turbine consumers that could bring a 30-fold growth to the US industry in as little as five years. With the right policies, the UK market could see similar growth.”
Should BIS follow the US federal government’s lead, the UK small wind market could play a part in achieving Lord Mandelson’s stated beliefs, and the opportunity is there for the UK to have a little piece of its low carbon economy future now. British people have got used to the proliferation of mobile phone masts as a necessity for the digital age, and the countless CCTV cameras following our every move as a necessity of the anti-terror age.
Similarly is there a green age necessity for a landscape peppered by wind turbines generating green energy? If planning barriers can be reduced sensibly, and a feed in tariff introduced, British manufacturing could benefit manifold.