Supply chain opportunities in offshore wind power

Around the coast of Britain, huge windfarms are mushrooming to take advantage of the UK’s abundant offshore wind resource. The windfarms offer ambitious manufacturers a wealth of business opportunities. James Lawson reports.

By 2020, offshore wind is forecast to supply upwards of 10% of the UK’s electricity needs.
By 2020, offshore wind is forecast to supply upwards of 10% of the UK’s electricity needs.

Growing from a fledgling industry to a mainstream energy source in just over a decade, offshore wind’s rise has been spectacular. By 2020, it will supply 10% of the UK’s electricity.

As this sector continues to boom, there are juicy opportunities for UK manufacturers.

“What’s been achieved in offshore wind in the last 10 years is fantastic,” says Richard Turner, CEO at JDR Cable Systems. “It’s been a great success story for Britain, which continues to lead the way globally.”

Cheap, cheaper, cheapest

The Contract for Difference (CfD) strike prices that set minimum offshore wind energy costs hit a new low of £57.50/MWh in 2017 – half that of the first CfD auction only two years before.

The government’s original target of £100/MWh by 2020 shows just how well the industry has performed. Offshore wind is far cheaper than nuclear – Hinckley costs £92.50/MWh – and, astonishingly, even gas.

That reduction is driven by more efficient installation, improved foundation designs and, most of all, by growing numbers of ever-bigger turbines whose rotor diameters are now famously larger than the London Eye.

The next generation of 15MW machines will be almost as tall as the Shard, the tallest building in the EU, helping to push generation costs even lower.

This article first appeared in the April issue of The Manufacturer magazine. To subscribe, please click here.

Made in Britain

By 2021, offshore wind will have put £11.5bn into UK infrastructure. British content has risen steadily to 48%, close to the informal industry target of 50%, helping to make wind’s promise to boost UK manufacturing a reality.

Turbine wind mould at the Siemens blade factory in Hull - offshore wind power
Turbine wind mould at the Siemens blade factory in Hull.

MHI Vestas and Siemens Gamesa have the offshore turbine market sewn up and both now produce blades here. (Learn more about how Siemens has helped Hull transform from fishing to fibre glass here)

Vestas manufactures the 35-ton blades for its V164 turbine on the Isle of Wight, a welcome return after its previous factory closed in 2009.

Many other Tier 1 suppliers subcontract much of their work within the UK. At its Rosyth yard, Babcock International is building offshore transformer modules for Siemens as part of the £2.6bn Beatrice project.

Off the Brighton coast, Babcock also built Rampion’s substation jacket and topsides, and recently won the order for the world’s first offshore reactive power compensation facility.

Grabbing the opportunities

Many companies bring existing marine engineering or oil and gas expertise to offshore wind. JDR took that path in 2006 when it started manufacturing the interarray cables that connect turbines and offshore substations.

“We saw the chance to grow our market share and took the decision to invest in a large facility in Hartlepool,” says Turner. “It was a bold step but the right one.”

As the contracts kept coming, the company kept investing – half its 500 employees now work in this sector – and it will soon start making the higher voltage export cables that connect farms to shore.

Hornsea Project One will require 242km of array cabling – the largest contract in the company’s history.

“At the start, a typical project’s cabling would have been a few million pounds and a few hundred tons of product,” says Turner. “Projects are now 10 times that size.”

At its base in Machrihanish, down at the southern tip of the Mull of Kintyre, CS Wind is the UK’s only offshore tower manufacturer. Towers are the giant steel tubulars that sit on top of a turbine’s foundation to support the nacelle and rotor.

Installation of Statoil-Hywind Scotland’s first turbine – image courtesy of Woldcam – Roar Lindefjeld - offshore wind power
Installation of Statoil-Hywind Scotland’s first turbine – image courtesy of Woldcam – Roar Lindefjeld.

Rolling steel up to 80mm thick and joining it using submerged arc welding, the factory produces sections up to 7m in diameter, 50m high and weighing up to 200 tons. Its first towers for the Walney Extension farm recently left Campbeltown harbour on wind turbine transport vessel Rotra Vente.

Offshore wind requires much other steel fabrication. Houlder produces specialist lifting tools for turbine and foundation installation, as well as custom sea fastening, handling and deck lifting equipment.

For Dudgeon’s monopile foundations, Hutchinson Engineering built 67 sets of internal and external access ladders, cable ladders, rescue support frames and platforms.

It also made the J-tubes which guide electrical cabling around the concrete turbine foundations at the Blyth offshore farm just north of Newcastle.

Growing offshore income saw the company invest £5m in a new 4,000sqm tower fabrication facility in 2014. “It’s heading towards 25% of our turnover,” says David Oswin, Hutchinson’s Business Development Manager.

Further north, Fife-based BiFab is nearing the end of a £100m contract that’s seen it consume 22,500 tons of steel to build 28 jacket foundations for Beatrice’s turbines and its two 300MW substations.

Huge supply chain

From bearings and lifting gear to electrical control equipment, the parts needed for turbines and their installation make up a long shopping list. Rochdale-based Granada Material Handling has made more than 400 cranes for offshore turbines and the fast crew transfer vessels (CTVs) that transport maintenance workers.

Subsea specialist Tekmar first entered the offshore wind market in 2007. It’s now supplied over 5,500 cable-protection systems in seven countries, recently opened a new factory and is building an R&D facility.

Post-construction, there’s plenty of opportunity to support operations with everything from nuts, bolts and lubricants to safety helmets and workwear. Ctruk and South Boats have built many of those CTVs at their UK shipyards.

A tower section being submerged arc welded at CS Wind’s Mull of Kintyre factory.
A tower section being submerged arc welded at CS Wind’s Mull of Kintyre factory.

There’s great appetite for innovation too. Operators have rapidly adopted drones and magnetic crawlers for turbine inspection. Osbit and Houlder both manufacture ground-breaking turbine access systems.

Challenging conditions

But wind can be a tough market too. The downward pressure on costs makes for tight supplier margins and it’s notoriously cyclical, with CfD auctions introducing further uncertainty.

If a bid fails, the whole project disappears. If it succeeds, suddenly there’s huge demand for factory capacity.

“The projects that succeeded at the last CfD auction will all probably be built around the same time,” says Lesley Black, UK Market Manager at CS Wind. “For any manufacturer, that’s going to be extremely difficult. Then there’s the pressure to reduce costs and innovate, but at the same time, we’ve just had a three-month gap in production.”

“Demand is very lumpy and as the projects get bigger, the lumps become larger,” agrees JDR’s Richard Turner, noting that JDR works with major clients to plan production up to three years ahead. “You have to be extremely agile.”

Being part of a large multinational and supplying markets beyond wind certainly helps JDR. High volumes make lower margins possible, something smaller players struggle to achieve.

“Our competitors in Spain might produce 30 tower sections a week where we produce five,” notes Black. “If we had more volume, we would be more competitive.”

Wind is also sensitive to political policy. The Conservative government’s distaste for renewables has seen overall UK green investment slump by 56% in the past two years.

When it banned onshore wind in England and Wales, many suppliers saw their market disappear overnight. However, political pressure works the other way too.

Backing from the Scottish Government helped keep CS Wind’s factory open after previous owner Skycon went bankrupt in 2011. The desire for local content also led to its current long-term contract with Siemens Gamesa and Ørsted.

A set of 256-tonne hydraulic pile restraint arms manufactured by Houlder. The arms ensure foundation piles at offshore wind sites are kept vertical as they are hammered into the seabed.
A set of 256-tonne hydraulic pile restraint arms manufactured by Houlder. The arms ensure foundation piles at offshore wind sites are kept vertical as they are hammered into the seabed.

“Ørsted were keen to see local content and paid a premium on the tower price to help fund our factory upgrades,” says Black.

Know your market and build relationships

Finding business opportunities in offshore wind simply requires focused sales effort. The advice is: do your research, look for the right contacts and attend industry events.

Local development agencies are often a good lead source while farm developers and major contractors hold frequent supply chain events, some online, like SSE’s Open4Business procurement portal.

“Build a relationship directly with the developer,” counsels CS Wind’s Lesley Black. “I find out from them who the turbine supplier is and ask them to make a introduction.”

Industry body RenewableUK organises many supplier events, from giant annual trade fairs to local meet-the-buyer networking get-togethers. But having a compelling proposition is vital. Can you deliver faster, cheaper or safer?

“I networked like fury to make contacts in the industry,” says Hutchinson’s Dave Oswin. “There are certainly still opportunities in offshore wind but you need all the relevant industry certifications and have to understand how the sector operates.”

There’s export potential too. Offshore wind is catching on globally so the UK’s hard-won expertise is in demand. As ScottishPower Renewables, Statoil, Ørsted and others develop large projects in the US and beyond, their suppliers can take existing relationships into new markets.

Export success

“The UK’s wind, wave and tidal energy exports are great British success stories on the international stage,” says RenewableUK’s executive director Emma Pinchbeck. “Our businesses are securing hundreds of contracts, worth millions of pounds, across six continents.”

In 2016, UK companies won offshore wind contracts in 17 countries including Germany, China and Taiwan. JDR is the preferred cable partner for US Wind’s Maryland field, the largest American offshore wind project so far.

Support structures manufactured by Hutchison Engineering keep the giant 80-metre-long MHI Vestas blades safe during transport – image courtesy of MHI Vestas.
Support structures manufactured by Hutchison Engineering keep the giant 80-metre-long MHI Vestas blades safe during transport – image courtesy of MHI Vestas.

The first cargo loaded out from Hutchinson’s new facility at Garston Docks on Merseyside last July were blade transport frames for MHI Vestas in Denmark.

Osbit built a CTV access system for Fukushima Forward, Japan’s first offshore wind farm. Gaia-Wind and Britwind have exported millions of pounds worth of small, British-built turbines.

Low and still-dropping costs now make offshore wind today’s favoured renewable. Clean growth was at the heart of the Industrial Strategy white paper published last November while a sector deal from the Department of Business, Energy and Industrial Strategy is in the offing.

With 30GW of capacity by 2030, or even 50GW by 2050 looking very possible in the UK alone, the offshore boom will be supporting manufacturers for many years to come.