The Labour government is starting to grapple with the UK’s chequered history of leveraging investment into offshore wind supply chains. But will the ‘Clean Industry Bonus’ work as intended?

The Clean Industry Bonus (CIB), launched to great fanfare by Prime Minister Kier Starmer at COP29 last week, is effectively a rebranding of the Sustainable Industry Reward (SIR). This was developed by the previous Conservative administration.

The SIR had proposed forcing developers to achieve certain minimum supply chain investments in order to be eligible to compete for a Contract for Difference (CfD). The CIB delivers on this promise and takes it a step further. It offers an additional reward for investments that go above and beyond the baseline.

Keys to entry

The seventh allocation round (AR7) will take place in 2025. Under the CIB framework, developers intending to submit projects will need to demonstrate adequate investment in sustainable supply chains.

The minimum is £100 million per GW of installed capacity for a fixed bottom offshore wind farm. This falls to £50mn per GW for a floating offshore wind farm.

The focus is on manufacturing, assembly, or installation infrastructure for key offshore wind components. These include blades, nacelles, cables and towers.

This also includes upgrades to ports, vessel facilities and other critical infrastructure such as those required for operations and maintenance (O&M) activities.

Targeted investment

One of two key criteria must be met. Either the investment is in “shorter supply chains”, or it is targeted at a “more sustainable means of production”.

Shorter supply chains refer to investments located in an economically deprived region. Sustainable investment is defined as a facility or company that has committed to a ‘Science Based Target’. This is a clearly defined path to reduce emissions, in line with the Paris Agreement goals.

With some exceptions, investments must be tied to the generator’s CfD unit or other projects within the same leasing zone. This should ensure the funds directly contribute to projects with tangible benefits.

The CIB is strictly focused on physical infrastructure and supply chain improvements. It explicitly excludes intangible investments such as skills or R&D programmes.

Above and beyond

Projects that pass the CIB minimum threshold have the option of competing for additional rewards via a submission of a ‘CIB extra proposal’. These are essentially investments that meet the same criteria above, but with a financial value greater than the minimum investment threshold.

A complex scoring system will be used to rank CIB extra proposals and allocate funding from a dedicated CIB budget, starting with the highest-ranking proposals.

The provisional budget for AR7 is up to £200 million, enough to incentivise projects totalling 7-8 GW of capacity. A portion of this budget is ring-fenced for floating offshore wind projects to encourage the development of this nascent technology.

If a project is awarded CIB budget but fails to win a CfD at auction, the budget can be recycled and awarded to the next project under a secondary allocation procedure.

Gaming the system

The CIB represents an incremental tightening of supply chain obligations, and as such it runs the risk of being too lax, according to industry sources.

The initiative also adds a fresh layer of complexity onto a support regime that is already far from simple. The dual-pathway approach of a minimum ‘stick’ and extra reward ‘carrot’ exacerbates this.

One supply chain expert, speaking on condition of anonymity, said developers are likely to make the lowest or loosest possible commitment in order to avoid the ‘stick’, and concentrate their genuine value-additive efforts in maximising their chances of getting the ‘carrot’.

“What this might mean is we see a sort of ‘purchase order’ approach where companies signal a loose intention to invest, to ensure they qualify for AR7. If [the CIB] doesn’t deliver meaningful investments then I would expect it is tightened up in time for AR8 in 2026,” the source told E-FWD.

*Steel foundations in The Netherlands. Photo: Shutterstock*

Where’s the sweet spot?

The Clean Industry Bonus is an attempt to reconcile two critical but sometimes competing goals for the UK government. The country wants to maximise inward investment in offshore wind supply chains while accelerating deployment to meet 2030 renewable energy targets.

Until now, the overarching priority was cost to consumers. The CfD’s competitive allocation framework delivered that, albeit imperfectly, by pitching developers against each other in cut-throat auctions.

Labour’s Clean Power 2030 agenda alters things. Cost remains a political priority, but pace of delivery is becoming increasingly urgent.

Offshore wind must ramp up deployment rates to four or five times the historical average to stay on track for 2030. That means contracting as much as 10 GW in AR7, according to the National Energy System Operator (NESO).

Since the CIB is now a barrier to entry for the CfD, government appears to be taking a cautious approach in this first implementation to avoid constraining the pool of eligible projects.

The ‘too lax’ approach to supply chain investment requirements might be better than the alternative. An excessively onerous obligation would see companies struggle and endanger the Clean Power 2030 mission.

No protectionism in Global Britain

No matter how stringently the criteria are applied, there are some glaring omissions. Nowhere in the CIB Allocation Framework is there a requirement to create British jobs, or to achieve a set minimum local economic content.

Meanwhile, the rest of the world is sliding towards protectionism in the face of growing geopolitical and trade tensions. The US presidential election result and prospect of transatlantic trade war upped the ante.

“British jobs is what we’re really talking about when it comes to offshore wind supply chains and non-price factors, but people are too timid to say it out loud,” one industry source commented.

“Everyone in Whitehall is afraid of falling foul of WTO [World Trade Organisation] rules even though they are the only ones who care now. Just look at the IRA [Inflation Reduction Act], or Trump’s trade agenda,” the source added, referring to the US president-elect.

The long shadow of Brexit

Following Brexit, the UK needs to establish favourable international trade relationships. Avoiding explicit protectionist policies may reflect a strategic effort to maintain an open trade posture.

The CIB exemplifies the UK’s prioritisation of its attractiveness to foreign investors and manufacturers, particularly as it seeks to position itself as a leader in offshore wind.

Imposing strict local content mandates might deter multinational original equipment manufacturers (OEMs) from entering the UK market due to increased operational costs or supply chain constraints.

But this leaves the door open to the European offshore wind industry’s greatest fear: giant Chinese turbines undercutting Western OEMs and ultimately dominating the European market.

*Turbine tower segment fabrication in Germany. Photo: Shutterstock*

Trojan horse investments

The CIB criteria do nothing to stop Goldwind or Mingyang setting up a plant in northern England or eastern Scotland.

Theoretically, they could employ Chinese nationals to the exclusion of local communities, while being subsidised by British consumers for their efforts. In reality, other factors – such as access to visas – might pose an obstacle. Even so, Mingyang’s proposed Scottish factory has raised alarm in some quarters.

They could employ Chinese nationals to the exclusion of local communities, while being subsidised by British consumers for their efforts.

Scotland’s spectacular wind resource, supportive policy environment and strategic position make it a perfect location for Chinese OEMs to establish a ‘beachhead’ from which to conquer other northwest European markets, sources told E-FWD.

The CIB’s exclusion of intangible investments – skills and workforce retooling – is incongruous in this context.

For whatever reason, local content mandates might be a step too far for the British government. But incentivising capacity-building among local communities through the CIB – particularly those most likely to host CIB investments – would position them to seize the opportunities that this programme promises to create.

Coordinated approach

Rather than identifying bespoke supply chain investments, offshore wind developers have the option of outsourcing this to a central body. This could improve ‘genuine’ local job creation and avoid the CIB subsidising ‘trojan horse’ investments such as those above.

The Scottish Offshore Wind Energy Council’s Strategic Investment Model (SIM) is one vehicle for this. Any investment made through SIM can be put forward as a means of achieving CIB minimum standards, or as a CIB extra proposal. Mingyang’s factory plans via the SIM provide it automatic CIB qualification.

The Industrial Growth Plan (IGP) is another. RenewableUK, the Offshore Wind Industry Council, The Crown Estate and Crown Estate Scotland developed the IGP. The aim was to grow supply chains while accelerating and de-risking delivery of government targets for the sector.

Project developers may invest a share of their CIB minimum in the IGP delivery body. This will direct these funds toward projects that align with the framework’s criteria. This pooling of resources could enable larger-scale, strategic investments that might not be feasible for individual developers.

National interest

Centralising investments through the IGP delivery body ensures funding decisions are guided by national priorities. These include strengthening domestic manufacturing and advancing innovation in key technologies. This approach mitigates the risk of fragmented or suboptimal investment patterns that might arise from purely developer-led initiatives.

The CIB framework does not explicitly mandate local content requirements. But the IGP delivery body can prioritise projects that deliver clear benefits to British industries and workforce. By identifying and supporting high-impact initiatives, the body could foster job creation in coastal and industrial communities.

Centralisation might introduce delays or inefficiencies that hinder delivery of 2030 targets. Also, developers might perceive the pooling of CIB funds as limiting their autonomy over investments, potentially reducing buy-in.

Time will tell whether this comes to pass. In true British fashion, the CIB lets the market decide.

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