Offshore wind could enjoy monumental growth this decade, having made big strides scaling up, lowering costs and then weathering a tsunami of inflationary pressures. However, the industry’s ability to seize the opportunity is still constrained by lacklustre policy ambition. Capturing the economic opportunity for local supply chains means confronting a smorgasbord of finickity technical, regulatory and cultural challenges that no single stakeholder can tackle alone.

These issues were discussed at length in the offshore wind working group at North Sea 2, the second E-FWD in-person event in Aberdeen last week. Prominent figures from across the industry and the UK and Scottish governments spoke candidly in the dedicated workshop session to identify high-level action points that could break the logjam, accelerate momentum, unlock investment and reskill the existing North Sea workforce.

While there was a diversity of views expressed under Chatham House rules, the following themes emerged as areas with the broadest consensus:

Change of mindset: All stakeholders need to adopt a holistic energy system view, to shift the conversation away from siloes and towards an all-encompassing ‘ocean energy’ supply chain vision
Industrial strategy: Government must urgently develop a coherent policy for identifying areas where the UK has a competitive advantage, and focus on industrialising and scaling those supply chain opportunities instead of diluting or wasting precious resources
Greater knowledge sharing: Companies that have learned from experience must find a way to share their insights. The industry as a whole stands benefit – and a rising tide lifts all boats
Boost local supply chain participation: There was agreement on the need to increase local content, but views diverged over how to do so and what would be the best approach for government, regulators and the seabed licencing regime

1. Taking a ‘whole energy system’ view

The need to break down psychological and cultural barriers permeated much of the discussion on the night. The offshore wind ‘think pod’ provided a discreet environment for those on each side of the oil/wind supply chain divide to voice their grievances and coalesce around a common cause: the need for mutual respect.

On the one hand, there was a feeling that the oil and gas supply chain has been ‘demonised’ by the polarisation of the overarching energy narrative. At the other end of the spectrum, offshore wind is sometimes perceived as an immature sector that has endured avoidable challenges due to its failure to adopt best practices from oil and gas.

*Ørsted’s Avedøre plant., Denmark. Credit: Ørsted*

Successful integration won’t happen unless all sides move beyond unhelpful tropes and unite under a single banner. Suggestions included terms such as ‘offshore energy’ or ‘Team Scotland’, but the question then becomes: who is best placed to represent a single unified offshore energy supply chain?

There was criticism expressed of industry bodies that fail to work together to protect their membership, which is often dominated by ‘tier one’ developers and technology suppliers. Adequate representation of small and medium suppliers could help to promote a holistic view.

It could also rebalance risk allocation, which is pushed onto supply chain companies by the current cost-reduction paradigm propagated by the competitive Contracts for Difference (CfD) auction framework.

The group identified a need for a ‘virtual EPC’ – an overarching engineering, procurement and construction entity, akin to a systems integrator – that agglomerates several smaller suppliers and service providers. This would enable tier one companies to contract with only one party rather than several, allowing the offshore wind supply base to shift to ‘packaged’ services instead of the current patchwork. There was no consensus on how this entity should be formed, though, or by whom.

On the positive side, the UK government and the Electricity System Operator (ESO) are developing a Strategic Spatial Energy Plan (SSEP) that will ultimately cover the whole energy system, land and sea, across Great Britain to determine the optimal location of energy infrastructure. This must be accompanied by both an aligned strategy at the top level, and implemented by devolving responsibilities to a more local level, the group concluded.

2. Competitive advantage

Improving the competitiveness of British and Scottish supply chain companies was identified as a common objective. While the need for an overarching industrial strategy was not explicitly mentioned, the conversation veered towards this when the group settled on the need to identify and develop those areas where the UK already has a competitive advantage.

This means focusing and targeting industrialisation of the things where the UK and Scotland already excel. These areas include cables, moorings and other subsea technologies, as well as some niche manufacturing opportunities arising from innovation. By definition, this means excluding aspects of the wind value chain where there is already well-established capability in other markets.

In the absence of leadership on industrial strategy from the current administration, the wind industry has taken the initiative to develop its own industrial growth plan that will be published in the coming weeks. The next government must engage with this blueprint and work with developers to make it a reality.

3. Sharing is caring

A perennial obstacle to progress is the (understandable) desire among private companies to keep closely guarded secrets of the lessons learned and data accrued from real-world projects. Some of the most valuable lessons are learned the hard way – through hitting snags or expensive failure – so it is natural for this intellectual property to be held under lock and key.

There are two ways to move beyond the self-interest approach. Companies in a position to share could find a way to do so without compromising their commercial advantage, fostering a culture of sharing for the benefit of the greater good. Or, they could be mandated to do so.

There is a model for the latter: INTOG. The Innovation and Targeted Oil and Gas leasing round contains clauses in the seabed leases that encourage data-sharing and dissemination of lessons learned. All stakeholders, particularly those at the most senior levels, must get behind the INTOG projects as a vehicle for how to collaborate across industry.

Government should also take the initiative on developing a single central, trusted data source to which all stakeholders sign up. This would end the practice of competing seabed users surveying the same area of marine space and using contradictory data to further their own commercial interests.

4. Maximise local content

The group heard a lively discussion on how to boost the participation of local supply chain companies in the offshore wind value chain. All agreed that this is the right objective. How to get there was less clear.

Mandating local content was supported by some but not others. France was cited as an example, where offshore wind farms are often built with up to 100% local content without running into state aid or WTO compliance issues.

However, mandates must be enforced, and this is where things get tricky. The CfD regime includes Supply Chain Plans (SCPs), which will probably be replaced by a Sustainable Industry Reward (SIR) from the seventh allocation round onwards. But no project has ever had its CfD rescinded for failure to deliver on supply chain promises.

The Crown Estate and Crown Estate Scotland are gradually becoming more proactive in this space by scoring supply chain commitments in their scoring of seabed lease bids. This was widely seen as a positive development that is to be encouraged and accelerated.

However, the group also heard that a better alignment of interests would be to boost the competitiveness of the supply chain so that large developers – and their shareholders – are encouraged to use local suppliers simply because they offer the best value for money. Achieving this means delivering on the second point on the list above, regarding targeted support of strategic industrial sub-sectors.

Other critical actions

Aside from the above themes, the group also heard of the need to “concertina” the current patchwork of skills classifications into fewer pots with greater commonality.

A common training and standards certification for workforce could be modelled on OPITO, the global network of oil and gas training providers that offers courses and guidelines for industry safety. The slow implementation of the Energy Skills Passport was cited as an unnecessary hindrance in this space that needs “industry push” to get it over the line.

If the UK does not get its house in order on skills, training and standards, there is a risk that it will end up importing best practice from abroad. While this is not inherently bad, the danger is that large foreign companies use their heft and influence to impose their standards here, which may or may not be in the best interests of domestic UK supply chain companies.

The discussion also addressed the problem of rolling out new grid infrastructure. There is a degree of cross-party alignment here, but the industry itself has its work cut out to communicate the benefits of new substations, transmission lines and future energy supply in the media and to local affected communities. The industry needs to find a compelling answer to the common question of ‘why do we need this here?’

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