Attrition will create more investable sector

The UK is one of the best places to invest in offshore wind in the world. This is down to a range of factors, not least this country's unrivalled natural resources.

24 November 2013

London Array Offshore Wind Farm silhouette

Since I began working in the offshore renewable energy, some 15 years ago, we have seen remarkable progress. From the two turbines deployed in 2000, we now have over 1,000 turbines operating. That's an installed capacity of over 3.5 GW, providing on average over 3.5 per cent of the country's electricity. Add to this the schemes currently under construction, or with funding commitments in place, and the percentage of our electricity coming from offshore wind is set to rise to about 5 per cent over the next few years. That's electricity for around four million homes and capital commitment to a still maturing industry in the region of £15 billion; no mean feat.

The national debate around how we as a nation should deliver the right mix of energy sources has become polarised in recent months but what the UK needs is diversity of supply. These aren't binary choices; it's not about gas or nuclear, wind or wave. Government recognises this and is rightly encouraging investment in as diverse a supply as possible. Current Government thinking suggests it expects to see between 8 and 15 GW of offshore wind capacity installed by 2020. Even at the lower end of these projections the sector would grow by 10 per cent year on year for a decade.

The Government's reform of the electricity market has put in place a legislative and regulatory framework to enable investors to commit to the best projects. With the strike price set, the first FiD enabling contracts announced and the Energy Bill now law, we are moving from a period of unpredictability to more certain times. Developers are now able to assess the cumulative impact of current market dynamics, technology availability, seabed conditions and anticipated project costs on the future of their particular sites. As we have seen with recent announcements on Argyll Array and Atlantic Array, tough decisions are being made to draw work to a close on those projects deemed too costly, or that currently face insurmountable construction challenges. The industry is maturing. This means we will continue to see a healthy attrition as the UK pipeline moves from a potential 40 GW towards a figure more in line with the Government's current thinking. The Crown Estate, as landlord of the UK seabed is taking a very active role in this process, working with developers to optimise development and identify the best sites.

Far from this implying the industry is running out of steam, these developments are telling signs of a healthy sector, one that is maturing and, in doing so, firming up a clear, sustainable pathway towards future growth. Streamlining of the pipeline will deliver a leaner industry. One that's more manageable for consenting bodies to resource and critically, one that offers greater certainty about the scale of near term opportunities; this will be critical to making offshore wind an even more attractive investment opportunity.

Since the UK offshore wind industry began to grow, a lot has been learnt. Not least that this type of at-scale nationwide engineering programme does not lend itself to firm targets set against specific dates, such as 2020. This is an industry with a very promising future in the near term, but also way beyond 2020. Taking a long term view is crucial as supporting technological innovation today is what will unlock even more of the UK's vast offshore wind potential, not tomorrow, but over decades. That is why we are supporting Statoil in bringing the UK's first floating wind array to the Scottish coast.    

However, we are clear that that the task at hand now for industry, and for ourselves, is to sharpen our focus on the best projects in the current pipeline. Inevitably this will mean difficult decisions over the coming months and years, but it is this precisely this process of attrition that will ensure that offshore wind's contribution to the UK's energy needs continues to grow.