In November, Energy Secretary Amber Rudd announced her vision for the energy system: to put consumers first, increase competition and secure electricity generation for the UK. In addition to a proposal to end unabated coal-fired power stations and prioritise gas-fired power stations, the Energy Secretary disclosed a commitment to offshore wind (OW) whereby the government will support the target of 10GW of capacity by 2020, if costs reduction conditions are met.
According to Rudd, the cost of contracts for OW have reduced by 20% over the last two years, but costs need to reduce further to secure government support. If the government’s conditions are met, there will be funding for three auctions by the end of 2016.
This is good news for companies involved in the OW supply chain who have already seen the benefits of increased activity in the sector in recent years. OW projects have been delivered on schedule and on budget: 3.7GW of capacity has been installed over the past five years, whilst costs have been reduced, resulting in a 38% reduction in government subsidy.
Given the current downturn in O&G activity, many companies are looking to diversity into the OW sector. Halfan Brustad, VP of Statoil recently noted that OW can learn from the O&G industry, and vice versa:
“Project management for OW farms can be learnt from O&G as well as marine & logistics"
“Renewables has a strong commercial mind set to specifications and materials choice which is key to keep low margins - we could take this back to oil and gas [during this period of cost-cutting]."
In addition to O&G companies moving into the OW supply chain, a number of start-ups are entering the OW sector. This has been evident to DW, who in addition to covering this sector via our Offshore Wind Market Forecast series, have recently provided bespoke consulting for new companies looking to take advantage of this growing sector. Given the announcement by the Energy and Climate Change secretary recently, the opportunities for investors wishing to cash-in on this rapidly growing sector are significant.
