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Wind Power Is Here To Stay, Despite Manufacturing Slow Down

November 06, 2012

Offshore wind turbine manufacturers have been hit with a production freeze, but renewable energy experts predict this is more of a delay than a shutdown.

A report in the Financial Times found three leading manufacturers of the turbines due to create banks of wind farms in the British seas have taken just one offshore order between them this year, triggered by a crunch on investment in the sector.

The halting of orders is symptomatic of a year-long slowdown in the sector, but rather than predicting a death knell for the sector, energy experts have told the Huffington Post UK this is simply a normal part of the engineering cycle.

Aris Karcanias, management consultant at Navigant, said: "The wind industry went through a boom up until 2008 and since then its been in a vast decline – what we’re seeing now is a two-to-three year delay on what we’ve seen with the economy impacting upon other industries.

"The FT report focuses on offshore wind, which is a relatively nascent industry; it’s immature compared to onshore wind, and the stop/start nature of the industry is part of it evolving.

"All of this is following a natural engineering lesson; deploy, learn, evaluate and deploy again."

David Nickols, global managing director of WSP Future Energy, agreed. He explained to Huff Post UK that while the previous investment in offshore wind turbines had been a smaller operation, driven by the Crown Estate’s so-called "Round 1" and "Round 2" licensing, these projects were in shallower waters where costs and risks are reasonably well understood.

offshore windfarm norfolk

The UK's largest offshore windfarm is off the coast of Great Yarmouth

"The next round will be driven by 'Round 3'; these projects are larger, are in deeper waters, with much higher costs and risks, and require significant debt financing. At the moment the cost and risk profile is not bankable for debt financing.

"In addition, the main developers are not as strong financially as they were a few years ago...and the nuclear 'stop' in Germany and Spanish financial woes have financially damaged several of the major UK offshore wind developers, causing them to defer investment including in offshore wind in the UK."

Nickols also said the government's inconsistent policy support for offshore wind was hampering development - a point raised by Jennifer Webber, director of external affairs at Renewable UK.

"The delays in the Energy Bill are also probably meaning that people are waiting to put forward projects," she said.

And despite recent rhetoric around nuclear energy - including huge praise for Japanese engineers Hitachi announcing a 100-year commitment to UK nuclear energy - the government appears to be more proactive behind the scenes.

"It’s important to remember that significant levels of investment are still occurring in offshore wind – 2011-12 saw overall capital investment in the offshore wind industry rise by 60% to £1.5bn," said Webber.

"We’ve seen continued demonstration of support for offshore wind from the prime minister down, the most latest being in his comments in Abu Dhabi on 6 November. However investors are keen to see certainty of what happens beyond 2017 – in terms of both the energy bill and how, beyond 2020, we’re going to mete out decarbonisation targets."

Conservative energy minister John Hayes hit the headlines at the end of October, when he told the Daily Telegraph and the Daily Mail newspapers that “enough is enough” for onshore wind farms, saying it was “extraordinary” that so many wind turbines had been “peppered” around the country without due regard to local communities.

He said he wanted to base future policy on fresh analysis of the case for onshore wind power, rather than on what he called “a bourgeois left article of faith based on some academic perspective”.

Although the offshore wind industry is entirely different to the onshore wind industry, there are concerns that government criticism of one will lead to a lack of investment in the other. More than 100 Tory backbenchers have already signed a letter calling for cuts in wind subsidies.

The energy secretary, Ed Davey, was forced to refute his minister's claims, saying: "There are no targets – or caps – for individual renewable technologies such as onshore wind. Nor are there reviews being done of onshore wind on the basis of landscape or property values.”

davey and cameron

Ed Davey (centre right) and David Cameron (centre left) pictured at the Clean Energy Ministerial conference in April 2012

Navigant's Karcanias told Huff Post UK: "What politicians are saying and what they are doing is quite different – recent comments seem to be contrary to what’s actually happening; they’re confusing the situation rather than supplying clarity to it.

"They've invested so much to establish new jobs around the renewables sector and to make it competitive – it would be silly to not capitalise on that heavy investment."

However, others believe the government is putting the investment earmarked for UK windfarms at risk of moving elsewhere.

"The reality of actual tariff reductions or obstinate planners matters more than the perception of the government's feelings on the matter," said Michael Ware, parter at BDO.

"Capital is astonishingly global in its outlook and funders regard the UK as just a rainy island off the coast of Europe. If the government continues to makes it hard, money will simply go elsewhere. Tariff regimes are universal and there is no intrinsic attraction for UK wind compared to Norway or Sweden."

And Alexander Hill, energy business development manager at Critical Software Technologies, added: "Wind power in the UK has come too far and is too necessary to be killed off by stalling and some government squabbles.

"We are at a point where we face a choice of becoming increasingly dependant on Europe and Norway for our energy or we get extra home-grown generation capacity. With 'conventional' power stations scheduled to switch off, we need offshore wind to help fill a significant capacity gap or we will end up paying significantly more than we do now."

BDO's Ware warned if action wasn't taken now, it could be "the beginning of the end" for UK offshore wind farms.

"The government needs to set long term tariffs and address structural planning issues if it is to keep the industry alive.

"We have some of the best wind resources in western Europe and an opportunity to create 1000s of highly skilled jobs in a recession; it would be a travesty to let this go because of short-term politics."

On the home front

One area not discussed by ministers in the past few weeks is the rise in smaller, domestic wind turbines being sold in the UK.

Gaia-Wind Manufactures told Huff Post UK that sales for 11kW wind turbines - which are enough to power a family home - have risen from £33,000 in 2007 to almost £7 million in 2011.

The company is on target to achieve a growth of more than 50% this year, with sales of between £40m to £50m planned for 2015.

"This is all about so called 'distributed wind', using the energy where you generate it," said Martin Paterson, marketing director of the company.

"While it is true that lack of clarity and agreement at the highest levels of government are causing confusion among potential buyers, the rocketing utilities’ energy price rises make the decision to invest very tempting."

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