Draft Offshore Wind Policy Statement

Our view is that the current pipeline of projects is not sufficient to meet Scotland’s climate change goals. Hence it is necessary to ensure that the Scotwind leasing round and subsequent leasing rounds are sufficiently ambitious.

Our recommendation would be to reassess and increase the 2030 visions and aspirations in light of the expected increased overall ambitions for offshore wind for the UK and the roadmap to net-zero in UK for 2050 and Scotland in 2045.

Scotland has a great potential for floating offshore wind which will be important to deliver the necessary offshore wind capacity to meet the net-zero target. Given the industrial opportunities presented by early deployment of floating offshore wind, it is important that the Scottish Government and the UK Government work together to establish an aspiration for floating offshore wind and a support mechanism that ensures that commercial scale projects can be built. We believe that the proposed approach in the consultation on amendments to the CfD scheme by Department for Business, Energy &Industrial Strategy of March 2020 is an important first step and a good basis to establish a good framework for floating offshore wind.

It is important that investment in the offshore and onshore grid is made to realise the potential of offshore wind in Scotland and that the grid charging mechanism is appropriate. We welcome the Ofgem decarbonisation programme action plan of 3rd February 2020 which will assess issues related to network investments and development of an offshore grid.

Please also refer to our response to Q3,

It is important that the regulatory and cost burden on Scottish projects are not higher than on projects elsewhere in the UK, as this will disadvantage Scottish projects in future CfD rounds. This applies for example to the planned Supply Chain Plan Statement for the Scotwind process where it is important that this is structured in a way that is maintaining competition to driving costs down whilst ensuring opportunities for the domestic supply chain.

In our view the Offshore Wind Sector Deal is a good framework to address key issues related to offshore wind. The Offshore Wind Growth Partnership would be important to strengthen the position of the local supply chain. Furthermore, we welcome the formation of SOWEC to help coordinate and accelerate measures that will help grow the industry in Scotland.

We would encourage a clear steer from Scottish Government on how identified knowledge gaps can best be met, including the role of the Advisory Committee. Industry wide collaboration initiatives should be encouraged and facilitated where appropriate, in collaboration with SNCBs.

For floating offshore wind in particular, but also bottom fixed, commercial fishing industry is likely to be a key conflict area. A greater emphasis on co-existence and what both co-existence and displacement means for both the fishing industry and offshore wind industry could help reduce and avoid conflict.

The CfD system has delivered substantial cost reduction for fixed-bottom offshore wind. It is our view that by using the mechanisms in the CfD system, either through a separate “pot” for commercial scale floating offshore or by setting a “minima”, it is possible to establish the necessary competition that will help drive costs down. This will help retaining value for money for the consumer. We believe that the proposed approach in the consultation on amendments to the CfD scheme by Department for Business, Energy &Industrial Strategy of March 2020 is an important first step and a good basis to establish a good framework for floating offshore wind.

Please see our response to Q12

Please see our response to Q12

The CCC has estimated that to meet net-zero there will be a need for 75 GW of offshore wind in the UK by 2050. Our estimate is that the CCC’s 6th Carbon Budget will raise this further. We assume that a substantial part of this will be developed in Scottish waters given the excellent conditions for offshore wind in particular for floating offshore wind which will be needed to meet this target.

We support a collaborative approach between government and industry to ensure that development is done as cost-effective as possible and gives as much benefits as possible. Continued cooperation through the Sector Deal, OWGP and SOWEC will be important.

Scotland has considerable competence and expertise in development services (environmental, engineering), subsea engineering, marine operations, and O&M, largely building on experience from the oil and gas and onshore renewable sectors. These are areas where Scotland should look to transfer this competence to offshore wind to establish a leading position and reputation for excellence, which can support export to other markets. In particular, Scottish suppliers have the potential to become leading providers to the emerging floating offshore wind market. Again, a focus on specialization of areas of existing competence can increase the ability to become market leaders and exploit export potential.

Scotland has challenges with being able to offer world class and competitive fabrication, particularly for large-scale volume orders which require serial production. Despite some existing competence and track record, there is a need for considerable investment in order to ensure that Scottish suppliers can be competitive, compared to more advanced and established facilities outside the UK, particularly those with a lower cost base. The public and private sector should work together to identify opportunities for targeted strategic investment that can deliver benefits to the Scottish economy and wider offshore wind industry. This should include attracting world-leading fabricators to invest in and establish facilities in Scotland.

Scotland has struggled to attract industrial opportunities due to a limited pipeline of projects entering construction, in comparison to other parts of the UK and continental Europe. Despite a moderate existing pipeline, future growth, including from Scotwind projects, may not be delivered until the end of the decade. Maximising the available order pipeline for Scottish suppliers should therefore consider both the near-term opportunities from projects in Scotland and the wider UK context. Given the raised ambitions for offshore wind deployment in the UK, together with increased UK content ambitions under the Sector Deal, Scotland should evaluate potential gaps and bottlenecks in the UK market where Scottish suppliers could have a competitive advantage. Coordination with UK authorities and industry groups will key to identifying and unlocking these opportunities. Turbine towers could be one area to meet an existing lack of UK suppliers able to supply to the latest design specifications.

Gaining competitive advantage may be easier to achieve in new emerging technology areas, including floating offshore wind. Scotland is particularly well-position here due to its established oil and gas supply chain, which bears many similarities with floating wind. Possible areas where Scotland could establish a world-leading position, include:
• Mooring system engineering
• Fibre rope moorings
• Mooring connectors
• Dynamic cable engineering
• Cable accessories and protection systems
• Cable connectors
• O&M subsea monitoring and inspection technologies

These are areas where Scottish suppliers could be well-placed to serve both domestic and overseas markets. Establishing manufacturing facilities for innovative products could represent an opportunity to capture a higher economic value from future projects in Scotland.

Create a competitive supplier base: Efforts to assist the local supply chain secure contracts should be focused on ensuring that suppliers can win projects under competitive procurement processes, rather than imposing strict local content requirements. Ensuring that domestic suppliers are competitive is the best way to ensure that a sustainable supply chain can develop to deliver long-lasting benefits to Scotland. Competitive suppliers will also be able to capitalize on the considerable export opportunities that offshore wind will present.

Specialisation vs generalization: To achieve this, Scotland would be better taking an approach of specialization in areas where there are existing strengths and/or potential to exploit competitive advantage (see above), as opposed to spreading its focus across too many areas and risk failing to deliver on its potential in key areas. In line with this approach, expectations should be managed with the supply chain to give clear guidance on the opportunities

Build a pipeline of competitive projects: It will be critical for both UK and Scottish Governments to work together to create a pipeline of projects that can unlock investment from the supply chain. This includes existing domestic suppliers, but also inward investment from major tier one and two suppliers, which could deliver a step-change in local job creation. Critically, projects in Scotland will need to be competitive in the wider UK portfolio to provide confidence to supply chain investors and ensure that the economic opportunities can be realised.

Government investment: Government support could include investment in port and manufacturing facilities to ensure that they can meet quality, schedule and HSE requirements for large-scale serial production, as well as enabling high productivity and efficiency to ensure competitive pricing. Such investment should be used to attract world class companies to establish operations in Scotland.

Agency support: Agencies should work with local supply chain to highlight upcoming opportunities, provide advisory and incubation support, and create a bridge between the supply chain and the developer community and, in particular, their tier one suppliers. Agencies may also support collaboration within the supply chain so that local suppliers can team-up to provide more competitive tender responses.

Existing support for initiatives such as the Carbon Trust Floating Wind JIP and the recently formed Floating Wind Centre of Excellence are welcome and can deliver impact through industry collaboration. We encourage continued support for these initiatives, whilst minimising duplication and overlap. To build on this, there may be scope to provide support for the demonstration of innovative technologies identified through JIP and other initiatives to de-risk their application and bridge the gap to commercial adoption. There could also be closer alignment between innovation activities undertaken in the oil and gas and offshore wind sector to ensure that synergies can be realised to the benefit of both industries, for example through engagement with the OGTC.

Despite being a more mature technology, there remains considerable scope for innovation in fixed offshore wind. Arguably, there is greater scope for innovation during the operations and maintenance phase, as wind farm operators strive to reduce costs, improve health and safety, and better understand the performance of a growing fleet of assets. Innovation in areas such as digitalization, robotics, and subsea engineering could represent high value opportunities for Scottish suppliers, leveraging experience from the oil and gas and other marine sectors. Developing new products and services in the O&M space may also be more suitable for export to other global markets.

Floating offshore wind offers great opportunities for Scotland. In our view there are two main actions which are needed to ensure uptake of commercial scale floating offshore wind:

- It is necessary that lease areas suitable for commercial scale floating offshore wind are made available to create a pipeline of projects. The Scotwind lease process will offer such areas and it is necessary that further lease rounds are continuing to offer new areas.

- It is necessary that there is an adequate support for floating offshore wind to ensure deployment. As described in our answer to Q9 we believe that the CfD system is a good mechanism for this. Given the industrial opportunities that floating offshore can offer to Scotland it is important to ensure early deployment with commercial scale projects coming in production in the last part of the 2020s.

a) hydrogen

To enable opportunities for offshore wind production to be linked with green hydrogen production it is necessary to establish and incentivize local markets with potential high value revenue streams. Support structure to establishing such markets, whether for use within maritime, road transportation, heating or industry sector is key.
As Scotland have few natural caverns to enable storage of hydrogen, establishing storage solutions and infrastructure needs specific attention if large-scale production from offshore wind is envisaged.

b) Oil and gas sector

Scotland’s strong oil and gas industry and supply chain should be in a good position to capture the industrial and job opportunities offered by offshore wind. Furthermore, integration of oil and gas assets with offshore wind, and in particular floating offshore wind, offers opportunities to reduce carbon emission from the sector. Equinor’s Hywind Tampen project is contributing to such carbon emission related to our fields on the Norwegian Continental Shelf and similar opportunities may also be beneficial on the UKCS. We are supportive of Oil and Gas UK’s Routemap 2035 and Oil and Gas Authorities’ Energy Integration Project. Equinor, and Norway, also have experience of electrification of oil and gas installations from shore (such as Johan Sverdrup) which can significantly reduce the carbon intensity of oil and gas production. This experience is relevant for the Shetland Islands, where an interconnector from the mainland could serve oil and gas installations and floating wind.