Wind turbine manufacturing in the UK – and beyond

It was an extraordinary thing for the British Wind Energy Association to say.

In a briefing note sent to journalists late on Friday, the BWEA admitted that there was no business case for building a new manufacturing plant for onshore wind turbines in the UK. Nor was there a business case for Vestas to keep its wind turbine manufacturing plant open.

This is a blow to the UK government’s low-carbon industrial strategy, which relies on attracting wind manufacturing jobs to the UK, as well as jobs in wind farm installation and maintenance.

Onshore wind is a limited market in the UK because of the huge difficulty of gaining planning permission for wind farms.

The BWEA argues that in order for a turbine maker to set up a factory in the UK, or for Vestas to convert its factory from making blades for the US to making blades for the UK, the company would need to be confident of having about 1GW of new orders per year. There is no chance of that happening, given that the cost of doing so would make the company’s products uncompetitive compared with rival products from Denmark, Germany and Spain, where most of the turbines installed in the UK come from.

So the great hope for the government has been the offshore wind market. But the BWEA dampened any hopes of that taking off in the near future.

Here’s what they said:

Although the offshore market is projected for dramatic growth, it is still in an early stage of development, with only 600MW installed, 1.2GW under construction and another 3-4GW expected to be built by 2015. However, by 2020 over 20GW are expected to be installed in UK waters (nearly half the worldwide market), as the Round 3 sites, which are currently being identified by the Crown Estate come on stream. Nonetheless, these new offshore wind farms are unlikely to start being built in numbers sufficient to make UK manufacturing attractive for another 5-6 years and are still dependent on a number of external factors such as availability of financing, and oil and commodity prices.

The BWEA, which is the UK’s industry body for the wind sector, also explained why Vestas was unlikely to convert its existing factory in the UK to make offshore wind turbines:

“If the factory was to be converted (which is a significant cost in itself) to supply the emerging offshore market, the orders for these new turbines would not start coming through at such a volume until around 2015.”

So the outlook for offshore wind turbine manufacturing in the UK in the short term is not so great.

However, in a qualification to what it said in its briefing, the BWEA emailed us earlier to add:

Given the length of investment cycles, someone looking to invest in an offshore factory, and establish an operations and maintenance base, will start making inquiries now – and again from our direct experience, this is exactly what is happening.

But just how much interest is there? The BWEA’s own estimates show that there will be 20GW of wind capacity in the UK by 2020, and this will be half the global market. Taking the earlier rule of thumb, that a company would want to be sure of 1GW a year of orders before setting up a factory, and presuming that a factory would be operational in 2014 or 2015, the company would want to sell at least 5GW of turbines by 2020. In other words, a quarter of the UK market, and an eighth of the world market. From a single factory. So how many factories do we think will be needed for offshore wind manufacturing in 2020?

Answers on a postcard, please.

Related links:

Wind industry body deals Vestas blow (FT, 02/08/09)
Getting over the nimby-ism hurdle
(FT Energy Source, 29/07/09)
InVestas in the future? Why offshore wind won’t work
(FT Energy Source, 28/07/09)

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