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December 7, 2015

DW: Opportunity Abound in UK Offshore Wind Sector

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 U.K. In addition to a proposal to end unabated coal-fired power stations and prioritize gas-fired power stations, the Energy Secretary disclosed a commitment to offshore wind whereby the government will support the target of 10 GW of capacity by 2020, if costs reduction conditions are met.
 
According to Rudd, the cost of contracts for offshore wind have reduced by 20 percent 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 offshore wind supply chain who have already seen the benefits of increased activity in the sector in recent years, says industry analyst and consultant Douglas-Westwood. Offshore wind projects have been delivered on schedule and on budget: 3.7 GW of capacity has been installed over the past five years, whilst costs have been reduced, resulting in a 38 percent reduction in government subsidy.
 
Given the current downturn in oil and gas activity, many companies are looking to diversity into the OW sector. Halfan Brustad, VP of Statoil recently noted that OW can learn from the oil and gas industry, and vice versa: “Project management for offshore wind farms can be learnt from oil and gas, as well as marine and 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 oil and gas companies moving into the offshore wind supply chain, a number of start-ups are entering the offshore wind sector. This has been evident to Douglas-Westwood, who in addition to covering this sector via its 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.
 

StatoilUnited KingdomAmber Rudd
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