'I don't see it': Siemens Gamesa shy of new UK factory investment without firmer pipeline

The UK government would need to provide much greater clarity on long-term demand for offshore wind to convince the likes of Siemens Gamesa to provide more manufacturing capacity, an industry panel heard.

The business environment for investing in offshore wind came under scrutiny during a panel discussion on UK offshore wind targets at the City & Financial Global Annual Sustainable Infrastructure Summit, held in London last week.

The UK’s Clean Power 30 (CP30) plan apparently points to a robust pipeline for offshore wind, with capacity targeted for a range of 43-51GW by 2030.

The UK has an estimated 28GW in operation or in construction, and grid connection offers are in place for up to 50GW of offshore capacity.

“I'd say that from a capacity point of view, we're in a really good position, with 16GW of onshore and 16.6GW of offshore wind installed," said Sandra Li, head of onshore and offshore wind with the UK's Department for Business and Trade (DBT).

Li said a raft of auction changes to the CfD auction model were “designed to drive certainty, but also competition”.

Some of the changes, such as the extension of CfDs from 15 to 20 years have been warmly welcomed by developers.

Yet opinions have been diverging in the offshore wind industry about how much capacity the UK government will actually award in AR7, especially since the initial budget of £1.1bn ($1.5bn) for offshore wind that fell below expectations.

To meet allocation targets, energy secretary Ed Miliband may use new powers to boost the budget after “peeping” at bids confidentially.

"The budget that's being announced will hopefully serve as a floor rather than a ceiling," said Adam Ezzamel, UK head of development with the German utility RWE.

Beyond 2030

Andrew Elmes, head of government affairs for the UK and Ireland with Siemens Energy, agreed that the objectives are achievable, but he pressed for further momentum beyond 2030.

“Projects that are going to receive contracts in AR7 could still be building by 2034,” he said.

“We need to make sure that (AR7) and (AR8) are delivered properly and put a 2035 build-out in place to maintain the momentum and deliver properly on those projects.”

Elmes made it clear that the German giant is not about to embark on a new expansion in the UK, even though its blade manufacturing facility in Hull has become a flagship investment for the Siemens Gamesa (SGRE) unit.

Asked about the possibility of additional investments in the UK, Elmes said there was little prospect of the company building “another Hull” or a nacelle factory in the UK due to longer term uncertainties.

“I don't see it, certainly not unless we have properly ambitious targets beyond 2030 in the UK,” he said.

“The UK is already our most important market for offshore wind, and one of our top four or five markets in all technologies.

“But we would need to see a roadmap of what is to be achieved by 2035 or even by 2050 to give us the kind of certainty we need to invest in more capacity.”

Siemens Gamesa's main production line for nacelles is in Cuxhaven, Germany.

“Our supply chain for nacelles is in mainland Europe, so we can't go about re-inventing the wheel unless that long-term (UK) pipeline is there,” Elmes said.

Li stressed that business investments and jobs are among the key indicators for the UK government and she highlighted a green industrial strategy that identifies onshore and offshore wind sectors as critical sectors.

"We have set a target that we want to at least double investment into those sectors by 2035 to £30bn per year,” Li said

"We recognise that the supply chain needs that support, which is why, for example, we want to create an ecosystem that is conducive to investment.

Li mentioned the UK's new £1bn supply chain fund, under which a first £300m tranche of GB Energy funding will be announced this week.

"We have our policy frameworks, like the CfD mechanism, we have our grant funding scheme and we have also recently introduced a clean industry bonus, which is about encouraging developers to invest in cleaner supply chains," she said.

Political sea changes

Elmes welcomed such moves, but added that the political outlook in the UK also forms part of the calculations when it comes to future investment.

“Certain parties say offshore wind is too expensive, but there is a gap in the public conversation when it comes to showing that wind is creating secure electricity pricing for the next 20 or 30 years,” he said.

“This gap has made it easy to score political points against offshore wind.”

"From our perspective, you also need to be careful that existing factories are busy and you need to look after 2030 and what government commitments will be then, whoever is in power.

“We need to know what comes after the 2030 plan in the political sense, in order to make investments in the infrastructure and the supply chain that go to 2035 and beyond.”

'Initial target

Li stressed that Clean Power 2030 plan is just an initial target.

“I think it was a priority for our government to set a strategic push for onshore and offshore wind.

“But, of course, we do have longer-term targets, such as net zero by 2050. It's all about accelerating that transition, but for us, I think 2030 is very much an initial target.

She also offered encouragement for those expecting energy secretary Ed Miliband to boost the budgets for offshore wind beyond the initial £900m set for fixed-bottom and £180m set for floating.

"The government needs to balance the ambition of deployment that we want to achieve with value for money and protecting the consumer bill," Li said.

“If the energy secretary reviews the bids... and deems that there are certain projects that broke past the initial budget but deliver value for money, he will decide how to increase that budget.

“I think the energy secretary is very much open to increasing that budget,” she added.

'Don't shoehorn'

Siemens Energy, like others in the sector, has questioned the efficacy of the clean industry bonus mechanism as a supply chain policy lever when it also forms part of the competitive bidding process for CfDs.

“The CfD is there to help deliver low-cost, predictable outcomes, so let's not try to shoehorn in lots of other commitments like workforce and supply chain investments to do it,” Elmes said.

Elmes instead urged the UK government to step up direct support such as the funding under the UK's Industrial Growth Plan and praised a growing alignment between government departments, national energy champion GB Energy and the National Wealth Fund.

“We think that if you want to foster industrial investment, you go straight to the supply chain companies within that sector, within that region, and allow us to pitch for that and demonstrate it,” he said.

Is floating wind ready?

Li insisted that the UK government wants to address a failure to develop a supply chain to match the scale of the country's offshore wind industry.

“We are looking to reverse that pattern, especially in floating offshore wind, where we think there is a potential first-mover advantage, both in terms of deployment, but also building that supply chain manufacturing capacity early on,” she said.

Siemens Energy, through its SGRE unit, has shown lukewarm interest in the floating wind sector.

Elmes, while stressing that Siemens Gamesa is open to adapting its established 15MW turbines to floating deployment, said his relatively upbeat view of UK targets was based on bottom-fixed potential that can be deployed “profitably with an economy of scale”.

Mingyang moves

With little prospect of any major new investment by the likes of Siemens Gamesa, the UK sector is waiting for a government decision on whether to allow China's Mingyang to build its factory in Scotland.

The proposed £1.5bn ($2bn) facility would manufacture both blades and nacelles for domestic and export markets, and would target both fixed-bottom and floating markets.

The decision is known to involve several different government departments with differing perspectives on matters such as supply chain development, employment opportunities, trade and national security.

In a speech in London last week, British prime minister Keir Starmer said his government wanted to give companies “the confidence, clarity and support they need” to do business with Beijing while taking appropriate and effective measures to address national security risks.

Starmer is reportedly planning to travel to China early next year, in what would be the first trip to Beijing by a UK prime minister since 2018.