Scroby Sands - Supply Chain Analysis

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Scroby Sands - Supply Chain Analysis

  1. 1. Scroby Sands - Supply Chain Analysis Final Report A Report to Renewables East by Douglas-Westwood Limited and ODE Limited Commissioned by the DTI DWL Report Number 334-04 July 2005
  2. 2. Scroby Sands – Supply Chain Analysis Final Report Renewables East is a not-for-profit, independent company, grant funded by the East of England Development Agency, tasked with advocating the growth of renewable energy opportunities in the East of England. The company addresses issues underpinning the Government’s long-term strategic vision for a national energy policy that encompasses a response to the threat of climate change, the need to address the security of the UK’s energy supplies, and the opportunities to improve our economic competitiveness by the development and deployment of renewable energy technologies to achieve a low carbon future. (www.renewableseast.org.uk) The DTI 2010 Target Team is responsible for successfully delivering the Government’s target of 10 per cent of UK electricity from renewable energy sources by 2010. The team does this through co-ordination, influencing and driving of activity. Within the 2010 Target Team, the Business Development Unit is working with UK industry, tracking business opportunities, to help it win a greater share of renewables business. This involves working in partnership with the UK regions to drive the creation of economic benefit and jobs. The Renewables Advisory Board provides advice to Government on a wide range of renewable energy issues. The board is an independent, non-departmental public body sponsored by the DTI that brings together government departments, the renewables industry and the unions. It aims to develop mutual understanding of the key issues for the industry – like technology development, barriers to market penetration, and export enhancement – both in the short term and over the next 20 years. The board has seven workstreams that address some of the key issues and barriers to the Government’s target of providing 10 per cent of electricity from renewable sources by 2010. The workstreams, jointly chaired by a DTI representative and an industry member, are: making offshore wind work, finance and investment, jobs, emerging technologies, planning, unblocking Consents, Renewables Obligation Review. (www.dti.gov.uk/renewables) E.ON UK, the company that runs Powergen, is a leading energy company in the UK being the second largest electricity generator in the UK and owning the second largest distribution network in the UK. One of the UK’s leading wind farm developers with a portfolio of 20 wind farms either in service or under construction, producing enough power to supply 125,000 homes,E.ON UKalso runs and owns two hydro-power stations, including England and Wales’ largest hydro station, the 50MW plant at Rheidol in Ceredigion. The companyis also burning renewable biomass fuels such as woodchip and palm nuts alongside coal at some of its conventional power stations, and has outline planning permission to build a wood-burning power station at Lockerbie. (www.eon-uk.com) Vestas is the world leader in wind technology and a driving force in the development of the wind power industry. Vestas’ core business comprises the development, manufacture, sale, marketing and maintenance of wind power systems. Vestas started to manufacture wind turbines in 1979 and has played an active role in this dynamic industry ever since. In 1987, Vestas began to concentrate exclusively on wind energy and since then, the company has developed from a pioneer in the industry with a staff of around 60 to a global hi-tech market-leading group with more than 9,500 employees. (www.vestas.com) July 2005 2 Douglas-Westwood Limited & ODE Ltd
  3. 3. Scroby Sands – Supply Chain Analysis Final Report Contents 1 EXECUTIVE SUMMARY .................................................................................................................................7 1.1 SCROBY SANDS CONTRACT HIERARCHY.......................................................................................................... 7 1.2 KEY AREAS OF UK AND EAST OF ENGLAND CAPABILITY................................................................................. 7 1.3 FUTURE UK AND EAST OF ENGLAND CONTENT............................................................................................... 8 1.4 RECOMMENDATIONS ........................................................................................................................................ 9 2 INTRODUCTION ..............................................................................................................................................11 2.1 AIMS & OBJECTIVES .......................................................................................................................................12 2.2 SCOPE OF WORK ............................................................................................................................................12 2.3 PROJECT DELIVERABLES ................................................................................................................................13 2.4 METHODOLOGY ..............................................................................................................................................13 2.5 RELATED STUDIES...........................................................................................................................................16 3 MARKET TRENDS ..........................................................................................................................................19 3.1 WORLD OFFSHORE WIND 2000-2009 .........................................................................................................19 3.2 UK OFFSHORE WIND .....................................................................................................................................21 3.3 EAST OF ENGLAND OFFSHORE WIND ............................................................................................................22 4 SCROBY SANDS .............................................................................................................................................25 4.1 CONTRACT HIERARCHY...................................................................................................................................26 4.2 UK CONTENT ..................................................................................................................................................31 4.3 EAST OF ENGLAND CONTENT .........................................................................................................................32 5 GAP ANALYSIS ...............................................................................................................................................35 5.1 THE UK SUPPLY CHAIN CAPABILITY ..............................................................................................................35 5.2 THE EAST OF ENGLAND SUPPLY CHAIN CAPABILITY .....................................................................................35 5.3 VALUE AND EMPLOYMENT ASSESSMENT ......................................................................................................36 5.4 GAPS IN THE SUPPLY CHAIN ...........................................................................................................................37 5.5 KEY AREAS FOR FUTURE UK CONTENT ..........................................................................................................39 6 POTENTIAL SUPPLY CHAIN PENETRATION .........................................................................................43 7 FORECAST ROUND 2 UK CONTENT ........................................................................................................49 7.1 UK ROUND 2 PROJECTS ................................................................................................................................49 7.2 TYPICAL ATTRIBUTES OF A ROUND 2 PROJECT .............................................................................................58 7.3 THE KEY CHALLENGES OF ‘SCALING-UP’ .......................................................................................................58 7.4 ROUND 2 CAPABILITY ASSESSMENT AND ANALYSIS .....................................................................................60 7.5 FORECAST CONTENT IN EAST OF ENGLAND ROUND 2 PROJECTS ................................................................64 8 INTERVENTION STRATEGIES AND FUTURE RESEARCH .................................................................68 8.1 BUSINESS DEVELOPMENT STRATEGY ............................................................................................................68 8.2 ACTION PLAN ..................................................................................................................................................70 8.3 RECOMMENDATIONS FOR FUTURE RESEARCH ..............................................................................................72 9 APPENDICES ....................................................................................................................................................73 Douglas-Westwood Ltd St Andrew’s House, Station Road East, Canterbury, Kent, CT1 2WD, UK tel: +44 1227 780999 fax: +44 1227 780880 email: admin@dw-1.com www.dw-1.com Offshore Design Engineering Ltd Marine Base, South Denes Road, Great Yarmouth, Norfolk, NR30 3PR, UK tel: +44 1493 845100 fax: +44 1493 847568 www.ode-ltd.co.uk The information contained in this document is believed to be accurate, but no representation or warranty, express or implied, is made by Douglas-Westwood Limited or Offshore Design Engineering Ltd as to the completeness, accuracy or fairness of any information contained in it, and we do not accept any responsibility in relation to such information whether fact, opinion or conclusion that the reader may draw. July 2005 3 Douglas-Westwood Limited & ODE Ltd
  4. 4. Scroby Sands – Supply Chain Analysis Final Report Figures FIGURE 1-1: SCROBY SANDS – VALUE BY TIER 1 CATEGORY (£’000S)........................................................................ 7 FIGURE 1-2: FORECAST UK CONTENT IN EAST OF ENGLAND ROUND 2 PROJECTS ..................................................... 9 FIGURE 3-1: WORLD OFFSHORE WIND CAPACITY 2000-2009 (MW).......................................................................20 FIGURE 3-2: UK OFFSHORE WIND CAPACITY 2004-2012 (MW) ..............................................................................21 FIGURE 3-3: UK OFFSHORE WIND CAPITAL EXPENDITURE 2040-2012 (£M)............................................................22 FIGURE 3-4: EAST OF ENGLAND POTENTIAL CAPACITY 2004-2012 (MW)................................................................22 FIGURE 3-5: EAST OF ENGLAND POTENTIAL CAPITAL EXPENDITURE 2004-2012 (£M) .............................................23 FIGURE 4-1: SCROBY SANDS – £’000S ........................................................................................................................26 FIGURE 4-2: SCROBY SANDS – VALUE BY TIER 1 CATEGORY (£’000S)......................................................................27 FIGURE 4-3: SCROBY SANDS – HOURS BY TIER 1 CATEGORY ....................................................................................27 FIGURE 4-4: SCROBY SANDS CONSTRUCTION & OPERATION TIMELINE - MANHOURS .............................................30 FIGURE 6-1: CONTRACTING STRATEGIES – SCENARIO 1..............................................................................................43 FIGURE 6-2: CONTRACTING STRATEGIES – SCENARIO 2..............................................................................................44 FIGURE 6-3: CONTRACTING STRATEGIES – SCENARIO 3..............................................................................................45 FIGURE 6-4: CONTRACTING STRATEGIES – SCENARIO 4..............................................................................................46 FIGURE 7-1: UK STRATEGIC AREAS ..............................................................................................................................49 FIGURE 7-2: FORECAST UK CONTENT IN EAST OF ENGLAND ROUND 2 PROJECTS ...................................................64 FIGURE 7-3: FORECAST EAST OF ENGLAND CONTENT IN REGIONAL ROUND 2 PROJECTS ........................................65 FIGURE 7-4: UK AND EAST OF ENGLAND MAN-HOURS FOR A TYPICAL ROUND 2 PROJECT .....................................66 Tables TABLE 1-1: SCROBY SANDS – VALUE BY PHASE (£’000S) ............................................................................................ 7 TABLE 1-2: UK PROVEN CAPABILITY – TIER 1 COMPONENT ........................................................................................ 8 TABLE 1-3: FORECAST UK CONTENT IN EAST OF ENGLAND ROUND 2 PROJECTS ....................................................... 9 TABLE 1-4: FORECAST EAST OF ENGLAND CONTENT IN REGIONAL ROUND 2 PROJECTS............................................ 9 TABLE 2-1: DEVELOPMENT PHASE – COMPONENT ITEMS...........................................................................................14 TABLE 2-2: CONSTRUCTION PHASE – COMPONENT ITEMS .........................................................................................14 TABLE 2-3: OPERATIONS PHASE – COMPONENT ITEMS ..............................................................................................15 TABLE 3-1: WORLD OFFSHORE WIND CAPACITY 2000-2009 (MW).........................................................................20 TABLE 3-2: UK OFFSHORE WIND CAPACITY 2004-2012 (MW) ................................................................................21 TABLE 3-3: UK & EAST OF ENGLAND PROJECTS 2004-2013 – UNITS ......................................................................21 TABLE 3-4: UK OFFSHORE WIND CAPITAL EXPENDITURE 2004-2012 (£M) .............................................................22 TABLE 3-5: EAST OF ENGLAND POTENTIAL CAPACITY 2004-2012 (MW) .................................................................22 TABLE 3-6: EAST OF ENGLAND POTENTIAL CAPITAL EXPENDITURE 2004-2012 (£M)...............................................23 TABLE 3-7: EAST OF ENGLAND – OFFSHORE WIND FARMS OPERATIONAL & PLANNED 2004-2012 ......................24 TABLE 4-1: SCROBY SANDS – PROJECT DATA .............................................................................................................25 TABLE 4-2: SCROBY SANDS – VALUE BY PHASE (£’000S) ..........................................................................................26 TABLE 4-3: SCROBY SANDS – HOURS BY PHASE.........................................................................................................26 TABLE 4-4: SCROBY SANDS –VALUE BY TIER 1 CATEGORY (£’000S )........................................................................27 TABLE 4-5: SCROBY SANDS – HOURS BY TIER 1 CATEGORY ......................................................................................28 TABLE 4-6: SCROBY SANDS – DEVELOPMENT PHASE VALUE (£’000S)......................................................................28 TABLE 4-7: SCROBY SANDS – DEVELOPMENT PHASE HOURS ....................................................................................28 TABLE 4-8: SCROBY SANDS – CONSTRUCTION PHASE VALUE (£’000S).....................................................................29 TABLE 4-9: SCROBY SANDS – CONSTRUCTION PHASE COMPONENT VALUE (£’000S) ..............................................29 TABLE 4-10: SCROBY SANDS – CONSTRUCTION PHASE HOURS.................................................................................29 TABLE 4-11: SCROBY SANDS – COMPONENT CONSTRUCTION HOURS ......................................................................30 TABLE 4-12: SCROBY SANDS – 5 YEAR OPERATIONS VALUE (£’000S) & HOURS.....................................................30 TABLE 4-13: SCROBY SANDS – UK CONTENT VALUE (£’000S) ..................................................................................31 TABLE 4-14: SCROBY SANDS – UK CONTENT HOURS ................................................................................................32 TABLE 4-15: SCROBY SANDS – EAST OF ENGLAND CONTENT VALUE (£’000S).........................................................32 TABLE 4-16: SCROBY SANDS – EAST OF ENGLAND CONTENT HOURS .......................................................................33 TABLE 5-1: UK PROVEN CAPABILITY – TIER 1 COMPONENT ......................................................................................35 TABLE 5-2: EAST OF ENGLAND PROVEN CAPABILITY – TIER 1 COMPONENT .............................................................36 TABLE 5-3: SCROBY SANDS – VALUE (£’000S) ...........................................................................................................36 TABLE 5-4: SCROBY SANDS – HOURS ..........................................................................................................................37 TABLE 5-5: SCROBY SANDS – COMPONENT CONSTRUCTION (£’000S)......................................................................37 TABLE 5-6: SCROBY SANDS – COMPONENT CONSTRUCTION (HOURS) ......................................................................38 TABLE 5-7: SCROBY SANDS – OFFSHORE INSTALLATION (£’000S) ............................................................................38 TABLE 5-8: SCROBY SANDS – OFFSHORE INSTALLATION (HOURS) ............................................................................38 July 2005 4 Douglas-Westwood Limited & ODE Ltd
  5. 5. Scroby Sands – Supply Chain Analysis Final Report TABLE 5-9: SCROBY SANDS – PROCUREMENT & MANUFACTURE (£’000S) ..............................................................39 TABLE 5-10: SCROBY SANDS – PROCUREMENT & MANUFACTURE (HOURS) ............................................................39 TABLE 5-11: SCROBY SANDS – POTENTIAL UK VALUE (£’000S)................................................................................39 TABLE 5-12: SCROBY SANDS – POTENTIAL UK HOURS ..............................................................................................40 TABLE 5-13: SCROBY SANDS – POTENTIAL EAST OF ENGLAND VALUE (£’000S) ......................................................40 TABLE 5-14: SCROBY SANDS – POTENTIAL EAST OF ENGLAND HOURS .....................................................................41 TABLE 7-1: TYPICAL PROJECT CHARACTERISTICS ........................................................................................................58 TABLE 7-2: HIGH-CASE – MAXIMUM POTENTIAL UK AND EAST OF ENGLAND VALUE (£’000S)...............................61 TABLE 7-3: HIGH-CASE – MAXIMUM POTENTIAL UK AND EAST OF ENGLAND HOURS .............................................61 TABLE 7-4: PROVEN-CASE – PROVEN UK AND EAST OF ENGLAND VALUE (£’000S).................................................62 TABLE 7-5: PROVEN-CASE – PROVEN UK AND EAST OF ENGLAND HOURS ...............................................................62 TABLE 7-6: LOW-CASE – UK AND EAST OF ENGLAND VALUE (£’000S) .....................................................................63 TABLE 7-7: LOW-CASE – UK AND EAST OF ENGLAND HOURS ...................................................................................63 TABLE 7-8: FORECAST UK CONTENT IN EAST OF ENGLAND ROUND 2 PROJECTS .....................................................64 TABLE 7-9: FORECAST EAST OF ENGLAND CONTENT IN REGIONAL ROUND 2 PROJECTS..........................................65 TABLE 7-10: UK AND EAST OF ENGLAND MAN-HOURS FOR A TYPICAL ROUND 2 PROJECT ....................................66 TABLE 8-1: EAST OF ENGLAND POTENTIAL CAPABILITY – TIER 1 COMPONENT .........................................................70 July 2005 5 Douglas-Westwood Limited & ODE Ltd
  6. 6. Scroby Sands – Supply Chain Analysis Final Report July 2005 6 Douglas-Westwood Limited & ODE Ltd
  7. 7. Scroby Sands – Supply Chain Analysis Final Report 1 Executive Summary 1.1 Scroby Sands Contract Hierarchy The development, construction and initial five years operation of the Scroby Sands offshore wind farm will result in a total expenditure of £80 million. Contracts to the value of £38.8m (48%) were sourced from UK companies, with £12.8m (16%) originating within the East of England. 50,000 Non-UK Other UK 40,000 East of England Expenditure £'000s 30,000 20,000 10,000 0 Annual O&M Surveys Transport & Management Procurement & Onshore Pre- Other Costs Installation Installation Development Environmental Insurance/Legal Detailed Design Manufacture Onshore Offshore Commissioning Delivery Monitoring Assembly Design Project Figure 1-1: Scroby Sands – Value by Tier 1 Category (£’000s) Table 1-1: Scroby Sands – Value by Phase (£’000s) East of EofE % £’000s Other UK Non UK Total Cost UK % England Development 335 922 480 1,737 72% 19% Construction 7,415 24,485 39,611 71,511 45% 10% Operations 5,095 550 1,180 6,825 83% 75% Total 12,845 25,957 41,217 80,073 48% 16% The highest levels of UK and East of England content were realised within the development and operations phases of the project. The construction phase presented the highest value phase of the project and despite there being some notable successes including foundation and cable manufacture, onshore cable installation, grid interface, and the installation of the export cable to shore this phase presents significant challenges for East of England and UK companies to deliver competitive products and services into future offshore wind projects. 1.2 Key Areas of UK and East of England Capability The majority of the UK’s 48% content has been sourced from successful penetration of the lower tiers of the supply chain with a significant number of relatively low value, service-based contracts with, for instance, the UK providing all environmental monitoring, survey, insurance/legal and onshore installation related works. Such activity was supplemented by high levels of East of England content within project management, onshore pre-assembly and operations and maintenance activities. July 2005 7 Douglas-Westwood Limited & ODE Ltd
  8. 8. Scroby Sands – Supply Chain Analysis Final Report Table 1-2: UK Proven Capability – Tier 1 Component High Medium Low Environmental Development Design Monitoring Detailed Design Commissioning Procurement & Insurance / Legal Manufacturing Surveys Onshore Pre-Assembly Offshore Installation Project Management Transport & Delivery Onshore Installation Operations & Maintenance 70% of the value of contracts awarded for Scroby related to the procurement and manufacture of components and offshore installation. However, of a total value of £55.7 million, £19 million was sourced from within the UK and only £291,000 from within the East of England. Whilst the UK has sufficient fabrication and installation capabilities to cope with Round 1 projects it currently lacks both the capability and capacity to gain maximum attainable contract value from the Round 2 projects. The majority of the highest value contracts at the higher tiers of the supply chain (i.e. main contractor) were secured from outside the region and indeed outside the UK. Regional companies were able to penetrate the supply chain for the provision of lower tier labour intensive activities. This resulted in significant employment benefits for the UK supply chain with UK content at 48% of the value of contracts awarded on Scroby Sands accounting for 73% of the hours spent on the project, with East of England content growing from 16% to 40% respectively. An analysis of the contracts awarded within Scroby Sands shows that UK content could conceivably have been raised from £38.8 million (48%) to £56.5 million (71%) given current but as yet unrealised capability. The primary area of potential growth is offshore installation, where UK companies have the capabilities to perform all tasks. If the region could fully develop this inherent capability and offer a cost competitive suite of products and services, East of England content within Scroby Sands could have reached approximately £24 million. 1.3 Future UK and East of England Content 3000 Low-Case Proven-Case 2500 High-Case Total Cost 2000 Expenditure £m 1500 1000 500 0 2008 2009 2010 2011 2012 July 2005 8 Douglas-Westwood Limited & ODE Ltd
  9. 9. Scroby Sands – Supply Chain Analysis Final Report Figure 1-2: Forecast UK Content in East of England Round 2 Projects Table 1-3: Forecast UK Content in East of England Round 2 Projects £m 2008 2009 2010 2011 2012 Total Low-Case 12 214 398 159 220 1,002 Proven-Case 33 602 1120 447 619 2,821 High-Case 49 889 1653 660 913 4,163 Total E of E R2 70 1,285 2,390 954 1,320 6,019 Using the data from Scroby Sands, total UK and regional content was forecast for future Round 2 projects within the Greater Wash and the Thames Estuary using 3 different scenarios. Total forecast expenditure on the Round 2 projects in the two strategic areas of relevance to the East of England amounts to approximately £6 billion. The low-case scenario forecasts that £1 billion should be achievable by UK companies. If a similar contracting methodology to Scroby Sands was used, UK content could be as high as £2.8 billion. The maximum potential UK content is forecast at approximately £4.2 billion. Table 1-4: Forecast East of England Content in Regional Round 2 Projects £m 2008 2009 2010 2011 2012 Total Low-Case 9 155 289 115 160 728 Proven-Case 11 204 380 152 210 957 High Case 21 385 716 286 396 1,804 Total E of E R2 70 1,285 2,390 954 1,320 6,019 From the total forecast expenditure on Round 2 projects within the area of influence of the East of England, regional value is forecast to be between £728 million and £1.8 billion. Scaled up levels of regional content achieved within Scroby Sands on all Round 2 projects in the two strategic areas would result in a forecast total regional spend of £957 million. Future regional, and indeed national, content will largely be determined be the use of a local port as a pre-assembly, construction and operations base. National ports face substantial competition from mainland Europe and without major improvements, such as Great Yarmouth’s Outer Harbour, logistical requirements and competitive forces will probably drive the opportunities elsewhere. 1.4 Recommendations The UK and East of England have demonstrated a high capability and competitiveness to attain significant value and work from future offshore wind projects. There are some significant challenges to be met to ensure national and regional economic benefits can be delivered. These actions need to further support and maintain existing capabilities whilst stimulating diversification and market entry into high value areas such as manufacturing and offshore installation. Whilst much of this action needs to be delivered at a regional level, it is important that it is backed up by a long-term co-ordinated approach from government. It is vital that the UK Government continues to show commitment to the sector and maintains market conditions that will support the transition from Round 1 projects such as Scroby Sands to larger and more technically complex Round 2 projects in the period up to and beyond 2010. Such support is necessary to the economics of the sector, both in terms of project financing and creating the confidence for required long-term investment by the developers and also the supply chain. Key tasks for the East of England are, therefore, as follows: • Knowledge Holding and Transfer – provision of market intelligence • Relationship Building – facilitating business-to-business linkage • Innovation Support – funding and support for small and medium sized enterprises • Strategic Support – inward investment and public sector infrastructure development. July 2005 9 Douglas-Westwood Limited & ODE Ltd
  10. 10. Scroby Sands – Supply Chain Analysis Final Report July 2005 10 Douglas-Westwood Limited & ODE Ltd
  11. 11. Scroby Sands – Supply Chain Analysis Final Report 2 Introduction Scroby Sands was commercially complete on 31st December 2004 and was formally opened in March 2005. It is the second of the UK Round 1 offshore wind projects to be constructed. To date, analysis of the economic benefits likely to accrue nationally and regionally from UK companies participating in these projects and future second round developments has been based upon high level capability assessments, rather than practical experience. Thanks to support from the Department of Trade and Industry, Renewables East, the renewable energy agency for the East of England, was able to commission research to accurately measure the level of UK penetration of Scroby Sands to confirm what economic benefits accrued nationally, regionally and locally during the development, construction and operation of the project. Direct benefits will be seen in terms of jobs created or safeguarded and the value of contracts secured. This analysis has only been possible with the support and involvement of E.ON UK Renewables Offshore Wind Limited (EROWL – formerly Powergen Renewables Offshore Wind Ltd), and the main contractors, Vestas Celtic, who acted as turbine supplier and engineering, procurement, installation and construction (EPIC) contractor. As with most large scale capital projects, commercial capabilities from those tendering their goods and services have been assessed through contractual processes, with corporate assessments of risk and cost determining the level of UK company involvement through the contracts awarded by the project developer and owner, E.ON UK Renewables Offshore Wind Limited and by way of the sub- contracts awarded by the main contractors, particularly Vestas Celtic. This contractual framework has had an effect on UK involvement in the project, offering an insight into how successful UK companies have been under international contracting procedures and how such procedures may change in the future with larger projects and with greater practical experience in construction. The timetable associated with the project also helped increase content through discussions with local firms during the development phase, with the period between the original tendering programme and the later resubmission of tenders being a key phase for regional companies to become involved with the project. The way in which contracts are assembled and subsequently issued for tender can have a pronounced effect on final tender submissions. In particular, inconsistent or over complex contracts can adversely affect the way in which a contractor will submit their tender, or influence if they will even submit a tender return at all. This is something that has been previously recognised in the offshore oil and gas sector through a sector wide initiative called Cost Reduction In a New Era (CRINE), where various areas of consistent over expenditure and complexity were reviewed with a view to standardisation. One of the key results of CRINE was the adoption of standard terms and conditions that could be applied across the whole sector. Whilst it is recognised that the offshore wind industry in the UK is still in its infancy, consideration for adopting standard terms of contract, could lead to a simplification of process and resultant savings. Logistical issues have also played their part, with equipment supply capabilities and construction port selection having a significant impact on direct, indirect and induced economic activity associated with the project. These issues will also have a bearing on the capability of individual and collective regions to meet the supply chain demands for the construction of future projects, particularly when the scale of the projects and number of projects to be constructed in any given year are increasing. Understanding the effect of logistical barriers will enable UK companies to target areas of the supply chain with the highest value or which are most open to UK and regional company involvement because of local knowledge, and also provide for an indication as to where strategic interventions by the public sector would derive greatest potential benefit. A thorough review of the Scroby Sands supply chain offers the potential to better understand the relative current success of UK businesses in securing work within the offshore wind industry. Building on this information a review can be undertaken of what further opportunities and challenges face the attempts to grow a strong domestic supply chain to support future projects of this scale and give a good indicator as to the challenges facing UK involvement in projects of a greater complexity and scale such as the second round projects. Finally, it becomes possible to forecast what additional research will be required to identify the appropriate level of strategic intervention and business support required nationally and regionally to secure a greater share of the economic benefits for the July 2005 11 Douglas-Westwood Limited & ODE Ltd
  12. 12. Scroby Sands – Supply Chain Analysis Final Report UK economy as the industry matures and the rate of deployment of the technology accelerates to support growing national, European and world markets. 2.1 Aims & Objectives The study is specifically seeking to: • Map the supply chain to the Scroby Sands project down to Tier 3 service and component supply and identify the associated contracts, sub-contracts, and in-house services required to develop, construct and operate the project. • Assess maximum level of UK and East of England supply chain penetration in project construction on current contracting procedures and possible variance through use of alternative contracting structures. • Identify gaps within the supply chain for Scroby Sands that were not obviously open to UK penetration, confirm which of these opportunities could be targeted to maximise UK and regional economic benefits, and asses what mechanisms exist to develop the necessary business skills to secure contracts to supply goods and services in these areas. • Forecast likely scale-up effects in to a typical Round 2 project including changes in fundamental logistical, contractual and equipment supply requirements. • Outline potential future research required to assess probable UK supply chain levels in such projects and levels of public sector intervention required to support or extend the UK supply chain to secure greater economic benefits at national and regional level. 2.2 Scope of Work In fulfilling the aims and objectives of the study the following activities are underway: • Development Phase: Identify by value the principal development costs incurred by EROWL to advance the Scroby Sands project to a successful financial close. Identify the contracted service providers and those provided in-house by EROWL and assess the likely levels of employment directly attributable to these activities. • Construction Phase: Identify all major construction contracts awarded by EROWL, all major sub-contracts, particularly those of Vestas Celtic as EPC Contractor, and, as far as possible, principal turbine component supplies to Vestas Celtic as turbine supplier. Confirm contract values and assess likely levels of employment directly attributable to the supply of equipment and provision of services. • Operation Phase: Identify all operations and maintenance contracts awarded by EROWL, including those warranty services provided by Vestas Celtic as turbine supplier. Confirm contract values and assess likely levels of employment directly attributable to the management of the site, maintenance of equipment and provision of services. • Review procurement procedures to confirm which contracts, sub-contracts or component supplies could have been secured by UK and regional companies given more competitive tenders. Identify criteria for contracting procedures and review likely alternatives available to industry now and in the future as the industry matures. Assess the effect of alternative contractual frameworks on levels of UK and regional penetration of the supply chain. • Assess the relative value and employment characteristics of supply chain gaps against known national and regional capabilities. Provide a list of the areas within the supply chain which offer the greatest opportunity for future UK participation and assess the possible strategies of business development and support required to realise these opportunities. • Consider scale-up effects, in terms of overall contract values and employment, of moving from Scroby Sands scale offshore wind projects to a typical Round 2 site of 500 MW. Identify and review likely logistical and contractual changes that are expected to occur to permit commercial development of such sites and provide high level assessment of the effect on UK supply chain capabilities. Assess what additional intervention strategies in July 2005 12 Douglas-Westwood Limited & ODE Ltd
  13. 13. Scroby Sands – Supply Chain Analysis Final Report the form of business support, strategic investment or other public sector activity may be required to secure UK and regional participation in the supply chain. 2.3 Project Deliverables The following project deliverables were agreed: • Contract hierarchy for each phase of development with relevant contract values, employment levels and level of regional and UK-wide participation. • Contract hierarchy for the construction phase of Scroby Sands with maximum credible UK and regional involvement including relevant contract values and employment levels. Alternative contract hierarchies identified with assessment of the effect on UK supply chain. • Assessment of the role of Operation and Maintenance (O&M) in terms of value, working hours and likely future changes to O&M contracting. Scroby Sands is currently operated by Vestas under a five-year warranty contract, currently the standard procedure for offshore projects. O&M is an especially important area of local content. • Assessment of lessons learnt from this Round 1 site and creation of an action plan as to how best to realise the missed opportunities. The unrealised opportunities will be arranged according to understood capacity for national and regional businesses to meet the opportunities, reflecting the relative value of the activity, and the time and skills required to develop the necessary capability. • Future lines of research including specific projects designed to identify the most advantageous level of strategic investment and intervention by the public sector to support the growing UK supply chain. The value of comparative studies to be conducted on other UK offshore projects already completed or nearing construction. 2.4 Methodology The supply chain analysis for Scroby Sands has been undertaken by Renewables East in partnership with Offshore Design Engineering Limited (ODE) & Douglas-Westwood Limited (DWL). The majority of primary data collection and supply chain contract mapping was carried out by Offshore Design Engineering Limited, who acted as Project Managers for EROWL in the construction of the Scroby Sands project and are site manager for EROWL during the operational phase whilst the turbines are under warranty. Douglas-Westwood Limited undertook an independent verification of data and comparative analysis against previous research. Analysis of anticipated and potential UK penetration of the supply chain for future Round 2 projects including mechanisms to better target supply chain development and UK business support was undertaken jointly between all three parties. 2.4.1 Project Data It was recognised from the outset that previous studies forecasting the potential revenue and employment generation of offshore wind farms had been based on the predicted development of offshore wind farms and were estimates that were unable to draw upon actual historic information. The principal aim of the data gathering exercise was therefore to ascertain the actual value and associated man-hours within the development, construction and operation of Scroby Sands. The process of data gathering involved the mapping of Tier 3 services and supply, including associated contracts, subcontracts and in-house services, during all phases of the project. The main suppliers of project data were EROWL (the owner) and Vestas Celtic (the EPIC contractor) who were asked to complete a standard form (see Appendix 1) specifically designed to collect the targeted information and ensure that all data was captured in a consistent and comparative manner. With the provision of actual contract value and associated man-hours to Tier 3 of the project and supply chain, the data could then be used as a sound basis for analysis and comparative forecasting of July 2005 13 Douglas-Westwood Limited & ODE Ltd
  14. 14. Scroby Sands – Supply Chain Analysis Final Report future expenditure and man-hours relating to further wind farms forecast for development offshore UK. 2.4.2 Definitions In mapping the supply chain to Scroby Sands it was initially necessary to define the key activities in developing, constructing and operating the project, down to Tier 3 service and component supply. In developing the project’s contract hierarchy 14 Tier 1 Categories were created encompassing all activities within the lifecycle of an offshore wind farm, in line with activities defined within the Category of Energy Industry Classifications (see Appendix 2) and used to define East of England offshore wind capability as part of DWL’s ongoing work on the POWER project (see Section 1.5.1). Key Sub-Component items were then defined in partnership with Vestas and E.ON according to their internal accounting procedures. Development Phase Table 2-1: Development Phase – Component Items Tier 1 Category Sub-Component Item Development Design Consultancy Development Agreement Electrical System Studies FEPA License Application Section 36 Planning Application Site Management Staff Costs Environmental Monitoring Environmental Surveys Insurance/Legal Insurance Legal Fees Surveys Geotechnical Survey / Investigation Site Surveys Other Misc Costs Reprographics The development phase has been defined as being all activities completed in identifying, technically and environmentally assessing, insuring and licensing the project site through to project implementation and, in this case, the appointment of an EPIC contractor (assumes an EPIC type development). Construction Phase Table 2-2: Construction Phase – Component Items Tier 1 Category Sub-Component Item Environmental Monitoring Surveys - Arial, Bird & Coastal Bird Protection Environmental Management Noise Monitoring Insurance/Legal Construction Insurance Legal / Easements Site Inspection Surveys Site Surveys Project Management Board & Lodging HSE Site Rep Offshore Installation Onshore Logistics Planning Supervisor Project Administration Quality Assurance Detailed Design Electrical Foundation SCADA Scour Surveys July 2005 14 Douglas-Westwood Limited & ODE Ltd
  15. 15. Scroby Sands – Supply Chain Analysis Final Report Procurement & Manufacture Blades Cables Logistic Support Monopiles Nacelle Onshore Cable Supply Towers Transport & Delivery Blades Facility - Harbour Harbour Dues Nacelles Parts Surveys Towers Onshore Pre-Assembly Blade Handling Cranes Labour Onshore Equipment Quay Rental Site Transport Onshore Installation Onshore Cable Installation Substation / Grid Interface Offshore Installation Export Cables Inter Array Cables Piles Scour Protection Turbines Commissioning Senior Authorised Personnel Super Intendents Transfer Vessels Weather Forecasts Other Misc Costs Information Centre Building Works Project Film/Photography Training Visitor Centre Design & Fit Out The construction phase covers all supply chain activities relating to the contracting, financing, and procurement of all materials for the production, assembly and installation of all elements of the project. Key activities include the manufacture of components associated with the turbine, its foundation and any electrical equipment required to connect the facility to electricity infrastructure onshore, onshore and offshore installation activities and logistics at the construction port. Operations The operations phase covers all supplies of goods and services necessary to operate, maintain and repair offshore wind facilities during their asset life. In the context of this study, the Operations phase has been assessed over the first 5 years of the asset life of the project to correlate to the warranty and service provisions of Vestas Celtic. Table 2-3: Operations Phase – Component Items Tier 1 Category Sub-Component Item Operations & Maintenance Project Management Site Management Service Personnel Service Vessels Replacement Components Other Operational Costs July 2005 15 Douglas-Westwood Limited & ODE Ltd
  16. 16. Scroby Sands – Supply Chain Analysis Final Report 2.5 Related Studies There are two regional studies directly related to the Scroby Sands - Supply Chain Analysis project which Douglas-Westwood Ltd have conducted in 2005; the POWER project and the Catalogue of Energy Industry Classifications. 2.5.1 POWER – WP2 Regional Supply Chain Study The POWER (Pushing Offshore Wind Energy Regions) project is a three year European supply chain study as part of the Interreg IIIB North Sea Programme, and funded by the European Regional Development Fund. The project will discuss and assess issues relating to the environmental impact of offshore wind farms, the development of a reliable, economically beneficial regional supply chain and skills development issues. Studies are being undertaken in Denmark, Germany, the Netherlands and UK, with the aim of uniting North Sea regions with an interest in supporting and realising the economic and technological potentials of offshore wind energy. Work Package 2 (WP2) of the POWER project focuses on the supply chain and economic development in the offshore wind sector within regions with the ambition and opportunity to benefit economically from the evolving offshore wind energy industry. Under this work package Douglas- Westwood Ltd were commissioned to undertake a regional study to inform the East of England and particularly the sub-region of Great Yarmouth and Lowestoft on specific strengths and gaps within their supply chain to the offshore wind sector, and facilitate the development of strategies supporting supply chain development. This study was completed in June 2005 for Suffolk County Council. The aims of the study were to: • Establish the total value and likely level of regional content, both in terms of expenditure and employment, regarding offshore wind development in the East of England to date and develop a forecast for the future if the present situation were to continue. • Determine which local companies are active or plan to be active as suppliers to the offshore wind sector with regard to manufacturing, installation, operation, and maintenance, training and research. • Develop a market compatibility matrix to show regional capabilities. • Assess how the benefits to the region may increase through changes to the supply chain aimed at filling existing gaps. • Produce recommendations for specific targeted actions for the further development of the offshore wind supply chain within the East of England. 2.5.2 Catalogue of Energy Industry Classifications This study was commissioned by the EEEGR and completed by DWL in December 2004. The project required the creation of a “pragmatic” coding system to be applied to all companies identified, or seeking, to be working within the supply chain to the energy industry. The framework created will act as a means of facilitating the identification of specific capabilities of companies servicing one or more sectors and enable the effective segmentation of the industry. This is to be achieved through the creation of three independent, relational datasets, structured as a keyword listing based on a maximum of 150 categories, with each dataset to be supplemented by a glossary defining keywords where appropriate. The three independent relational datasets are; 1. Industry Sectors – Oil & Gas, Wind, Solar, Nuclear, etc 2. Industry Roles – Operator, Service Provider, Support Organisation, etc 3. Industry Classification – Drilling & Wells, Installation & Commissioning, etc The coding system will be supplemented by suggestions of the key industry metrics that should be recorded within supporting databases to facilitate attempts to perform a consistent and repeatable analysis of the nature and scale of activity within any supply chain to the energy industry (full details of which are available from EEEGR upon request). Having established an appropriate framework of use the catalogue of categories will then be integrated into EEEGR’s ‘Mapergy’ system and made available to all POWER project partners as a means of providing a common terminology in completing their country specific supply chain studies. It July 2005 16 Douglas-Westwood Limited & ODE Ltd
  17. 17. Scroby Sands – Supply Chain Analysis Final Report is also envisaged that such a system will be complementary to work being developed to better identify skills sets against the capabilities of the industry. July 2005 17 Douglas-Westwood Limited & ODE Ltd
  18. 18. Scroby Sands – Supply Chain Analysis Final Report July 2005 18 Douglas-Westwood Limited & ODE Ltd
  19. 19. Scroby Sands – Supply Chain Analysis Final Report 3 MARKET TRENDS 3.1 World Offshore Wind 2000-2009 3.1.1 Development History The first offshore wind turbines were installed at Vindeby off the Danish island of Lolland in 1991. The first ten years of the industry saw small projects being built in very shallow water near-shore locations. These wind farms, in most cases, used onshore turbine models with slight adaptations. These ‘demonstration’ projects have paved the way for the more recent projects that are of a much larger size. There are currently 19 operational offshore wind farms in the world. The 327 installed turbines in these projects provide a total of 617 MW. At the present time, Denmark is the world leader in installed capacity with 426 MW, but the UK is making fast progress and now has 124 MW operational with a further 180 MW to be online before the end of 2005 from the 90 MW Kentish Flats and Barrow offshore wind farms currently under construction. Europe’s onshore wind industry experience and supply chain coupled with excellent natural resource and supportive government policies make the region the clear leader offshore. Recent activity in South East Asia marked the first offshore wind development outside Europe, with North America expected to install its first offshore turbines this period. The largest installed offshore wind farm is the 165.6 MW Nysted development off Denmark which was completed in 2003. It has 72 2.3 MW Bonus (now Siemens Wind Power) turbines installed 9 km offshore in an average water depth of 8 metres. To date, the greatest water depth that a project has been installed in is 18 metres (Samsø, Denmark). Just as today’s projects dwarf those built ten years previously, within another decade projects will be installed that are many times greater in size than today’s offshore wind farms and that will be built in substantially deeper locations, further offshore. 3.1.2 Future Activity 3500 Belgium Canada China 3000 Denmark Finland France Germany 2500 Ireland Japan Netherlands Capacity MW Spain 2000 Sweden UK USA 1500 1000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 July 2005 19 Douglas-Westwood Limited & ODE Ltd
  20. 20. Scroby Sands – Supply Chain Analysis Final Report Figure 3-1: World Offshore Wind Capacity 2000-2009 (MW) Table 3-1: World Offshore Wind Capacity 2000-2009 (MW) Country 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2005-2009 Belgium 42 145 130 316 Canada 4 700 704 China 50 100 150 Denmark 40 163 213 200 200 400 Finland 5 104 109 France 29 29 Germany 4.5 4.5 198 384 438 771 1,797 Ireland 25 167 190 356 Japan 1.2 0 Netherlands 99 120 219 Spain 250 250 Sweden 21 125 142 18 285 UK 4 0 0 60 60 180 270 424 668 1655 3,197 USA 468 140 2 610 Grand Total 4 61 163 299 66 184.5 738 1,934 2,397 3,168 8,421 A total of 8.4 GW of offshore wind capacity is forecast for installation over the period to 2009. Progress was slow in 2004, with many delays pushing back installation schedules for projects off the UK, Belgium and the Netherlands. With only 66 MW coming online, it was the quietest year since 2001. 2004, however, did see Germany’s first installation and interestingly the first offshore wind turbines being installed outside Europe. In 2005, installations increase with 180 MW forecast for completion. This will all be off the UK where two 90 MW projects are scheduled for commissioning before the year’s end. The rate of installations is forecast to increase dramatically from there on, with 738 MW expected to be commissioned in 2006. The first commercial German wind farm is expected to be brought online in 2006 as will the first Belgian, Swedish and Dutch projects. This growth is continued into 2007 when 1.9 GW is forecast. The UK, Germany and Belgium will all build on their progress in 2006. The first US project, Cape Wind, is scheduled for a 2007 completion, although the ongoing planning and political disputes has made this project one of the most unpredictable at present. Sufficient progress was, however, made through 2004 for us to include the project in the 2007 season. The first Chinese project will also be commissioned in 2007. The leading players will see increasingly higher amounts of capacity installed to the end of the period, with the UK and Germany building dominating positions in the industry. 2008 is significant because it marks Denmark’s re-entry to the market it once led so strongly. The 200 MW Horns Rev II wind farm will be built in 2008 and the Nysted II project will follow in 2009. The last two years of the period sees countries such as Finland and Spain entering with their first major developments. The UK is forecast to have one third of all capacity installed over the next five years, illustrating the steady progress made by UK projects. Here, few projects have been cancelled, and the route to construction is more clear-cut than in other countries where a joined-up approach is lacking from the authorities. Germany has a 21% share of installations, less than was expected just one year ago. Slow progress on the necessary cable permits is one factor that is holding back projects from construction. There is no doubting the importance of the German market, but it is taking much longer to reach fruition than previously thought. The installation of the 4.5 MW Enercon turbine in 2004 is a promising signal. A second 4.5 MW turbine is expected online in the summer of 2005. Denmark currently has 69% of all installed offshore wind capacity so it is disappointing that it has only 5% of the 2005-2009 capacity in prospect. Regionally, North America has a total of 16% of the market and this comes from relatively few projects. In comparison to the large European market (82% of all capacity) this is small, but it is a significant share and one that will be built upon in the future as the market grows in response to the successes seen both in Europe and the early projects off the USA. July 2005 20 Douglas-Westwood Limited & ODE Ltd
  21. 21. Scroby Sands – Supply Chain Analysis Final Report Asia is only a small market at present (2% of all capacity 2005-2009) but in the longer-term has good prospects. Onshore wind has experienced dramatic levels of growth in countries such as China and offshore developments are expected in a number of Asian countries in the future. 3.2 UK Offshore Wind With the award of licences to develop offshore wind energy, the UK has created one of the world’s largest current market places for the deployment of marine renewable technology. With billions of pounds worth of capital required to realise over 7 GW of electrical capacity, a significant opportunity has been presented to develop a strong UK supply chain supporting this emerging industry. The maturation of the industry over the next five years, moving from the construction of Round 1 projects with 30 turbines in relatively shallow waters close to the coast, to Round 2 projects with hundreds of turbines close to or beyond the 12 nautical mile territorial limit, will also directly affect the opportunities open to UK companies. Project supply chains and principal contractors will be faced with increased logistical demands, growing contractual risks, and pressure on available equipment supplies being countered by opportunities for economies of scale and innovations in equipment design and construction processes. 3500 3000 2500 Capacity MW 2000 1500 1000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Figure 3-2: UK Offshore Wind Capacity 2004-2012 (MW) Table 3-2: UK Offshore Wind Capacity 2004-2012 (MW) MW 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004-2012 UK 60 180 270 424 668 1,655 3,315 1,367 2,200 10,079 The UK is forecast to have the greatest level of activity in offshore wind in the world for mid-term future surpassing more established markets such as Denmark and beating Germany to large-scale offshore wind development. A total of over 10 GW is in prospect for the UK which would result in over £11 billion of expenditure. Post 2008, the UK market will be worth in excess of £1 billion per year. From 2008 the Round 2 projects off the UK dramatically boost the market and this strong growth will continue into the next decade. Table 3-3: UK & East of England Projects 2004-2013 – Units 2004- Projects 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2013 E of E 1 1 2 2 1 4 6 2 1 19 Other UK 1 1 3 4 2 3 1 1 16 Total 1 2 3 5 5 6 9 3 1 1 35 A total of 35 projects are planned in the UK, with 19 of these being within the East of England’s area of influence. Note that some of these projects are developments with multiple phases such as London Array. July 2005 21 Douglas-Westwood Limited & ODE Ltd
  22. 22. Scroby Sands – Supply Chain Analysis Final Report 4000 £m 3000 2000 1000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Figure 3-3: UK Offshore Wind Capital Expenditure 2040-2012 (£m) Table 3-4: UK Offshore Wind Capital Expenditure 2004-2012 (£m) £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004-2012 UK 75 225 363 529 819 1,824 3,646 1,504 2,420 11,330 3.3 East of England Offshore Wind 2000 1500 Capacity MW 1000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Figure 3-4: East of England Potential Capacity 2004-2012 (MW) Table 3-5: East of England Potential Capacity 2004-2012 (MW) MW 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004-2012 E of E 60 90 180 216 64 1,165 2,173 867 1,200 5,955 The charts and text above present the total potential of offshore wind in the East of England for all Round 1 and Round 2 projects. This assumes all projects scheduled go ahead as planned. For the purpose of this study all projects in the Thames Estuary and the Greater Wash are being considered to fall within the East of England’s area of influence. Although in some cases the locations of the planned projects in these two areas are some distance from the defined East of England region (Bedfordshire, Cambridgeshire, Essex, Hertfordshire, Norfolk and Suffolk), East of England companies will be tendering for contracts for these projects and the region’s ports are suited to the requisite construction work. July 2005 22 Douglas-Westwood Limited & ODE Ltd
  23. 23. Scroby Sands – Supply Chain Analysis Final Report The East of England has access to a total of 5,955 MW of capacity planned which will come from approximately 1,700 turbines. The capacity is allocated to the developers’ target completion date for their project. Wind farm capacity has not been split across multiple years unless official project phases have been announced. This results in an extremely high jump in installations from 2009 when the second round projects begin construction. The constraining factors on the above project capacities will be examined in more detail within the report but include the projects gaining planning approval, grid capacity, restructuring, new legislation to allow projects beyond the 12-mile nautical limit to be developed, sufficient turbine and foundation manufacturing capability, installation vessel availability, and most importantly, continued governmental support. These factors could result in project delays and even cancellations. The potential capacity shown above and potential expenditure shown below are, therefore, best-case scenarios. 2000 1500 £m 1000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Figure 3-5: East of England Potential Capital Expenditure 2004-2012 (£m) Table 3-6: East of England Potential Capital Expenditure 2004-2012 (£m) £m 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004-2012 E of E 75 113 250 270 70 1,285 2,390 954 1,320 6,652 Total capital expenditure relating to the development and construction of regional projects could amount to as much as £6.7 billion. This assumes all projects reach construction. Again, the timing of the projects is based on developers’ announced timescales. July 2005 23 Douglas-Westwood Limited & ODE Ltd
  24. 24. Table 3-7: East of England – Offshore Wind Farms Operational & Planned 2004-2012 Project Name Developer Location Target Online MW Turbines Scroby Sands EROWL off Caister, Great Yarmouth 2004 60 30 Kentish Flats GREP off Whitstable, North Kent 2005 90 30 Inner Dowsing Centrica with RES off Ingoldmells, Skegness 2006 90-108 30 Lynn Centrica off Skegness on Boulders Bank, Lincs 2006 90-108 30 Gunfleet Sands GE Wind off Clacton-on-Sea, Essex 2007 108 30 Cromer EDF off Mundesley, Norfolk 2007 90-108 30 Gunfleet Sands phase II GE Wind off Clacton on Sea, Essex, Thames Estuary 2008 64 16 Humber Gateway United Utilities and GREP off Spurn Head, Greater Wash 2009 300 60-100 Lincs (Inner Dowsing II) Centrica with RES off Skegness, Greater Wash 2009 250 50-83 London Array – (LAWL) P.1 EROWL and Core (Energi E2 & FarmEnergy) Thames Estuary, London 2009 300 100 Sheringham Shoal Scira Offshore Energy (Ecoventures & SLP) off Cromer, Greater Wash 2009 315 63-105 Greater Gabbard Airtricity and Fluor off Orfod, Thames Estuary 2010 500 139 Dudgeon East Warwick Energy off Cromer, Greater Wash 2010 300 60-100 London Array – Shell Shell Thames Estuary, London 2010 333 111 Thanet Warwick Energy off North Foreland, Kent, Thames Estuary 2010 300 60-100 Westernmost Rough Total off Aldbrough, Holderness, Greater Wash 2010 240 60-80 Docking Shoal Centrica with Amec off Skegness/Hunstanton, Greater Wash 2010 500 100-125 London Array – (LAWL) P.2 EROWL and Core (Energi E2 & FarmEnergy) Thames Estuary, London 2011 367 122 Race Bank Centrica with Amec off Skegness/Hunstanton, Greater Wash 2011 500 100-125 Triton Knoll Npower Renewables off Mablethorpe, Greater Wash 2012 1,200 240-300 The above table provides basic details of the projects in the East of England. To date the region has one operational project – Scroby Sands – which was completed in 2004. 24
  25. 25. Scroby Sands – Supply Chain Analysis Final Report 4 SCROBY SANDS The Scroby Sands offshore wind farm, located an average of 3 km off Caister, was developed by EROWL (formerly Powergen Renewables Offshore Wind Ltd). The potential for an offshore wind farm site was first investigated in 1995 with government approval given in April 2002. Planning approval was granted for 76 MW in spring 2002. Table 4-1: Scroby Sands – Project Data Scroby Sands 3 km off Caister, EROWL Location Developer Norfolk Construction 2003 Owner/Operator EROWL Online 2004 EPC Vestas Capacity (MW) 60 Turbine Installation A2Sea & Seacore Number of Turbines 30 Foundation Installation Mammoet Van Oord Turbine Manufacturer Vestas Total Cost (£m) 80 (inc. 5 yrs O&M) Turbine Rating (MW) 2 Planning Status Complete Foundation Type Monopiles Contracting Status Complete Water Depth (m) 2-10 EROWL were originally planning construction in 2003 and remained confident this could be achieved when the invitation to tender for the EPIC contract was issued in June 2002, even though contractors had only six weeks to complete bids for the work. Those bidding included Vestas, Mammoet Van Oord, Mayflower Energy/JB Hydrocarbons, A2Sea, SLP/Bouygues and Mowlem/HydroSoil. EROWL postponed the 2003 offshore construction target to a more realistically achievable 2004, and called for revised bids to be submitted. Vestas had been the firm favourite for the job having been a joint venture partner in Scroby since 1995 and in February 2003 they won the EPIC contract for all the offshore facilities and confirmed the project was to use 30 V-80 2 MW turbines. The contract included responsibility for operation and maintenance on the site over five years. The first subcontract to be issued by Vestas was to Halliburton KBR to project manage the development on its behalf, while EROWL employed its own project manager, Offshore Design Engineering (ODE), on a 20-month contract valued at around £750,000. ODE were responsible for the management and co-ordination of all aspects of the engineering, manufacture and installation of the development. In May 2003 Cambrian Engineering were awarded the contract for the supply of 16 piles, with Isleburn Mackay and Macleod winning a contract to supply the remaining 14 piles and approximately 700 tonnes of additional steelwork. The foundations were installed by Mammoet Van Oord’s newbuild vessel Jumping Jack, between October 2003 and January 2004. CNS Subsea installed the infield and export offshore cables, which were sourced from AEI Cables, while Nacap UK installed the onshore cables, supplied by Pirelli Cable Limited, over the period October 2003 to February 2004. EROWL also contracted EDF (formerly 24-7) for the onshore grid connection and have on ongoing consultancy contract with Econnect. Turbines were assembled at Vestas’ factory at Campeltown with A2Sea being awarded the turbine installation contract in February 2004 which was completed by their Ocean Ady vessel. Seacore were also contracted to install six of the turbines in the shallowest water locations. The turbines/blades were pre-assembled by Vestas Celtic at SLP Engineering’s Lowestoft yard. All turbines were installed by the beginning of June 2004, with a total installation time of 68 days (A2Sea installed 24 turbines in 50 days). The first of the turbines began production on the 20th July 2004, however, bad weather hampered commissioning efforts which meant that all turbines did not complete initial commissioning until the end of October 2004. High winds continued to slow work in November, but all reliability testing was completed by the end of November and after testing was completed all the turbines were online together for the first time on the 14th December 2004, with commercial completion being 31st December 2004. June 2005 25 Douglas-Westwood Ltd & ODE Ltd
  26. 26. Scroby Sands – Supply Chain Analysis Final Report In August 2004 the £500,000 operations centre was opened in Great Yarmouth, providing the service back- up for the wind farm which Vestas are providing under warranty. The development was formally opened on the 22nd March 2005. 4.1 Contract Hierarchy The following tables represent the overall project value and associated man-hours broken down by the key project stages of development, construction and operations. The development and construction data being actual historic data obtained from source, whilst the operations data is a prediction for the first five years of operation. Table 4-2: Scroby Sands – Value by Phase (£’000s) £’000s East of England Other UK Non UK Total UK % Development 335 922 480 1,737 72% Construction 7,415 24,485 39,611 71,511 45% Operations 5,095 550 1,180 6,825 83% Total 12,845 25,957 41,217 80,073 48% Table 4-3: Scroby Sands – Hours by Phase Hours East of England Other UK Non UK Total UK % Development 5,189 15,974 8,000 29,163 73% Construction 130,050 193,680 139,446 463,176 70% Operations 124,160 10,715 28,855 163,730 82% Total 259,399 220,369 176,301 656,069 73% One of the major concerns regarding the offshore wind industry is that non-UK installation contractors will install non-UK equipment, such that minimal benefit will be gained by UK and regional economies. However, an analysis of the contract hierarchy to Scroby Sands shows a high level of actual UK and East of England content, which clearly proves that high UK and regional content can be achieved and as such sets a benchmark against which other projects can be measured. When analysed by value, the level of East of England and East of other UK content is very good, however, when expressed as man-hours these percentages increase considerably. The England fundamental reason for this differential being that a high 16% proportion of the non-UK value is associated with major component supply and installation vessel contractors, which by their very nature have a low man-hour content relative to actual contract value. Non-UK 52% Other UK 32% Figure 4-1: Scroby Sands – £’000s June 2005 26 Douglas-Westwood Ltd & ODE Ltd

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