by Amisha Patel, Head of Power, Nuclear and Renewables and Public Affairs, EIC
Amisha Patel, Head of Power, Nuclear and Renewables at the EIC, the UK’s largest supply chain trade association, explains why offshore wind is becoming big business for oil companies, and why that’s no bad thing for the environment.
While the development and deployment of renewable energy is progressing rapidly, especially in the offshore wind sector, where technological advances and cost reductions mean more and bigger projects are being approved for construction, the shift from fossil fuels will not happen overnight. It’s not simply a question of out with the old, in with the new, but a gradual process influenced by a plethora of factors, including international policy frameworks, oil prices and project financing, not to mention the mindset of both energy suppliers and consumers.
The diversification from offshore oil and gas to offshore wind is a prime example of the evolving energy landscape. The UK has been building offshore wind farms for more than 10 years and currently has 37 operating offshore wind farms, representing around 7.9GW of capacity – enough to power more than eight million British homes. The offshore wind industry shares many similarities with oil and gas in how it develops, constructs, operates and maintains offshore assets, making it a logical diversification strategy for oil and gas companies, with major players leading the way.
Once upon a time Ørsted was Denmark’s state oil and gas company. Not any more, though – it has since divested its oil and gas assets to focus on clean energy, in particular offshore wind, where it’s a world leader, with a 25 per cent global market share, and a sizeable chunk of its portfolio located in UK waters.
Another example of an oiler going green is Norway’s Equinor, which is using its offshore oil and gas experience to develop its innovative floating platform technology for the Hywind project in the North Sea, the world’s first floating wind farm.
It’s not just big outfits making the move though. Dynamic and forward-thinking supply companies are also branching out. For example, EIC member company Wilton overcame the oil price collapse through a successful diversification into offshore wind, which now accounts for 100 per cent of its business. The Middlesbrough-based firm expanded its product offering, teaming up with Steelwind in Germany, and has successfully delivered 21 offshore transition pieces which were installed at the Hornsea One offshore wind farm.
Another traditionally oil and gas EIC member company, Sparrows Group, was commended earlier this year for providing 102 bespoke WindMaster turbine platform cranes to the East Anglian ONE offshore wind farm for ScottishPower Renewables. The WindMaster, which was specifically developed for the renewables market, is the only luffing crane designed and manufactured in the UK suitable for the offshore wind industry.
The cases of Wilton and Sparrows Group show that in addition to opening up new business opportunities, diversification enables companies to reduce dependence on a single market, and to reorient and distribute resources between markets according to their project pipeline.
The UK oil and gas sector possesses a wealth of expertise, products and services that can be adapted for offshore wind. Thanks to technology overlap, notably in the maritime and subsea areas, it’s not an insurmountable step for oil and gas companies to adapt and redeploy their existing technologies in offshore wind.
While the skills overlap between oil and gas and offshore wind is evident, some petroleum supply firms who have diversified have stressed that the way oil and wind developers work is quite different. In the offshore wind sector, suppliers are expected to develop a product internally that complies with relevant standards, and only then approach potential buyers, which brings with it a greater risk burden. In the oil and gas sector operators and contractors tend to approach suppliers with specific problems that they want solved under a specific set of circumstances.
Whether by choice or due to market forces such as the downturn in oil prices, many companies whose main market has traditionally been offshore oil and gas are diversifying to make the most of the lucrative opportunities on offer in the offshore wind sector, where the UK is leading the world in installed capacity. Globally, the market is set to go from strength to strength, with 115GW of capacity expected by 2030, up from 18GW at the end of 2017.
Likewise, these new entrants into the market have demonstrated that they excel in problem-solving and producing innovative cost-cutting technologies, all of which are helping to create more efficient wind farms that are less reliant on subsidies. Whatever their motive, oil and gas companies moving into offshore wind is not only good for business, it’s good for the planet too.
For those companies working in the renewable energy sector or thinking about entering it, please contact me to find out how the EIC can help you to win work on clean energy projects around the world.