Friday 28th March 2014

Wind Watch

It's the deal everyone's talking about. It has also been three years in the making. But, this week, details of major manufacturing agreements worth £310m in Yorkshire were finally announced.

No wonder everybody's so damn pleased.

I am, of course, talking about Siemens investing in a new offshore turbine blade manufacturing facility and assembly plant, with Associated British Ports joining the development to build new port facilities. Siemens will invest £160m, and ABP will invest £150m.

The project began its gestation in 2011 but, as the European wind industry wavered in the face of inconsistent political support, it was placed on indefinite hold.

That lasted nigh on three years. Now, three years is a long time in an emerging energy market, and it is a very long time in politics.

So it is against a backdrop of waning support for offshore wind both in the UK and on the continent, particularly in Germany, that Siemens is now making this investment in what it considers to be the strongest offshore wind energy market.

Okay, the manufacturer took its time, but that's fair enough. For this is quite the commitment.

And remember, of the eight forthcoming UK North Sea initiatives, Siemens is currently only the confirmed turbine supplier for two of them.

Put bluntly, it will face no shortage of competition. Vestas is back at the top spot for turbine manufacturers, and there are new European operators that will increasingly get a look in, including in the joint venture between Gamesa and Areva.

On top of that you can add the aspirational Asian ambitions of the likes of Samsung, which is currently testing its own 7MW unit at the NAREC facility in Northumberland. The race is really heating up.

Sure, Siemens has already started to sell its 6MW units, the first of which will be installed at Westermost Rough, and its order book isn’t exactly slim. Nevertheless, there have been mutterings around the market about whether Siemens might have left the manufacturing investment decision too late.

The company clearly doesn’t think so, and it obviously has considerable faith not only in its ability to win work, but also in the ability for DONG Energy, with whom it has strong commercial ties, to keep building sites and buying turbines, too.

But it remains a big bet. Particularly given that, in the same week, SSE announced a consumer energy bill price freeze and pulled out of the Galloper and Islay offshore wind farm projects.

However, despite all of this, we see this as a bet that needs to be made.

This is a sign that multinationals feel they can still do business in the UK; and that, despite all the positive efforts to force a cost reduction on the industry, the market continues to recognises the importance of being able to dig deep and invest.

As an unnamed government official commented privately earlier in the week, it’s easy to be sceptical from the sidelines. It's far harder to actually spend.