Maintaining Momentum: Why Supply Chain Collaboration Is Key in Europe’s Offshore Wind Ambitions

The following article is a guest post by Wayne Mulhall, Managing Director at James Fisher Renewables.

The global offshore wind market is at an inflection point. On the one hand, megaprojects around the world are transitioning from a subsidy to a merchant development and finance model. On the other hand, floating offshore wind (FOW) is still in the testing stage, and we’ve barely begun to explore the possibilities of new concepts such as offshore wind plus hydrogen production.

By their nature, inflection points are both exciting and nerve-racking. There is opportunity to be grasped and success depends on our actions as an industry now – but there is fear that we fail to capitalise if we get things wrong.

In our view, in order to maintain – or even accelerate – that momentum, it’s time to refocus on collaboration throughout the supply chain, with sensitivity to the different strengths and needs across different countries, regions and even models.

Offshore wind targets are ballooning around the world. In May, Germany, Belgium, the Netherlands and Denmark pledged to build at least 150 GW of capacity in the North Sea by 2050, with the European Commission setting a wider 300 GW target for the same date – quite the climb from the roughly 16 GW currently installed in the EU.

To the west, the US is the sleeping giant that is beginning to stir, with the country’s first commercial-scale offshore wind farm under construction, Vineyard Wind. The first stage of the project runs to 800 MW capacity, bringing the US rapidly within touching distance of the first GW milestone, but still a way off from its 30GW by 2030 target.

Moving further around the globe, Australia has announced targets of 2 GW of capacity by 2032, rising to 4 GW in 2035 and 9 GW by 2040. Elsewhere in APAC, Spain’s BlueFloat Energy has unveiled a massive 1 GW floating offshore wind project off the coast of Hsinchu, Taiwan. Further GW scale projects abound around the world.

If this not-at-all comprehensive list seems eclectic, that’s the point. The offshore wind revolution isn’t restricted to a particular type or group of countries. Northern European nations are leveraging decades of offshore oil and gas expertise to build a formidable position, yet the US – which has equally dominated traditional offshore energy with its Gulf of Mexico expertise – has been a slow starter (though the California governor has called for 20 GW by 2045). High-tech Taiwan has been one of the fastest out of the blocks in APAC, but India has also ratcheted up its ambition. Another slow starter has been Australia, with preliminary work being done for one of its first projects, the 1.5 GW Seadragon site off the coast of Gippsland.

The differences between projects at least match the similarities. Compare the wide continental shelf enjoyed by North Sea operators, ideal for fixed-base projects, versus the very steep, narrow shelf off the coast of Japan, pushing towards FOW. Or even culturally – the flat business hierarchy typical of an Australian company is very different to the more rigid one common to Japan (partly) in the same time zone.

The nature of economies and resources also differ. The likes of Japan and Korea have an enviable manufacturing heritage that can be deployed to support offshore wind, while a neighbour such as the Philippines may need more external input to reach its planned 11.6 GW of projects.

This heterogeneity underscores the need for international collaboration across the supply chain. A one size fits all approach won’t work, but nor will reinventing the wheel for each and every project. We need agile approaches that can be adapted and applied in different scenarios.

The renewables sector is no stranger to adaptation. Take the TetraSpar project, it has developed a fully industrialised, modular approach to creating floating offshore wind foundation platforms. Itself a collaboration between four major companies in the offshore wind supply chain, the approach is highly configurable for different end-markets. For example, an advanced manufacturing economy such as Japan may wish to fabricate the foundations domestically according to licensed designs or according to policy preferences for local content, while a country like the Philippines may prefer to import the components and invest more in upskilling an installation and servicing workforce.

Collaboration is also vital simply due to the sheer scale of offshore wind ambition worldwide – both in terms of the total capacity, and also the difficulty of projects, which is scaling upwards. Today’s projects are pushing into deeper water, further from shore, creating logistical challenges as well as additional costs related to the transportation of people and materials. As the industry transitions away from subsidy support, it becomes critical to find engineering and commercial efficiencies.

A collaborative approach can help on both counts. From an engineering perspective, OEMs and suppliers can collaborate on component specifications to avoid unnecessary ‘gold plating’ projects. From a commercial perspective, open collaboration allows for more efficient sharing of project risk, translating into direct financial benefit. For example, supply chain parties could pool contingency rather than stacking it in every contract at each link in the chain, meaning less total margin needs to be set aside as contingency. Similarly, companies that understand each other’s capabilities can ensure that the right risk is carried by the party best placed to shoulder that risk – but it requires good faith cooperation.

These efficiencies will only become more valuable as the repercussions from the war in Ukraine begin to make themselves felt through the offshore wind supply chain – something we can expect to become more acute in the coming months. However, the offshore wind industry has rallied and overcome every challenge it has faced so far, and I have faith it can continue to do so – if we can keep collaboration throughout the supply chain front of mind.