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This commentary is part of Energy Rewired, a project from the CSIS Energy Security and Climate Change Program studying the industrial strategies of major economies for the energy transition. The project examines countries’ big bets on emerging energy technologies and how these will rewire the world’s energy map.
Vision
The United Kingdom’s offshore wind strategy relies on strong partnership between the government and industry. Initially, this effort fell under a broader Industrial Strategy for the country that aimed to make the country the “world’s most innovative economy.” However, in the wake of the Covid-19 crisis, the government shifted to a new Plan for Growth, which doubled down on infrastructure investments and research and development (R&D) spending. Building on The Ten Point Plan for a Green Industrial Revolution from November 2020, the Plan for Growth pledges £ 100 billion ($138 billion) in infrastructure spending in 2021, a 30 percent increase from the previous year. The United Kingdom spent £13.4 billion ($18.5 billion) on R&D in 2019 and the government has pledged to increase that to £22 billion ($30 billion) per year by 2025. It is unclear how much of this will be directed toward energy, but the Ten Point Plan pledged £12 billion ($17 billion) to support green jobs. In 2019, energy received 4 percent of public R&D funding, with 13 percent of that going to renewable energy specifically.
The Plan for Growth also increases ambitions for offshore wind—while the previous strategy pledged 30 gigawatts (GW) by 2030, the Plan for Growth increases the target to 40 GW. This would be a 400 percent increase from the approximately 10 GW already installed, the most of any country in the world. The 40 GW target is roughly in line with targets established in some other major economies, including the United States’ 30 GW by 2030 target, Japan’s 35–45 GW by 2040 target, and India’s 30 GW by 2040 target.
The United Kingdom emphasizes economic opportunity in its offshore wind buildout—the Plan for Growth suggests its 40 GW target could increase direct jobs in the industry from 7,200 today to 60,000 in 2030. However, it also makes it clear that offshore wind contributes to the country’s emissions goals, which pledge net-zero emissions by 2050. In 2008, the Climate Change Act created a requirement for “carbon budgets” that establish emissions reduction targets in five-year increments. Cumulatively, the first five budgets establish a 57 percent reduction from 1990 levels by 2032. As of 2020, the country had already reached a 50 percent reduction from 1990 levels, although some of that was due to the Covid-19 pandemic and is expected to rebound. These reductions were driven by the country eliminating almost all coal from electricity production, increasing industrial and building efficiency, and lowering methane emissions from fossil fuels. The latest “carbon budget” estimates that the United Kingdom will need to build 95 GW of offshore wind capacity by 2050 to reach net-zero emissions.
Strategy
The cornerstone of the United Kingdom’s offshore wind strategy is the 2018 Offshore Wind Sector Deal, one of ten sector deals under the Industrial Strategy, which implements five major policies and goals to support the industry. First, the government pledges £557 million ($770 million) for future Contracts for Difference auctions (described below). Next, the industry commits to using domestic content for 60 percent of materials by 2030. The industry also aspires that a third of the workforce will be women by 2030. The fourth element of the deal seeks to increase exports to £2.6 billion ($3.6 million) by 2030. Finally, the industry pledges £250 million ($346 million) to strengthening the domestic supply chain, primarily through a new organization called the Offshore Wind Growth Partnership (OWGP). The OWGP is a joint effort of the government’s innovation arm, Innovate UK, and private sector incubator ORE Catapult.
The Contracts for Difference (CfD) scheme is one of the major economic incentives the United Kingdom provides to offshore wind generators. This program, established in 2013 and run approximately every two years, runs reverse auctions in which renewable energy generation owners submit bids to supply a certain amount of capacity and the electricity system operator selects projects for support. Each winning bidder signs a contract that establishes a strike price based on the cost of investment and either pays or receives the difference between that price and the market price on an ongoing basis. The size of offshore wind farms has led them to dominate CfD auctions, making up 54 percent of capacity in the 2015 round, 96 percent in the 2017 round, and 95 percent in the 2019 round (despite not making up a majority of projects in the first two rounds).
Other types of government support for offshore wind in the United Kingdom often take the form of competitive grant opportunities. In 2020 and 2021, the government announced funding opportunities for subjects, such as £160 million ($221 million) for domestic component manufacturing in disadvantaged regions, £1.5 million ($2.1 million) for R&D partnerships with U.S. companies, and £20 million ($28 million) for floating offshore wind demonstration projects. A committee of government and industry stakeholders is also evaluating the potential to shift from a transmission model—in which individual wind farm owners pay for transmission lines from their projects directly to shore—to one where multiple wind farms connect to a single line to shore.
There are several institutions in the United Kingdom that bring together government and industry. The Offshore Wind Industry Council brings together government and industry to oversee the offshore wind sector and, more recently, the implementation of the Offshore Wind Sector Deal. In addition to the OWGP, the government funds ORE Catapult and the Knowledge Transfer Network to run the Offshore Wind Innovation Hub, which identifies priorities and opportunities for innovation in offshore wind technology. One of the ways in which the hub identifies these opportunities is through its Technology Innovation Roadmaps, formed in consultation with industry on companies’ needs.
Geography
Offshore wind is inherently a geographically focused technology, in that it must be located off coasts and in areas with sufficient wind speeds. Much of the offshore wind sector built or planned is in the North Sea off the eastern coast of the United Kingdom (a region with “among the world’s best wind resources”), but the country also has several development zones off the northern coast and some development in the Irish Sea between the United Kingdom and Ireland.
The North Sea is home to much of the United Kingdom’s oil and gas production. In March 2021, the government signed a deal with the domestic oil and gas industry to help invest in a cleaner power supply for its operations and to help identify potential job opportunities in growing industries, such as offshore wind. This was in exchange for emissions reductions commitments and a new “checkpoint” for oil and gas leases that are “aligned with wider climate objectives.” Oil and gas industry executives have indicated that they are able to apply solutions from their traditional business to offshore wind in the region and, in turn, offshore wind is helping lower emissions from oil and gas operations.
To support its domestic supply chain requirements, the government has begun directing investment to ports in disadvantaged regions where much of the current offshore wind development is occurring. In March, the government announced a £75 million ($104 million) investment in a port on the eastern coast of England and a £20 million ($28 million) investment in a port on the northeastern coast of England to make their facilities ready for offshore wind component manufacturers. The Offshore Wind Growth Partnership also oversees the development of eight regional clusters—strategic efforts to co-locate different parts of the offshore wind supply chain, from manufacturing and fabrication to construction, operations, and maintenance.
Stephen Naimoli is an associate fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.
This commentary is made possible by support from the Hewlett Foundation.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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