Scroby Sands - Supply Chain Analysis

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

Scroby Sands – Supply Chain Analysis Final Report

July 2005 2 Douglas-Westwood Limited & ODE Ltd

Renewables East is a not-for-profit, independent company, grant funded by theEast of England Development Agency, tasked with advocating the growth ofrenewable energy opportunities in the East of England.

The company addresses issues underpinning the Government’s long-term strategic vision for anational energy policy that encompasses a response to the threat of climate change, the need toaddress the security of the UK’s energy supplies, and the opportunities to improve our economiccompetitiveness by the development and deployment of renewable energy technologies to achieve alow carbon future. ( www.renewableseast.org.uk )

The DTI 2010 Target Team is responsible for successfully delivering theGovernment’s target of 10 per cent of UK electricity from renewable energysources by 2010. The team does this through co-ordination, influencing and drivingof activity.

Within the 2010 Target Team, the Business Development Unit is working with UK industry, trackingbusiness opportunities, to help it win a greater share of renewables business. This involves working inpartnership 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 renewableenergy issues. The board is an independent, non-departmental public body sponsored by the DTI thatbrings together government departments, the renewables industry and the unions. It aims to developmutual understanding of the key issues for the industry – like technology development, barriers tomarket 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 theGovernment’s target of providing 10 per cent of electricity from renewable sources by 2010. Theworkstreams, jointly chaired by a DTI representative and an industry member, are: making offshorewind 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 theUK being the second largest electricity generator in the UK and owning thesecond 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 orunder construction, producing enough power to supply 125,000 homes,�E.ON UK�also runs and ownstwo hydro-power stations, including England and Wales’ largest hydro station, the 50MW plant atRheidol in Ceredigion. The company�is also burning renewable biomass fuels such as woodchip andpalm nuts alongside coal at some of its conventional power stations, and has outline planningpermission 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 thedevelopment 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 dynamicindustry 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-techmarket-leading group with more than 9,500 employees. ( www.vestas.com )



Contents1 EXECUTIVE SUMMARY .................................................................................................................................7

1.1 S CROBY S ANDS C ONTRACT H IERARCHY.......................................................................................................... 7 1.2 K EY A REAS OF UK AND E AST OF E NGLAND C APABILITY................................................................................. 7 1.3 F UTURE UK AND E AST OF E NGLAND C ONTENT............................................................................................... 8 1.4 R ECOMMENDATIONS ........................................................................................................................................ 9

2 INTRODUCTION ..............................................................................................................................................11

2.1 A IMS & O BJECTIVES.......................................................................................................................................12 2.2 S COPE OF W ORK ............................................................................................................................................12 2.3 P ROJECT D ELIVERABLES ................................................................................................................................13 2.4 M ETHODOLOGY ..............................................................................................................................................13 2.5 R ELATED S TUDIES...........................................................................................................................................16

3 MARKET TRENDS ..........................................................................................................................................19

3.1 W ORLD O FFSHORE W IND 2000-2009 .........................................................................................................193.2 UK O FFSHORE W IND .....................................................................................................................................21 3.3 E AST OF E NGLAND O FFSHORE W IND............................................................................................................22

4 SCROBY SANDS .............................................................................................................................................25

4.1 C ONTRACT H IERARCHY...................................................................................................................................26 4.2 UK C ONTENT ..................................................................................................................................................31 4.3 E AST OF E NGLAND C ONTENT .........................................................................................................................32

5 GAP ANALYSIS ...............................................................................................................................................35

5.1 T HE UK S UPPLY C HAIN C APABILITY ..............................................................................................................35 5.2 T HE E AST OF E NGLAND S UPPLY C HAIN C APABILITY .....................................................................................35 5.3 V ALUE AND E MPLOYMENT A SSESSMENT ......................................................................................................36 5.4 G APS IN THE S UPPLY C HAIN...........................................................................................................................37 5.5 K EY A REAS FOR F UTURE UK CONTENT..........................................................................................................39

6 POTENTIAL SUPPLY CHAIN PENETRATION .........................................................................................43

7 FORECAST ROUND 2 UK CONTENT ........................................................................................................49

7.1 UK R OUND 2 P ROJECTS ................................................................................................................................49 7.2 T YPICAL A TTRIBUTES OF A R OUND 2 P ROJECT .............................................................................................58 7.3 T HE K EY C HALLENGES OF ‘S CALING - UP ’ .......................................................................................................587.4 R OUND 2 C APABILITY A SSESSMENT AND A NALYSIS.....................................................................................60 7.5 F ORECAST C ONTENT IN E AST OF E NGLAND R OUND 2 P ROJECTS................................................................64

8 INTERVENTION STRATEGIES AND FUTURE RESEARCH .................................................................68

8.1 B USINESS D EVELOPMENT S TRATEGY ............................................................................................................68 8.2 A CTION P LAN ..................................................................................................................................................70 8.3 R ECOMMENDATIONS FOR F UTURE R ESEARCH..............................................................................................72

9 APPENDICES ....................................................................................................................................................73

Douglas-Westwood LtdSt Andrew’s House, Station Road East, Canterbury, Kent, CT1 2WD, UK

tel: +44 1227 780999 fax: +44 1227 780880email: [email protected] www.dw-1.com

Offshore Design Engineering LtdMarine Base, South Denes Road, Great Yarmouth, Norfolk, NR30 3PR, UK

tel: +44 1493 845100 fax: +44 1493 847568www.ode-ltd.co.uk

The information contained in this document is believed to be accurate, but no representation or warranty, expressor 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 suchinformation whether fact, opinion or conclusion that the reader may draw.



Figures

FIGURE 1-1: SCROBY SANDS – VALUE BY TIER 1 CATEGORY (£’000S)........................................................................ 7FIGURE 1-2: FORECAST UK CONTENT IN EAST OF ENGLAND ROUND 2 PROJECTS ..................................................... 9FIGURE 3-1: WORLD OFFSHORE WIND CAPACITY 2000-2009 (MW).......................................................................20FIGURE 3-2: UK OFFSHORE WIND CAPACITY 2004-2012 (MW) ..............................................................................21FIGURE 3-3: UK OFFSHORE WIND CAPITAL EXPENDITURE 2040-2012 (£M)............................................................22FIGURE 3-4: EAST OF ENGLAND POTENTIAL CAPACITY 2004-2012 (MW)................................................................22FIGURE 3-5: EAST OF ENGLAND POTENTIAL CAPITAL EXPENDITURE 2004-2012 (£M) .............................................23FIGURE 4-1: SCROBY SANDS – £’000S........................................................................................................................26FIGURE 4-2: SCROBY SANDS – VALUE BY TIER 1 CATEGORY (£’000S)......................................................................27FIGURE 4-3: SCROBY SANDS – HOURS BY TIER 1 CATEGORY ....................................................................................27FIGURE 4-4: SCROBY SANDS CONSTRUCTION & OPERATION TIMELINE - MANHOURS .............................................30FIGURE 6-1: CONTRACTING STRATEGIES – SCENARIO 1..............................................................................................43FIGURE 6-2: CONTRACTING STRATEGIES – SCENARIO 2..............................................................................................44FIGURE 6-3: CONTRACTING STRATEGIES – SCENARIO 3..............................................................................................45FIGURE 6-4: CONTRACTING STRATEGIES – SCENARIO 4..............................................................................................46FIGURE 7-1: UK STRATEGIC AREAS..............................................................................................................................49FIGURE 7-2: FORECAST UK CONTENT IN EAST OF ENGLAND ROUND 2 PROJECTS ...................................................64FIGURE 7-3: FORECAST EAST OF ENGLAND CONTENT IN REGIONAL ROUND 2 PROJECTS ........................................65FIGURE 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) ............................................................................................ 7TABLE 1-2: UK PROVEN CAPABILITY – TIER 1 COMPONENT ........................................................................................ 8TABLE 1-3: FORECAST UK CONTENT IN EAST OF ENGLAND ROUND 2 PROJECTS....................................................... 9TABLE 1-4: FORECAST EAST OF ENGLAND CONTENT IN REGIONAL ROUND 2 PROJECTS............................................ 9TABLE 2-1: DEVELOPMENT PHASE – COMPONENT ITEMS...........................................................................................14TABLE 2-2: CONSTRUCTION PHASE – COMPONENT ITEMS .........................................................................................14TABLE 2-3: OPERATIONS PHASE – COMPONENT ITEMS ..............................................................................................15TABLE 3-1: WORLD OFFSHORE WIND CAPACITY 2000-2009 (MW).........................................................................20TABLE 3-2: UK OFFSHORE WIND CAPACITY 2004-2012 (MW) ................................................................................21TABLE 3-3: UK & EAST OF ENGLAND PROJECTS 2004-2013 – UNITS......................................................................21TABLE 3-4: UK OFFSHORE WIND CAPITAL EXPENDITURE 2004-2012 (£M) .............................................................22TABLE 3-5: EAST OF ENGLAND POTENTIAL CAPACITY 2004-2012 (MW) .................................................................22TABLE 3-6: EAST OF ENGLAND POTENTIAL CAPITAL EXPENDITURE 2004-2012 (£M)...............................................23TABLE 3-7: EAST OF ENGLAND – OFFSHORE WIND FARMS OPERATIONAL & PLANNED 2004-2012 ......................24TABLE 4-1: SCROBY SANDS – PROJECT DATA.............................................................................................................25TABLE 4-2: SCROBY SANDS – VALUE BY PHASE (£’000S) ..........................................................................................26TABLE 4-3: SCROBY SANDS – HOURS BY PHASE.........................................................................................................26TABLE 4-4: SCROBY SANDS –VALUE BY TIER 1 CATEGORY (£’000S )........................................................................27TABLE 4-5: SCROBY SANDS – HOURS BY TIER 1 CATEGORY......................................................................................28TABLE 4-6: SCROBY SANDS – DEVELOPMENT PHASE VALUE (£’000S)......................................................................28TABLE 4-7: SCROBY SANDS – DEVELOPMENT PHASE HOURS....................................................................................28TABLE 4-8: SCROBY SANDS – CONSTRUCTION PHASE VALUE (£’000S).....................................................................29TABLE 4-9: SCROBY SANDS – CONSTRUCTION PHASE COMPONENT VALUE (£’000S) ..............................................29TABLE 4-10: SCROBY SANDS – CONSTRUCTION PHASE HOURS.................................................................................29TABLE 4-11: SCROBY SANDS – COMPONENT CONSTRUCTION HOURS ......................................................................30TABLE 4-12: SCROBY SANDS – 5 YEAR OPERATIONS VALUE (£’000S) & HOURS.....................................................30TABLE 4-13: SCROBY SANDS – UK CONTENT VALUE (£’000S) ..................................................................................31TABLE 4-14: SCROBY SANDS – UK CONTENT HOURS ................................................................................................32TABLE 4-15: SCROBY SANDS – EAST OF ENGLAND CONTENT VALUE (£’000S).........................................................32TABLE 4-16: SCROBY SANDS – EAST OF ENGLAND CONTENT HOURS .......................................................................33TABLE 5-1: UK PROVEN CAPABILITY – TIER 1 COMPONENT ......................................................................................35TABLE 5-2: EAST OF ENGLAND PROVEN CAPABILITY – TIER 1 COMPONENT .............................................................36TABLE 5-3: SCROBY SANDS – VALUE (£’000S) ...........................................................................................................36TABLE 5-4: SCROBY SANDS – HOURS..........................................................................................................................37TABLE 5-5: SCROBY SANDS – COMPONENT CONSTRUCTION (£’000S)......................................................................37TABLE 5-6: SCROBY SANDS – COMPONENT CONSTRUCTION (HOURS) ......................................................................38TABLE 5-7: SCROBY SANDS – OFFSHORE INSTALLATION (£’000S) ............................................................................38TABLE 5-8: SCROBY SANDS – OFFSHORE INSTALLATION (HOURS) ............................................................................38



TABLE 5-9: SCROBY SANDS – PROCUREMENT & MANUFACTURE (£’000S) ..............................................................39TABLE 5-10: SCROBY SANDS – PROCUREMENT & MANUFACTURE (HOURS) ............................................................39TABLE 5-11: SCROBY SANDS – POTENTIAL UK VALUE (£’000S)................................................................................39TABLE 5-12: SCROBY SANDS – POTENTIAL UK HOURS..............................................................................................40TABLE 5-13: SCROBY SANDS – POTENTIAL EAST OF ENGLAND VALUE (£’000S) ......................................................40TABLE 5-14: SCROBY SANDS – POTENTIAL EAST OF ENGLAND HOURS.....................................................................41TABLE 7-1: TYPICAL PROJECT CHARACTERISTICS........................................................................................................58TABLE 7-2: HIGH-CASE – MAXIMUM POTENTIAL UK AND EAST OF ENGLAND VALUE (£’000S)...............................61TABLE 7-3: HIGH-CASE – MAXIMUM POTENTIAL UK AND EAST OF ENGLAND HOURS .............................................61TABLE 7-4: PROVEN-CASE – PROVEN UK AND EAST OF ENGLAND VALUE (£’000S).................................................62TABLE 7-5: PROVEN-CASE – PROVEN UK AND EAST OF ENGLAND HOURS ...............................................................62TABLE 7-6: LOW-CASE – UK AND EAST OF ENGLAND VALUE (£’000S) .....................................................................63TABLE 7-7: LOW-CASE – UK AND EAST OF ENGLAND HOURS ...................................................................................63TABLE 7-8: FORECAST UK CONTENT IN EAST OF ENGLAND ROUND 2 PROJECTS.....................................................64TABLE 7-9: FORECAST EAST OF ENGLAND CONTENT IN REGIONAL ROUND 2 PROJECTS..........................................65TABLE 7-10: UK AND EAST OF ENGLAND MAN-HOURS FOR A TYPICAL ROUND 2 PROJECT ....................................66TABLE 8-1: EAST OF ENGLAND POTENTIAL CAPABILITY – TIER 1 COMPONENT.........................................................70





1 Executive Summary

1.1 Scroby Sands Contract HierarchyThe development, construction and initial five years operation of the Scroby Sands offshore wind farmwill result in a total expenditure of £80 million. Contracts to the value of £38.8m (48%) were sourcedfrom UK companies, with £12.8m (16%) originating within the East of England.

Figure 1-1: Scroby Sands – Value by Tier 1 Category (£’000s)

Table 1-1: Scroby Sands – Value by Phase (£’000s)

The highest levels of UK and East of England content were realised within the development andoperations phases of the project. The construction phase presented the highest value phase of theproject 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 phasepresents significant challenges for East of England and UK companies to deliver competitive productsand services into future offshore wind projects.

1.2 Key Areas of UK and East of England CapabilityThe majority of the UK’s 48% content has been sourced from successful penetration of the lowertiers of the supply chain with a significant number of relatively low value, service-based contractswith, for instance, the UK providing all environmental monitoring, survey, insurance/legal and onshoreinstallation related works. Such activity was supplemented by high levels of East of England contentwithin project management, onshore pre-assembly and operations and maintenance activities.

£’000s East ofEngland Other UK Non UK Total Cost UK % EofE %

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%

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Table 1-2: UK Proven Capability – Tier 1 ComponentHigh Medium Low

EnvironmentalMonitoring

Development DesignDetailed Design

Insurance / LegalCommissioning Procurement &

ManufacturingSurveys Onshore Pre-Assembly Offshore InstallationProject Management Transport & DeliveryOnshore InstallationOperations &Maintenance

70% of the value of contracts awarded for Scroby related to the procurement and manufacture ofcomponents and offshore installation. However, of a total value of £55.7 million, £19 million wassourced from within the UK and only £291,000 from within the East of England. Whilst the UK hassufficient fabrication and installation capabilities to cope with Round 1 projects it currently lacks boththe 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 topenetrate the supply chain for the provision of lower tier labour intensive activities. This resulted insignificant employment benefits for the UK supply chain with UK content at 48% of the value ofcontracts awarded on Scroby Sands accounting for 73% of the hours spent on the project, with Eastof England content growing from 16% to 40% respectively.

An analysis of the contracts awarded within Scroby Sands shows that UK content could conceivablyhave been raised from £38.8 million (48%) to £56.5 million (71%) given current but as yet unrealisedcapability. The primary area of potential growth is offshore installation, where UK companies have thecapabilities to perform all tasks. If the region could fully develop this inherent capability and offer acost competitive suite of products and services, East of England content within Scroby Sands couldhave reached approximately £24 million.

1.3 Future UK and East of England Content

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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

Using the data from Scroby Sands, total UK and regional content was forecast for future Round 2projects within the Greater Wash and the Thames Estuary using 3 different scenarios. Total forecastexpenditure on the Round 2 projects in the two strategic areas of relevance to the East of Englandamounts to approximately £6 billion. The low-case scenario forecasts that £1 billion should beachievable by UK companies. If a similar contracting methodology to Scroby Sands was used, UKcontent could be as high as £2.8 billion. The maximum potential UK content is forecast atapproximately £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 728Proven-Case 11 204 380 152 210 957High 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 ofEngland, regional value is forecast to be between £728 million and £1.8 billion. Scaled up levels ofregional content achieved within Scroby Sands on all Round 2 projects in the two strategic areaswould 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 apre-assembly, construction and operations base. National ports face substantial competition frommainland 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 RecommendationsThe UK and East of England have demonstrated a high capability and competitiveness to attainsignificant value and work from future offshore wind projects. There are some significant challengesto be met to ensure national and regional economic benefits can be delivered. These actions need tofurther support and maintain existing capabilities whilst stimulating diversification and market entryinto 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 upby a long-term co-ordinated approach from government. It is vital that the UK Government continuesto show commitment to the sector and maintains market conditions that will support the transitionfrom Round 1 projects such as Scroby Sands to larger and more technically complex Round 2 projectsin the period up to and beyond 2010. Such support is necessary to the economics of the sector, bothin terms of project financing and creating the confidence for required long-term investment by thedevelopers 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.

£m 2008 2009 2010 2011 2012 TotalLow-Case 12 214 398 159 220 1,002Proven-Case 33 602 1120 447 619 2,821High-Case 49 889 1653 660 913 4,163

Total E of E R2 70 1,285 2,390 954 1,320 6,019





2 Introduction

Scroby Sands was commercially complete on 31st December 2004 and was formally opened in March2005. It is the second of the UK Round 1 offshore wind projects to be constructed. To date, analysisof the economic benefits likely to accrue nationally and regionally from UK companies participating inthese projects and future second round developments has been based upon high level capabilityassessments, rather than practical experience.

Thanks to support from the Department of Trade and Industry, Renewables East, the renewableenergy agency for the East of England, was able to commission research to accurately measure thelevel 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. Directbenefits will be seen in terms of jobs created or safeguarded and the value of contracts secured. Thisanalysis has only been possible with the support and involvement of E.ON UK Renewables OffshoreWind Limited (EROWL – formerly Powergen Renewables Offshore Wind Ltd), and the maincontractors, Vestas Celtic, who acted as turbine supplier and engineering, procurement, installationand construction (EPIC) contractor.

As with most large scale capital projects, commercial capabilities from those tendering their goodsand services have been assessed through contractual processes, with corporate assessments of riskand cost determining the level of UK company involvement through the contracts awarded by theproject 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 insightinto how successful UK companies have been under international contracting procedures and howsuch procedures may change in the future with larger projects and with greater practical experience inconstruction. The timetable associated with the project also helped increase content throughdiscussions with local firms during the development phase, with the period between the originaltendering programme and the later resubmission of tenders being a key phase for regional companiesto become involved with the project.

The way in which contracts are assembled and subsequently issued for tender can have apronounced effect on final tender submissions. In particular, inconsistent or over complex contractscan adversely affect the way in which a contractor will submit their tender, or influence if they willeven submit a tender return at all. This is something that has been previously recognised in theoffshore 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 aview to standardisation. One of the key results of CRINE was the adoption of standard terms andconditions that could be applied across the whole sector. Whilst it is recognised that the offshorewind 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 portselection having a significant impact on direct, indirect and induced economic activity associated withthe project. These issues will also have a bearing on the capability of individual and collective regionsto meet the supply chain demands for the construction of future projects, particularly when the scaleof 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 supplychain with the highest value or which are most open to UK and regional company involvementbecause of local knowledge, and also provide for an indication as to where strategic interventions bythe public sector would derive greatest potential benefit.

A thorough review of the Scroby Sands supply chain offers the potential to better understand therelative current success of UK businesses in securing work within the offshore wind industry. Buildingon this information a review can be undertaken of what further opportunities and challenges face theattempts to grow a strong domestic supply chain to support future projects of this scale and give agood indicator as to the challenges facing UK involvement in projects of a greater complexity andscale such as the second round projects. Finally, it becomes possible to forecast what additionalresearch will be required to identify the appropriate level of strategic intervention and businesssupport required nationally and regionally to secure a greater share of the economic benefits for the



UK economy as the industry matures and the rate of deployment of the technology accelerates tosupport growing national, European and world markets.

2.1 Aims & ObjectivesThe study is specifically seeking to:

• Map the supply chain to the Scroby Sands project down to Tier 3 service and componentsupply and identify the associated contracts, sub-contracts, and in-house servicesrequired to develop, construct and operate the project.

• Assess maximum level of UK and East of England supply chain penetration in projectconstruction on current contracting procedures and possible variance through use ofalternative contracting structures.

• Identify gaps within the supply chain for Scroby Sands that were not obviously open toUK penetration, confirm which of these opportunities could be targeted to maximise UKand regional economic benefits, and asses what mechanisms exist to develop thenecessary business skills to secure contracts to supply goods and services in theseareas.

• Forecast likely scale-up effects in to a typical Round 2 project including changes infundamental logistical, contractual and equipment supply requirements.

• Outline potential future research required to assess probable UK supply chain levels insuch projects and levels of public sector intervention required to support or extend the UKsupply chain to secure greater economic benefits at national and regional level.

2.2 Scope of WorkIn fulfilling the aims and objectives of the study the following activities are underway:

• Development Phase: Identify by value the principal development costs incurred byEROWL to advance the Scroby Sands project to a successful financial close. Identify thecontracted service providers and those provided in-house by EROWL and assess the likelylevels of employment directly attributable to these activities.

• Construction Phase: Identify all major construction contracts awarded by EROWL, allmajor sub-contracts, particularly those of Vestas Celtic as EPC Contractor, and, as far aspossible, principal turbine component supplies to Vestas Celtic as turbine supplier.Confirm contract values and assess likely levels of employment directly attributable to thesupply 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. Confirmcontract values and assess likely levels of employment directly attributable to themanagement of the site, maintenance of equipment and provision of services.

• Review procurement procedures to confirm which contracts, sub-contracts or componentsupplies could have been secured by UK and regional companies given more competitivetenders. Identify criteria for contracting procedures and review likely alternatives availableto industry now and in the future as the industry matures. Assess the effect of alternativecontractual frameworks on levels of UK and regional penetration of the supply chain.

• Assess the relative value and employment characteristics of supply chain gaps againstknown national and regional capabilities. Provide a list of the areas within the supply chainwhich offer the greatest opportunity for future UK participation and assess the possiblestrategies of business development and support required to realise these opportunities.

• Consider scale-up effects, in terms of overall contract values and employment, of movingfrom 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 topermit commercial development of such sites and provide high level assessment of theeffect on UK supply chain capabilities. Assess what additional intervention strategies in



the form of business support, strategic investment or other public sector activity may berequired to secure UK and regional participation in the supply chain.

2.3 Project DeliverablesThe 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 UKand regional involvement including relevant contract values and employment levels.Alternative contract hierarchies identified with assessment of the effect on UK supplychain.

• Assessment of the role of Operation and Maintenance (O&M) in terms of value, workinghours and likely future changes to O&M contracting. Scroby Sands is currently operatedby Vestas under a five-year warranty contract, currently the standard procedure foroffshore 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 tohow best to realise the missed opportunities. The unrealised opportunities will bearranged according to understood capacity for national and regional businesses to meetthe opportunities, reflecting the relative value of the activity, and the time and skillsrequired to develop the necessary capability.

• Future lines of research including specific projects designed to identify the mostadvantageous level of strategic investment and intervention by the public sector tosupport the growing UK supply chain. The value of comparative studies to be conductedon other UK offshore projects already completed or nearing construction.

2.4 MethodologyThe supply chain analysis for Scroby Sands has been undertaken by Renewables East in partnershipwith Offshore Design Engineering Limited (ODE) & Douglas-Westwood Limited (DWL). The majorityof primary data collection and supply chain contract mapping was carried out by Offshore DesignEngineering Limited, who acted as Project Managers for EROWL in the construction of the ScrobySands project and are site manager for EROWL during the operational phase whilst the turbines areunder warranty. Douglas-Westwood Limited undertook an independent verification of data andcomparative analysis against previous research.

Analysis of anticipated and potential UK penetration of the supply chain for future Round 2 projectsincluding mechanisms to better target supply chain development and UK business support wasundertaken jointly between all three parties.

2.4.1 Project DataIt was recognised from the outset that previous studies forecasting the potential revenue andemployment generation of offshore wind farms had been based on the predicted development ofoffshore 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 andassociated 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, includingassociated contracts, subcontracts and in-house services, during all phases of the project. The mainsuppliers of project data were EROWL (the owner) and Vestas Celtic (the EPIC contractor) who wereasked to complete a standard form (see Appendix 1) specifically designed to collect the targetedinformation 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 andsupply chain, the data could then be used as a sound basis for analysis and comparative forecasting of



future expenditure and man-hours relating to further wind farms forecast for development offshoreUK.

2.4.2 DefinitionsIn mapping the supply chain to Scroby Sands it was initially necessary to define the keyactivities in developing, constructing and operating the project, down to Tier 3 service andcomponent supply. In developing the project’s contract hierarchy 14 Tier 1 Categories werecreated encompassing all activities within the lifecycle of an offshore wind farm, in line withactivities defined within the Category of Energy Industry Classifications (see Appendix 2) andused to define East of England offshore wind capability as part of DWL’s ongoing work on thePOWER project (see Section 1.5.1). Key Sub-Component items were then defined inpartnership with Vestas and E.ON according to their internal accounting procedures.

Development Phase

Table 2-1: Development Phase – Component ItemsTier 1 Category Sub-Component Item

Development Design Consultancy� Development Agreement� Electrical System Studies� FEPA License Application� Section 36 Planning Application� Site Management� Staff CostsEnvironmental Monitoring Environmental SurveysInsurance/Legal Insurance� Legal FeesSurveys Geotechnical Survey / Investigation� Site SurveysOther Misc Costs Reprographics

The development phase has been defined as being all activities completed in identifying, technicallyand environmentally assessing, insuring and licensing the project site through to projectimplementation and, in this case, the appointment of an EPIC contractor (assumes an EPIC typedevelopment).

Construction Phase

Table 2-2: Construction Phase – Component ItemsTier 1 Category Sub-Component Item

Environmental Monitoring Surveys - Arial, Bird & Coastal� Bird Protection� Environmental Management� Noise MonitoringInsurance/Legal Construction Insurance� Legal / Easements� Site InspectionSurveys Site SurveysProject Management Board & Lodging� HSE Site Rep� Offshore Installation� Onshore Logistics� Planning Supervisor� Project Administration� Quality AssuranceDetailed Design Electrical� Foundation� SCADA� Scour� Surveys



Procurement & Manufacture Blades� Cables� Logistic Support� Monopiles� Nacelle� Onshore Cable Supply� TowersTransport & Delivery Blades� Facility - Harbour� Harbour Dues� Nacelles� Parts� Surveys� TowersOnshore Pre-Assembly Blade Handling� Cranes� Labour� Onshore Equipment� Quay Rental� Site TransportOnshore Installation Onshore Cable Installation� Substation / Grid InterfaceOffshore Installation Export Cables� Inter Array Cables� Piles� Scour Protection� TurbinesCommissioning Senior Authorised Personnel� Super Intendents� Transfer Vessels� Weather ForecastsOther Misc Costs Information Centre Building Works

Project Film/PhotographyTrainingVisitor Centre Design & Fit Out

The construction phase covers all supply chain activities relating to the contracting, financing, andprocurement of all materials for the production, assembly and installation of all elements of theproject. Key activities include the manufacture of components associated with the turbine, itsfoundation and any electrical equipment required to connect the facility to electricity infrastructureonshore, onshore and offshore installation activities and logistics at the construction port.

OperationsThe operations phase covers all supplies of goods and services necessary to operate, maintain andrepair offshore wind facilities during their asset life. In the context of this study, the Operations phasehas been assessed over the first 5 years of the asset life of the project to correlate to the warrantyand service provisions of Vestas Celtic.

Table 2-3: Operations Phase – Component ItemsTier 1 Category Sub-Component Item

Operations & Maintenance Project ManagementSite ManagementService Personnel

� Service VesselsReplacement Components

� Other Operational Costs



2.5 Related StudiesThere are two regional studies directly related to the Scroby Sands - Supply Chain Analysis projectwhich Douglas-Westwood Ltd have conducted in 2005; the POWER project and the Catalogue ofEnergy Industry Classifications.

2.5.1 POWER – WP2 Regional Supply Chain StudyThe POWER (Pushing Offshore Wind Energy Regions) project is a three year European supply chainstudy as part of the Interreg IIIB North Sea Programme, and funded by the European RegionalDevelopment Fund. The project will discuss and assess issues relating to the environmental impact ofoffshore wind farms, the development of a reliable, economically beneficial regional supply chain andskills development issues. Studies are being undertaken in Denmark, Germany, the Netherlands andUK, with the aim of uniting North Sea regions with an interest in supporting and realising theeconomic and technological potentials of offshore wind energy.

Work Package 2 (WP2) of the POWER project focuses on the supply chain and economicdevelopment in the offshore wind sector within regions with the ambition and opportunity to benefiteconomically 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 andparticularly the sub-region of Great Yarmouth and Lowestoft on specific strengths and gaps withintheir supply chain to the offshore wind sector, and facilitate the development of strategies supportingsupply chain development. This study was completed in June 2005 for Suffolk County Council. Theaims of the study were to:

• Establish the total value and likely level of regional content, both in terms of expenditureand employment, regarding offshore wind development in the East of England to dateand 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 theoffshore wind sector with regard to manufacturing, installation, operation, andmaintenance, 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 ClassificationsThis study was commissioned by the EEEGR and completed by DWL in December 2004. The projectrequired the creation of a “pragmatic” coding system to be applied to all companies identified, orseeking, to be working within the supply chain to the energy industry. The framework created will actas a means of facilitating the identification of specific capabilities of companies servicing one or moresectors and enable the effective segmentation of the industry.

This is to be achieved through the creation of three independent, relational datasets, structured as akeyword listing based on a maximum of 150 categories, with each dataset to be supplemented by aglossary defining keywords where appropriate. The three independent relational datasets are;

1. Industry Sectors – Oil & Gas, Wind, Solar, Nuclear, etc2. Industry Roles – Operator, Service Provider, Support Organisation, etc3. Industry Classification – Drilling & Wells, Installation & Commissioning, etc

The coding system will be supplemented by suggestions of the key industry metrics that should berecorded within supporting databases to facilitate attempts to perform a consistent and repeatableanalysis of the nature and scale of activity within any supply chain to the energy industry (full details ofwhich are available from EEEGR upon request).

Having established an appropriate framework of use the catalogue of categories will then beintegrated into EEEGR’s ‘Mapergy’ system and made available to all POWER project partners as ameans of providing a common terminology in completing their country specific supply chain studies. It



is also envisaged that such a system will be complementary to work being developed to better identifyskills sets against the capabilities of the industry.





3 MARKET TRENDS

3.1 World Offshore Wind 2000-2009

3.1.1 Development HistoryThe first offshore wind turbines were installed at Vindeby off the Danish island of Lolland in 1991. Thefirst ten years of the industry saw small projects being built in very shallow water near-shorelocations. 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 muchlarger size.

There are currently 19 operational offshore wind farms in the world. The 327 installed turbines inthese projects provide a total of 617 MW. At the present time, Denmark is the world leader ininstalled capacity with 426 MW, but the UK is making fast progress and now has 124 MW operationalwith a further 180 MW to be online before the end of 2005 from the 90 MW Kentish Flats and Barrowoffshore wind farms currently under construction.

Europe’s onshore wind industry experience and supply chain coupled with excellent natural resourceand supportive government policies make the region the clear leader offshore. Recent activity inSouth East Asia marked the first offshore wind development outside Europe, with North Americaexpected to install its first offshore turbines this period.

The largest installed offshore wind farm is the 165.6 MW Nysted development off Denmark whichwas completed in 2003. It has 72 2.3 MW Bonus (now Siemens Wind Power) turbines installed 9 kmoffshore in an average water depth of 8 metres. To date, the greatest water depth that a project hasbeen installed in is 18 metres (Samsø, Denmark).

Just as today’s projects dwarf those built ten years previously, within another decade projects will beinstalled that are many times greater in size than today’s offshore wind farms and that will be built insubstantially deeper locations, further offshore.

3.1.2 Future Activity

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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 2005-2009Belgium 42 145 130 316Canada 4 700 704China 50 � 100 150Denmark 40 163 213 200 200 400Finland 5 104 109France 29 � 29Germany 4.5 4.5 198 384 438 771 1,797Ireland 25 167 � 190 356Japan 1.2 � 0Netherlands 99 120 � 219Spain 250 250Sweden 21 125 142 18 285UK 4 0 0 60 60 180 270 424 668 1655 3,197USA 468 140 2 610Grand 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 theUK, Belgium and the Netherlands. With only 66 MW coming online, it was the quietest year since2001. 2004, however, did see Germany’s first installation and interestingly the first offshore windturbines being installed outside Europe.

In 2005, installations increase with 180 MW forecast for completion. This will all be off the UK wheretwo 90 MW projects are scheduled for commissioning before the year’s end. The rate of installationsis forecast to increase dramatically from there on, with 738 MW expected to be commissioned in2006. The first commercial German wind farm is expected to be brought online in 2006 as will thefirst Belgian, Swedish and Dutch projects.

This growth is continued into 2007 when 1.9 GW is forecast. The UK, Germany and Belgium will allbuild 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 mostunpredictable at present. Sufficient progress was, however, made through 2004 for us to include theproject 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 itmarks Denmark’s re-entry to the market it once led so strongly. The 200 MW Horns Rev II wind farmwill be built in 2008 and the Nysted II project will follow in 2009. The last two years of the period seescountries 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 thesteady progress made by UK projects. Here, few projects have been cancelled, and the route toconstruction is more clear-cut than in other countries where a joined-up approach is lacking from theauthorities.

Germany has a 21% share of installations, less than was expected just one year ago. Slow progresson the necessary cable permits is one factor that is holding back projects from construction. There isno doubting the importance of the German market, but it is taking much longer to reach fruition thanpreviously thought. The installation of the 4.5 MW Enercon turbine in 2004 is a promising signal. Asecond 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 only5% of the 2005-2009 capacity in prospect.Regionally, North America has a total of 16% of the market and this comes from relatively fewprojects. In comparison to the large European market (82% of all capacity) this is small, but it is asignificant share and one that will be built upon in the future as the market grows in response to thesuccesses seen both in Europe and the early projects off the USA.



Asia is only a small market at present (2% of all capacity 2005-2009) but in the longer-term has goodprospects. Onshore wind has experienced dramatic levels of growth in countries such as China andoffshore developments are expected in a number of Asian countries in the future.

3.2 UK Offshore WindWith the award of licences to develop offshore wind energy, the UK has created one of the world’slargest current market places for the deployment of marine renewable technology. With billions ofpounds worth of capital required to realise over 7 GW of electrical capacity, a significant opportunityhas 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 1projects with 30 turbines in relatively shallow waters close to the coast, to Round 2 projects withhundreds of turbines close to or beyond the 12 nautical mile territorial limit, will also directly affect theopportunities open to UK companies. Project supply chains and principal contractors will be facedwith increased logistical demands, growing contractual risks, and pressure on available equipmentsupplies being countered by opportunities for economies of scale and innovations in equipmentdesign and construction processes.

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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 2004-2012UK 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-termfuture surpassing more established markets such as Denmark and beating Germany to large-scaleoffshore 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 2projects off the UK dramatically boost the market and this strong growth will continue into the nextdecade.

Table 3-3: UK & East of England Projects 2004-2013 – Units

Projects 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004-2013

E of E 1 1 2 2 1 4 6 2 1 19Other 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 areaof influence. Note that some of these projects are developments with multiple phases such asLondon Array.



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Figure 3-3: UK Offshore Wind Capital Expenditure 2040-2012 (£m)

Table 3-4: UK Offshore Wind Capital Expenditure 2004-2012 (£m)

3.3 East of England Offshore Wind

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Table 3-5: East of England Potential Capacity 2004-2012 (MW)

MW 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004-2012E 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 allRound 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 beingconsidered to fall within the East of England’s area of influence. Although in some cases the locationsof 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 companieswill be tendering for contracts for these projects and the region’s ports are suited to the requisiteconstruction work.

£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



The East of England has access to a total of 5,955 MW of capacity planned which will come fromapproximately 1,700 turbines. The capacity is allocated to the developers’ target completion date fortheir project. Wind farm capacity has not been split across multiple years unless official projectphases have been announced. This results in an extremely high jump in installations from 2009 whenthe second round projects begin construction.

The constraining factors on the above project capacities will be examined in more detail within thereport but include the projects gaining planning approval, grid capacity, restructuring, new legislationto allow projects beyond the 12-mile nautical limit to be developed, sufficient turbine and foundationmanufacturing capability, installation vessel availability, and most importantly, continued governmentalsupport. These factors could result in project delays and even cancellations. The potential capacityshown above and potential expenditure shown below are, therefore, best-case scenarios.

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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 2004-2012E 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 couldamount to as much as £6.7 billion. This assumes all projects reach construction. Again, the timing ofthe projects is based on developers’ announced timescales.

24

Table 3-7: East of England – Offshore Wind Farms Operational & Planned 2004-2012

Project Name Developer Location Target Online MW TurbinesScroby Sands EROWL off Caister, Great Yarmouth 2004 60 30Kentish Flats GREP off Whitstable, North Kent 2005 90 30Inner Dowsing Centrica with RES off Ingoldmells, Skegness 2006 90-108 30Lynn Centrica off Skegness on Boulders Bank, Lincs 2006 90-108 30Gunfleet Sands GE Wind off Clacton-on-Sea, Essex 2007 108 30Cromer EDF off Mundesley, Norfolk 2007 90-108 30Gunfleet Sands phase II GE Wind off Clacton on Sea, Essex, Thames Estuary 2008 64 16Humber Gateway United Utilities and GREP off Spurn Head, Greater Wash 2009 300 60-100Lincs (Inner Dowsing II) Centrica with RES off Skegness, Greater Wash 2009 250 50-83London Array – (LAWL) P.1 EROWL and Core (Energi E2 & FarmEnergy) Thames Estuary, London 2009 300 100Sheringham Shoal Scira Offshore Energy (Ecoventures & SLP) off Cromer, Greater Wash 2009 315 63-105Greater Gabbard Airtricity and Fluor off Orfod, Thames Estuary 2010 500 139Dudgeon East Warwick Energy off Cromer, Greater Wash 2010 300 60-100London Array – Shell Shell Thames Estuary, London 2010 333 111Thanet Warwick Energy off North Foreland, Kent, Thames Estuary 2010 300 60-100Westernmost Rough Total off Aldbrough, Holderness, Greater Wash 2010 240 60-80Docking Shoal Centrica with Amec off Skegness/Hunstanton, Greater Wash 2010 500 100-125London Array – (LAWL) P.2 EROWL and Core (Energi E2 & FarmEnergy) Thames Estuary, London 2011 367 122Race Bank Centrica with Amec off Skegness/Hunstanton, Greater Wash 2011 500 100-125Triton 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.


June 2005 25 Douglas-Westwood Ltd & ODE Ltd

4 SCROBY SANDS

The Scroby Sands offshore wind farm, located an average of 3 km off Caister, was developed byEROWL (formerly Powergen Renewables Offshore Wind Ltd). The potential for an offshore wind farmsite was first investigated in 1995 with government approval given in April 2002. Planning approvalwas granted for 76 MW in spring 2002.

Table 4-1: Scroby Sands – Project Data

Scroby Sands

Location 3 km off Caister,Norfolk Developer EROWL

Construction 2003 Owner/Operator EROWLOnline 2004 EPC VestasCapacity (MW) 60 Turbine Installation A2Sea & SeacoreNumber of Turbines 30 Foundation Installation Mammoet Van OordTurbine Manufacturer Vestas Total Cost (£m) 80 (inc. 5 yrs O&M)Turbine Rating (MW) 2 Planning Status CompleteFoundation Type MonopilesWater Depth (m) 2-10

Contracting Status Complete

EROWL were originally planning construction in 2003 and remained confident this could be achievedwhen the invitation to tender for the EPIC contract was issued in June 2002, even though contractorshad only six weeks to complete bids for the work. Those bidding included Vestas, Mammoet VanOord, Mayflower Energy/JB Hydrocarbons, A2Sea, SLP/Bouygues and Mowlem/HydroSoil.

EROWL postponed the 2003 offshore construction target to a more realistically achievable 2004, andcalled for revised bids to be submitted. Vestas had been the firm favourite for the job having been ajoint venture partner in Scroby since 1995 and in February 2003 they won the EPIC contract for all theoffshore facilities and confirmed the project was to use 30 V-80 2 MW turbines. The contract includedresponsibility 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 thedevelopment on its behalf, while EROWL employed its own project manager, Offshore DesignEngineering (ODE), on a 20-month contract valued at around £750,000. ODE were responsible for themanagement and co-ordination of all aspects of the engineering, manufacture and installation of thedevelopment.

In May 2003 Cambrian Engineering were awarded the contract for the supply of 16 piles, withIsleburn Mackay and Macleod winning a contract to supply the remaining 14 piles and approximately700 tonnes of additional steelwork. The foundations were installed by Mammoet Van Oord’snewbuild 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 periodOctober 2003 to February 2004. EROWL also contracted EDF (formerly 24-7) for the onshore gridconnection and have on ongoing consultancy contract with Econnect.

Turbines were assembled at Vestas’ factory at Campeltown with A2Sea being awarded the turbineinstallation contract in February 2004 which was completed by their Ocean Ady vessel. Seacore werealso contracted to install six of the turbines in the shallowest water locations. The turbines/bladeswere 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 July2004, however, bad weather hampered commissioning efforts which meant that all turbines did notcomplete initial commissioning until the end of October 2004. High winds continued to slow work inNovember, but all reliability testing was completed by the end of November and after testing wascompleted all the turbines were online together for the first time on the 14th December 2004, withcommercial completion being 31st December 2004.



In August 2004 the £500,000 operations centre was opened in Great Yarmouth, providing the serviceback- up for the wind farm which Vestas are providing under warranty.

The development was formally opened on the 22nd March 2005.

4.1 Contract HierarchyThe following tables represent the overall project value and associated man-hours broken down bythe key project stages of development, construction and operations. The development andconstruction data being actual historic data obtained from source, whilst the operations data is aprediction 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 PhaseHours 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 contractorswill 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 andEast of England content, which clearly proves that high UK and regional content can be achieved andas such sets a benchmark against which other projects can be measured.

When analysed by value, the level of East of England andother UK content is very good, however, when expressed asman-hours these percentages increase considerably. Thefundamental reason for this differential being that a highproportion of the non-UK value is associated with majorcomponent supply and installation vessel contractors, whichby their very nature have a low man-hour content relative toactual contract value.

Non-UK52%

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Figure 4-1: Scroby Sands – £’000s



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Table 4-4: Scroby Sands –Value by Tier 1 Category (£’000s )£’000s East of England Other UK Non UK Total UK %

Development Design 149 780 480 1,409 66%Environmental Monitoring 162 28 0 190 100%Insurance/Legal 211 1,568 0 1,779 100%Surveys 248 12 0 260 100%Project Management 2,201 2,175 175 4,551 96%Detailed Design 180 156 775 1,111 30%Procurement & Manufacture 8 16,821 22,158 38,986 43%Transport & Delivery 55 235 935 1,225 24%Onshore Pre-Assembly 1,614 230 356 2,200 84%Onshore Installation 1,825 0 0 1,825 100%Offshore Installation 283 1,940 14,478 16,700 13%Commissioning 613 978 585 2,175 73%Operations & Maintenance 5,095 550 1180 6,825 83%Other Misc. Costs 202 486 150 838 82%

Total 12,844 25,957 41,271 80,073 48%

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Figure 4-3: Scroby Sands – Hours by Tier 1 Category



Table 4-5: Scroby Sands – Hours by Tier 1 CategoryHours East of England Other UK Non UK Total UK %

Development Design 3,268 14,485 8,000 25,752 69%Environmental Monitoring 2,860 277 0 3,137 100%Insurance/Legal 400 1,633 0 2,033 100%Surveys 2,479 119 0 2,598 100%Project Management 35,875 50,250 4,375 90,500 95%Detailed Design 4,500 3,758 19,375 27,633 30%Procurement & Manufacture 200 94,019 39,261 133,479 71%Transport & Delivery 400 1,500 4,500 6,400 30%Onshore Pre-Assembly 24,281 8,422 4,847 37,549 87%Onshore Installation 34,375 0 0 34,375 100%Offshore Installation 5,400 16,560 49,500 71,460 31%Commissioning 17,500 12,072 13,304 42,875 69%Operations & Maintenance 124,160 10,715 28,855 163,730 82%Other Misc. Costs 3,702 6,561 4,286 14,548 71%

Total 259,399 220,369 176,301 656,069 73%

4.1.1 DevelopmentThis section of the report presents the value and derived man-hours associated with the initialdevelopment work that preceded project implementation. The supporting data for this phase wasentirely supplied by EROWL.

Table 4-6: Scroby Sands – Development Phase Value (£’000s)£’000s East of England Other UK Non UK Total

Development Design 149 780 480 1,409Environmental Monitoring 25 6 0 30Insurance/Legal 0 33 0 33Surveys 161 12 0 173Other Misc. Costs 0 92 0 92

Total 335 922 480 1,737

Table 4-7: Scroby Sands – Development Phase HoursHours East of England Other UK Non UK Total

Development Design 3,268 14,485 8,000 25,752Environmental Monitoring 309 55 0 364Insurance/Legal 0 235 0 235Surveys 1,613 119 0 1,732Other Misc. Costs 0 1,080 0 1,080

Total 5,189 15,974 8,000 29,163

The development phase ran for several years with the latter stages of the development incorporatinginput from Vestas Celtic. The majority of value and derived man-hours were expended during thedevelopment design, which was predominantly carried out by EROWL and Vestas Celtic. However,there was still significant expenditure with various consulting/contracting organisations, many ofwhich are based in the East of England, providing a diverse range of services such as consultancy,specialist surveys and environmental investigations.

Whilst it is unlikely that any of this work actually resulted in the creation of any new jobs, the overallman-hour expenditure is the equivalent of 15 man-years of work. Which when extrapolated up toreflect the overall man-hours associated with the various forecast developments, will certainly meanthat opportunities for job creation will exist in the future.

4.1.2 ConstructionAlthough significant value and derived man-hours were associated with the development phase thevast majority of project expenditure occurred during the construction phase of the project (which hasbeen defined as including all detailed design, manufacture, installation and associated costs). Theimplementation of this phase of the project was initiated in 2003 and undertaken over the subsequent2-year period, with various contracts being awarded by EROWL and tier 2 and 3 contracts awardedthrough their major contractor Vestas Celtic.



Table 4-8: Scroby Sands – Construction Phase Value (£’000s)£’000s East of England Other UK Non UK Total

Environmental Monitoring 138 22 0 160Insurance/Legal 211 1,536 0 1,747Surveys 87 0 0 87Project Management 2,201 2,175 175 4,551Detailed Design 180 156 775 1,111Procurement & Manufacture 8 16,821 22,158 38,986Transport & Delivery 55 235 935 1,225Onshore Pre-Assembly 1,614 230 356 2,200Onshore Installation 1,825 0 0 1,825Offshore Installation 283 1,940 14,478 16,700Commissioning 613 978 585 2,175Other Misc. Costs 202 393 150 745

Total 7,415 24,485 39,611 71,511

Table 4-9: Scroby Sands – Construction Phase Component Value (£’000s)£’000s East of England Other UK Non UK Total

Blades 125 0 6,325 6,450Cables 1,463 4,242 2,923 8,627Grid Interface 645 0 0 645Nacelles 994 1,875 19,306 22,175Piles 210 9,555 9,800 19,565Towers 0 4,425 350 4,775Indirect Costs 3,979 4,388 908 9,274

Total 7,415 24,485 39,611 71,511

Table 4-10: Scroby Sands – Construction Phase HoursHours East of England Other UK Non UK Total

Environmental Monitoring 2,551 222 0 2,773Insurance/Legal 400 1,398 0 1,798Surveys 866 0 0 866Project Management 35,875 50,250 4,375 90,500Detailed Design 4,500 3,758 19,375 27,633Procurement & Manufacture 200 94,019 39,261 133,479Transport & Delivery 400 1,500 4,500 6,400Onshore Pre-Assembly 24,281 8,422 4,847 37,549Onshore Installation 34,375 0 0 34,375Offshore Installation 5,400 16,560 49,500 71,460Commissioning 17,500 12,072 13,304 42,875Other Misc. Costs 3,702 5,481 4,286 13,468

Total 130,050 193,680 139,446 463,176



Table 4-11: Scroby Sands – Component Construction HoursHours East of England Other UK Non UK Total

Blades 1,125 0 10,765 11,890Cables 34,400 27,758 30,325 92,483Grid Interface 5,375 0 0 5,375Nacelles 26,299 21,308 48,429 96,035Piles 4,400 55,850 28,660 88,910Towers 0 29,214 3,250 32,464Indirect Costs 58,451 59,551 18,017 136,019

Total 130,050 193,680 139,446 463,176

The decision that the wind farm was to be wholly serviced locally throughout the construction phasewas a major contributing factor to the high level of UK and specifically East of England involvement.East of England companies were also awarded key contracts such as the overall project management,onshore cable installation and grid interface.

0

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Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05

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Environmental MonitoringInsurance/LegalSurveysProject ManagementDetailed DesignProcurement & ManufactureTransport & DeliveryOnshore Pre-AssemblyOnshore InstallationOffshore InstallationCommissioningOperations & MaintenanceOther Misc. Costs

Figure 4-4: Scroby Sands Construction & Operation Timeline - Manhours

The overall man-hours accrued within the East of England alone resulted in the equivalent of some 65man-years of work. Or spread over the 2 years of construction phase, this equates to the equivalentof 32 jobs. Again, as with the Development Phase, it is difficult to assess how many jobs wereactually created due to this work. But what is certain is that it represents a significant injection ofrevenue generation into the local economy, which will definitely be increased on a proportional basiswhen the next series of wind farms enter their construction phases.

4.1.3 OperationThe operational phase of the project commenced at the beginning of 2005. Estimates of the value andderived man-hours associated with Scroby Sands have been given for the first five years of operation.

Table 4-12: Scroby Sands – 5 Year Operations Value (£’000s) & HoursOperations East of England Other UK Non UK Total£’000s 5,095 550 1,180 6,825Hours 124,160 10,715 28,855 163,730

The operational phase is expected to generate the equivalent of 16 man years of work each year, withthe majority of this being employment based in the East of England. The majority of this work will bewithin the Vestas Celtic operations and maintenance contract where approximately 10 new,permanent jobs have been created. This will be further supplemented by the ongoing involvement ofOffshore Design Engineering Limited as the site management contractor and the use of various localsurvey and support companies throughout the local supply chain.Operations and maintenance is a core work-package within which the UK and the East of England canpotentially achieve a consistently high level of domestic and local content. With turbine manufacturers



likely to be responsible for a 5 year warranty for all offshore wind developments it is important for theregion to ensure this work is based locally.

4.2 UK ContentThe level of UK content for Scroby Sands is considered to be relatively high and sets a benchmark forfuture projects. It is important for comparative studies to be undertaken on existing and forthcomingUK projects to confirm these findings and to discover key features of Scroby Sands that can bereplicated in the future.

National content is well distributed across the full spectrum of the developmental, construction andoperational works, however there are notable exceptions within offshore installation and procurementand manufacturing where UK companies did not secure contracts either because they were not costcompetitive or because such capability is not present in the UK. However, there are areas ofsignificant success in these areas, with the pile and fender supply for instance being undertaken byScottish companies Cambrian Engineering and Isleburn McKay & McLeod. Also, not all the vesselsupply was by non-UK companies, a particular example being Seacore who provided the vesselExcalibur for some of the topsides (tower, nacelle and blades) installation.

Vestas Celtic were able to achieve a high level of UK and regional content on the Scroby Sandsproject through their role in procurement and manufacturing. This is an exception to what may happenfor other manufacturers as Vestas are currently the only major turbine supplier to establish assemblyplant in UK. Vestas is currently the only manufacturer that has got operational turbines on UK offshoreprojects, with Scroby Sands and North Hoyle using 2 MW machines, and the forthcoming KentishFlats and Barrow projects installing 3 MW turbines in the summer of 2005. Vestas is, therefore, amajor contributor to UK content in offshore wind and plays a major role in helping to drive the UKindustry.

Table 4-13: Scroby Sands – UK Content Value (£’000s)£’000s Development Construction Operations UK Total Total

Development Design 929 929 1,409Environmental Monitoring 30 160 190 190Insurance/Legal 33 1,747 1,779 1,779Surveys 173 87 260 260Project Management 4,376 4,376 4,551Detailed Design 336 336 1,111Procurement & Manufacture 16,829 16,829 38,400Transport & Delivery 290 290 1,225Onshore Pre-Assembly 1,844 1,844 2,200Onshore Installation 1,825 1,825 2,411Offshore Installation 2,223 2,223 16,700Commissioning 1,590 1,590 2,175Operations & Maintenance 5,645 5,645 6825Other Misc. Costs 92 595 688 838

UK Total 1,257 31,900 5,645 38,802 �Total 1,737 71,511 6,825 � 80,073

Whilst the values for UK contracts were relatively high the derived man-hours reflect an even betterpicture, as the majority of support activities, such as environmental monitoring and surveys, werealmost entirely UK based. How many actual jobs were developed by this work is not clear, but it isclear that certain areas such as the ongoing operations and maintenance have created new jobs, andthat the increased level of work in specific areas, has at the very least helped to sustain and safeguardexisting jobs.



Table 4-14: Scroby Sands – UK Content HoursHours Development Construction Operations UK Total Total

Development Design 17,752 17,752 25,752Environmental Monitoring 364 2,773 3,137 3,137Insurance/Legal 235 1,798 2,033 2,033Surveys 1,732 866 2,598 2,598Project Management 86,125 86,125 90,500Detailed Design 8,258 8,258 27,633Procurement & Manufacture 94,219 94,219 133,479Transport & Delivery 1,900 1,900 6,400Onshore Pre-Assembly 32,703 32,703 37,549Onshore Installation 34,375 34,375 34,375Offshore Installation 21,960 21,960 71,460Commissioning 29,572 29,572 42,875Operations & Maintenance 134,875 134,875 163,730Other Misc. Costs 1,080 9,183 10,263 14,548

UK Total 21,163 323,730 134,875 479,768 �Grand Total 29,163 463,176 163,730 � 656,069

An exception is the pile fabrication work where by the very nature of the work involved both CambrianEngineering and Isleburn McKay & McLeod had to gear up very quickly to be able to provide a volumeof manufacture. As such, many jobs were created for a relatively short period of time and when thepiles were complete there was little or no other similar work in the market place, so both companieswere unable to sustain their level of activity and consequently were unable to sustain the jobs thatwere created. Therefore, the aspiration for the wind industry must be, through the creation of asteady series of developments, that the increased demand for manufacture will be able to providesome level of continuity of work and, as a consequence, sustained employment.

4.3 East of England Content

Table 4-15: Scroby Sands – East of England Content Value (£’000s)£’000s Development Construction Operations East of England Total

Development Design 149 149 1,409Environmental Monitoring 25 138 162 190Insurance/Legal 0 211 211 1,779Surveys 161 87 248 260Project Management 2,201 2,201 4,551Detailed Design 180 180 1,111Procurement & Manufacture 8 8 38,986Transport & Delivery 55 55 1,225Onshore Pre-Assembly 1,614 1,614 2,200Onshore Installation 1,825 1,825 1,825Offshore Installation 283 283 16,700Commissioning 613 613 2,175Operations & Maintenance 5,095 5,095 6825Other Misc. Costs 0 202 202 837.5

East of England Total 335 7,415 5,095 12,844 � Grand Total 1,737 71,511 6,825 � 80,073

As with the UK content the actual East of England content for this project is considered to be veryhigh and again sets the benchmark for subsequent projects. However, the actual value of East ofEngland content is much lower than the UK content, primarily because of the lack of procurement(equipment supply) and manufacturing facilities in the region. The five areas in which the regionproved most successful in securing high value contracts were; Operations and Maintenance, ProjectManagement, Onshore Installation, Onshore Pre-Assembly and Commissioning.



Table 4-16: Scroby Sands – East of England Content HoursHours Development Construction Operations East of England Total

Development Design 3,268 3,268 25,752Environmental Monitoring 309 2,551 2,860 3,137Insurance/Legal 0 400 400 2,033Surveys 1,613 866 2,479 2,598Project Management 35,875 35,875 90,500Detailed Design 4,500 4,500 27,633Procurement & Manufacture 200 200 133,479Transport & Delivery 400 400 6,400Onshore Pre-Assembly 24,281 24,281 37,549Onshore Installation 34,375 34,375 34,375Offshore Installation 5,400 5,400 71,460Commissioning 17,500 17,500 42,875Operations & Maintenance 124,160 124,160 163,730Other Misc. Costs 0 3,702 3,702 14,548

East of England Total 5,189 130,050 24,832 160,071 �Grand Total 29,163 463,176 163,730 � 656,069

However, whilst the overall value of works completed within the East of England suggests there tobe room for improvement the derived man-hours for the region reflect a much higher level of activityin respect to employment. Although the majority of the high value work was completed outside theregion, local companies were able to penetrate the supply chain for the provision of labour intensiveactivities. With onshore installation, project management and onshore pre-assembly related worksreflecting particularly high levels of penetration and significant contract awards.

Naturally the physical location of the project will always be a major reason for bringing work into theregion within which the project is being constructed. However, this is not an absolute guarantee withareas such as use of local ports and construction facilities being passed over if they are unable toprovide cost effective services. This could result in work such as sub-assembly being undertaken inareas remote to the region.





5 GAP ANALYSIS

5.1 The UK Supply Chain CapabilityThe existing supply chain within the UK has the capability to support the majority of activity inherentwithin the development, construction and operation of an offshore wind farm. However, in keepingwith the development of the sector as a whole the supporting supply chain continues to evolve andwill not fully emerge until the market develops further. Indeed, the level of UK content will largely bea function of the timing and positioning of the development of the national supply chain as there is adanger companies may not have the experience to tender competitively when key opportunities arise.

The experiences of UK companies within offshore wind to date illustrates the current difficulties ofthe sector, whilst there have been many positive statements as to anticipated levels of UK contentthese have not generally been realised when contracts have been awarded. Of those UK and regionalsuppliers who have entered the market the primary motivation has been to develop sectoralexperience and with the extensive challenges and risks inherent in the construction of these first UKprojects, a number of companies across the supply chain have reported losses on the contractsawarded to date.

The economics of the first offshore wind projects in the UK have been marginal and this has placedsignificant cost pressure on developers, principal contractors and the wider supply chain during thedesign and tendering process for those projects. Coupled with this commercial pressure are thecurrent risks associated with certain aspects of project construction where the sector is still learninghow best to combine techniques and experience established in the onshore wind industry and otherpower industry developments with those developed for marine industries, such as oil & gas andtelecoms.

From a developer’s perspective, the long term investment that is required from suppliers to yieldeconomies of scale and establish fit for purpose and cost competitive solutions has yet to fullymaterialise, which has given rise to a much slower pace of project development. From the supplier’sperspective, elements of this investment cannot be considered and will therefore not be realised untilthey can rely upon a continual flow of projects to tender against. There is concern�from some UKsuppliers that they are currently perceived as uncompetitive on both price and quality relative tointernational suppliers, particularly within the construction phase. This contrasts with their�view thatthey are currently facing unrealistic cost forecasts given the technical complexity and risk of the work,a view reinforced by the experience of some contractors having lost money through working on firstround wind farms. Contractors have indicated that earlier involvement with developers during thedevelopment design and detailed design of projects could assist in reducing costs and risks.

Table 5-1: UK Proven Capability – Tier 1 ComponentHigh Medium Low

Environmental Monitoring Development Design Detailed DesignInsurance / Legal Commissioning Procurement & ManufacturingSurveys Onshore Pre-Assembly Offshore InstallationProject Management Transport & DeliveryOnshore InstallationOperations & Maintenance

The UK currently has limited manufacturing and assembly facilities to develop a constructioncapability to compete for a share of forthcoming opportunities. This is reinforced by prevailingprocurement policies within key sector players, with Vestas, for instance, operating a policy of havingthree preferred suppliers for each component, which limit the potential for a secure level of supplychain penetration by UK suppliers, though it does offer the opportunity for such UK companies tobreak into the market by displacing one of the current preferred suppliers. As such, the current focusof the national supply chain remains on opportunities within projects’ development phase and service-based competencies (such as project management and consultancy) throughout a project’s lifecycle.

5.2 The East of England Supply Chain CapabilityIn servicing related industries, most notably offshore oil and gas, the East of England has developed astrong base of suppliers who have the capability to be possible contributors to all phases of the



offshore wind sector, and providing the region’s infrastructure can be developed appropriately thesector is expected to emerge as a major opportunity as an alternative market for regional companies.Indeed, the sector has provided a new area of focus for the regional offshore supply chain which hasrecently been shaken by Shell’s departure and subsequently sought to safeguard against the vagariesof the oil and gas sector.

However, at present the region lacks a consolidated base of experienced suppliers to the sector aslittle of the potentially substantial regional capability has been realised to date. Indeed, questionsremain among regional companies over the economics of the sector as, in spite of substantial initialinterest, the difficulties of SMEs in particular in winning work on Scroby Sands has created aperception that contracts on future projects may be unobtainable.

Table 5-2: East of England Proven Capability – Tier 1 ComponentHigh Medium Low

Environmental Monitoring Commissioning Detailed DesignOnshore Installation Project Management Development DesignOnshore Pre-Assembly Insurance / LegalOperations & Maintenance Procurement & ManufacturingSurveys Offshore Installation

Transport & Delivery

At present, although the skills and expertise are in place, the region lacks the full complement ofequipment and infrastructure to fully support the sector particularly in the construction phase.Therefore regional suppliers are at a disadvantage in competing with the experience and capability ofother UK and European competitors and are not currently positioned to take full advantage of sectoralopportunities. This has been compounded by difficulties in breaking into established supply chainswhich has created a sense that while specific companies can benefit, the regional supply chain as awhole can only compete for lower value opportunities.

5.3 Value and Employment Assessment

Table 5-3: Scroby Sands – Value (£’000s)

£000s Total East ofEngland Other UK UK %

Procurement &Manufacture 38,986 8 16,821 43%

Offshore Installation 16,700 283 1,940 13%Project Management 4,551 2,201 2,175 96%Onshore Pre-Assembly 2,200 1,614 230 84%Commissioning 2,175 613 978 73%Onshore Installation 1,825 1,825 0 100%Insurance/Legal 1,779 211 1,568 100%Development Design 1,409 149 780 66%Operations & Maintenance 6,825 5,095 550 83%Transport & Delivery 1,225 55 235 24%Detailed Design 1,111 180 156 30%Other Misc. Costs 838 202 486 82%Surveys 260 248 12 100%Environmental Monitoring 190 162 28 100%

Total 80,073 12,844 25,957 48%

The respective contributions of the UK’s and East of England’s contributions to the development,construction and operation of Scroby Sands gives a clear indication of the key strengths andweaknesses of national and regional suppliers and infrastructure, as well as an indication of key areasof future content.

70% of the value of contracts awarded for Scroby related to the procurement and manufacture ofcomponents and offshore installation. However, of a total value of £55.7 million only £19 million wassourced from within the UK and just £291,000 from within the East of England. Indeed, the majorityof the UK’s 48% content has been sourced from relatively low value, service-based activities with, for



instance, the UK providing all environmental monitoring, survey, insurance/legal and onshoreinstallation related works. Such activity was supplemented by high levels of East of England contentwithin project management, onshore pre-assembly and operations and maintenance activities.

An analysis of the hours spent worked within each of the key contracts awarded for the development,construction and operation of Scroby Sands illustrates the relatively low value nature of UK contentwithin the project. For while UK content relates to 48% of the value of contracts awarded on ScrobySands it accounts for 73% of the hours spent on the project, with East of England content growingfrom 16% to 40% respectively. The key areas of UK content are the procurement and manufacture ofcomponent parts (specifically the piles, towers and cables) and project management related activities.

Table 5-4: Scroby Sands – HoursHours Total East of England Other UK UK %

Procurement &Manufacture 133,479 200 94,019 71%

Project Management 90,500 35,875 50,250 95%Offshore Installation 71,460 5,400 16,560 31%Commissioning 42,875 17,500 12,072 69%Onshore Pre-Assembly 37,549 24,281 8,422 87%Onshore Installation 34,375 34,375 0 100%Operations & Maintenance 163,730 124,160 10,715 82%Detailed Design 27,633 4,500 3,758 30%Development Design 25,752 3,268 14,485 69%Other Misc. Costs 14,548 3,702 6,561 71%Transport & Delivery 6,400 400 1,500 30%Environmental Monitoring 3,137 2,860 277 100%Surveys 2,598 2,479 119 100%Insurance/Legal 2,033 400 1,633 100%

Total 656,069 259,399 220,369 73%

5.4 Gaps in the Supply ChainThe primary areas of Scroby Sands which do not appear to be currently open to UK penetration centreon the construction phase, as UK companies have achieved a high level of content in both thedevelopment and operations phases.

Table 5-5: Scroby Sands – Component Construction (£’000s)

£’000s East ofEngland Other UK Non UK Total UK%

Blades 125 0 6,325 6,450 2%Cables 1,463 4,242 2,923 8,627 66%Grid Interface 645 0 0 645 100%Nacelles 994 1,875 19,306 22,175 13%Piles 210 9,555 9,800 19,565 50%Towers 0 4,425 350 4,775 93%Indirect Costs 3,979 4,388 908 9,274 90%

Total 7,415 24,485 39,611 71,511 45%

Within the construction phase of Scroby Sands contracts to the value of approximately £71.5 millionwere awarded of which £31.9 million was sourced from UK suppliers. The primary area in which theUK lacks capability is within activities related to the manufacture and installation of blades andnacelles, as of a total spend within the construction phase of £28.6 million just £3 million of suchactivity was catered for within the UK. However, UK suppliers were heavily involved in the onshorepre-assembly, commissioning and operation and maintenance of all components, resulting in the levelof UK content rising from 45% of the value of construction phase contracts to 70% of the associatedhours incurred.



Table 5-6: Scroby Sands – Component Construction (Hours)Hours East of England Other UK Non UK Total UK%

Blades 1,125 0 10,765 11,890 9%Cables 34,400 27,758 30,325 92,483 67%Grid Interface 5,375 0 0 5,375 100%Nacelles 26,299 21,308 48,429 96,035 50%Piles 4,400 55,850 28,660 88,910 68%Towers 0 29,214 3,250 32,464 90%Indirect Costs 58,451 59,551 18,017 136,019 87%

Total 130,050 193,680 139,446 463,176 70%

The lowest level of UK content in terms of value of contracts awarded on Scroby Sands was realisedwithin offshore installation as just £2.2 million of a total of £16.7 million was sourced within the UK,and just £283,000 within the East of England. The largest component of such activity related to theinstallation of the piles of which the UK had no content. The proportion of UK content again rosewhen analysing associated hours spent, from 13% to 31%, primarily due to the installation of theexport cable.

Table 5-7: Scroby Sands – Offshore Installation (£’000s)£’000s East of England Other UK Non UK Total UK%

Cables 283 1,320 2,898 4,500 36%Nacelles 0 620 2,480 3,100 20%Piles 0 0 9,100 9,100 0%

Total 283 1,940 14,478 16,700 13%

Table 5-8: Scroby Sands – Offshore Installation (Hours)Hours East of England Other UK Non UK Total UK%

Cables 5,400 14,400 29,700 49,500 40%Nacelles 0 2,160 8,640 10,800 20%Piles 0 0 11,160 11,160 0%

Total 5,400 16,560 49,500 71,460 31%

A further area of weakness within the UK supply chain at the time of tender for Scroby Sands was thelack of manufacturing capability, specifically for blades and nacelles. For while high levels of UKcontent was realised within the manufacture of piles, cables and towers the lack of facilities fornacelle manufacturing in particular restricted UK content to £16.8 million, and the East of England to£8,000, of a total spend of approximately £39 million.

UK manufacturers active in the offshore wind industry have had a challenging time since the firstround began with a number of high-profile companies entering administration. AEI Cables is the mostrecent company to face financial troubles and in February 2005 announced it would close its powercables manufacturing division in Gravesend due to fierce competition from abroad.

In February 2004, UK tower and foundation manufacturer Cambrian Engineering Ltd enteredadministration, struggling to keep afloat in the wake of many delayed onshore wind farm contracts.Cambrian Caledonian Ltd (CamCal) later acquired the assets of Cambrian Engineering and will restartproduction. Cable layer Global Marine Systems (GMS) also went through a period of administration,beginning September 2004, following the downturn in the submarine telecommunications industry.

Furthermore, Mayflower Energy, previously a division of the Mayflower Corporation who built anewbuild vessel for turbine and foundation installation, went into administration in March 2003.However, the management successfully bought the business out of administration with backing frominvestment bank Mizuho International in April 2004, and formed Marine Projects International (MPI).MPI have subsequently gone on to install the monopile foundations on Kentish Flats and wereawarded the offshore construction contract for the UK’s Barrow offshore wind farm in May 2005.



Table 5-9: Scroby Sands – Procurement & Manufacture (£’000s)£’000s East of England Other UK Non UK Total UK%

Blades 0 0 6,000 6,000 0%Cables 0 2,836 0 2,836 100%Nacelles 0 103 15,898 16,000 1%Piles 0 9,450 0 9,450 100%Towers 0 4,425 75 4,500 98%Indirect Costs 8 8 185 200 8%

Total 8 16,821 22,158 38,986 43%

Table 5-10: Scroby Sands – Procurement & Manufacture (Hours)Hours East of England Other UK Non UK Total UK%

Blades 0 0 8,640 8,640 0%Cables 0 11,350 0 11,350 100%Nacelles 0 2,255 23,200 25,454 9%Piles 0 51,000 0 51,000 100%Towers 0 29,214 2,250 31,464 93%Indirect Costs 200 200 5,171 5,571 7%

Total 200 94,019 39,261 133,479 71%

5.5 Key Areas for Future UK contentAn indication of potential key areas for future UK and East of England content within forthcomingoffshore wind farms is illustrated by an assessment of which contracts, sub-contracts or componentsupplies to Scroby Sands could have been undertaken by national and regional companies givencurrent capability.

In undertaking such a process each contract down to Tier 3 component supply was analysed and anassessment made as to whether there is a UK or East of England company with the capability toperform the task. It was assumed that EROWL were the developer, however, no further assumptionswere made as to turbine manufacturer, contract strategy or any other element of the development.

Table 5-11: Scroby Sands – Potential UK Value (£’000s)£000s Actual Potential Total

Development Design 929 1,409 1,409Environmental Monitoring 190 190 190Insurance/Legal 1,779 1,779 1,779Surveys 260 260 260Project Management 4,376 4,526 4,551Detailed Design 336 1,111 1,111Procurement & Manufacture 16,829 16,961 38,986Transport & Delivery 290 1,225 1,225Onshore Pre-Assembly 1,844 1,976 2,200Onshore Installation 1,825 1,825 1,825Offshore Installation 2,223 16,700 16,700Commissioning 1,590 1,950 2,175Operations & Maintenance 5,645 5,845 6,825Other Misc. Costs 688 738 838

Total 38,802 56,494 80,073



Table 5-12: Scroby Sands – Potential UK HoursHours Actual Potential Total

Development Design 17,752 25,752 25,752Environmental Monitoring 3,137 3,137 3,137Insurance/Legal 2,033 2,033 2,033Surveys 2,598 2,598 2,598Project Management 86,125 89,875 90,500Detailed Design 8,258 27,633 27,633Procurement & Manufacture 94,219 97,313 133,479Transport & Delivery 1,900 6,400 6,400Onshore Pre-Assembly 32,703 34,888 37,549Onshore Installation 34,375 34,375 34,375Offshore Installation 21,960 71,460 71,460Commissioning 29,572 36,447 42,875Operations & Maintenance 134,875 137,730 163,730Other Misc. Costs 10,263 11,691 14,548

Total 479,768 581,332 656,069

An analysis of the contracts awarded within Scroby Sands shows that UK content could conceivablyhave been raised from £38.8 million (48%) to £56.5 million (71%) given current capability andassuming competitive tenders. The primary area of potential growth is offshore installation, where itis believed UK companies could perform the installation of all the key components of thedevelopment. Therefore the only area of significant weakness remains the manufacturing of nacelleand blades which account for £22 million of the differential between UK potential value and the totalvalue of Scroby Sands.

Table 5-13: Scroby Sands – Potential East of England Value (£’000s)£000s Actual Potential Total

Development Design 149 149 1,409Environmental Monitoring 162 187 190Insurance/Legal 211 1,727 1,779Surveys 248 260 260Project Management 2,201 2,454 4,551Detailed Design 180 1,111 1,111Procurement & Manufacture 8 100 38,986Transport & Delivery 55 233 1,225Onshore Pre-Assembly 1,614 1,836 2,200Onshore Installation 1,825 1,825 1,825Offshore Installation 283 6,400 16,700Commissioning 613 1,950 2,175Annual O&M 5,095 5,345 6,825Other Misc. Costs 202 738 838

Total 12,844 24,312 80,073



Table 5-14: Scroby Sands – Potential East of England HoursHours Actual Potential Total

Development Design 3,268 3,268 25,752Environmental Monitoring 2,860 3,106 3,137Insurance/Legal 400 1,933 2,033Surveys 2,479 2,598 2,598Project Management 35,875 42,188 90,500Detailed Design 4,500 27,633 27,633Procurement & Manufacture 200 2,906 133,479Transport & Delivery 400 1,400 6,400Onshore Pre-Assembly 24,281 30,317 37,549Onshore Installation 34,375 34,375 34,375Offshore Installation 5,400 51,300 71,460Commissioning 17,500 36,447 42,875Annual O&M 124,160 127,730 163,730Other Misc. Costs 3,702 11,691 14,548

Total 259,399 376,890 656,069

East of England content within Scroby Sands could have reached approximately £24 million givencurrent capability and competitive tenders. The primary area of potential growth is again offshoreinstallation, particularly the installation of cables and scour protection, within which it is believedregional companies could have undertaken contracts to the value of £6.4 million. However, in theabsence of a manufacturing capability for any of the key components or offshore installation capacityfor nacelles or piles regional content would not exceed 30% of the value of all contracts awarded.





6 POTENTIAL SUPPLY CHAIN PENETRATION

Four different contracting strategies for offshore wind development are presented below, along withan analysis of their potential impact on levels of UK and East of England content had they beenemployed within the development, construction and operation of Scroby Sands. The first is thestrategy used by EROWL for Scroby Sands, while the others are a combination of strategies that arecurrently being pursued by other developers of UK projects and likely strategies for futuredevelopments.

By adopting a different contracting strategy the level of UK and East of England content in a projectcould be significantly altered due to the implicit changes in the supply chain. For instance the use of aUK company high up within the supply chain (i.e. as an EPIC contractor) will, for example, lead to ahigher level of regional content further down the chain as the company places contracts withcompanies with whom it has existing relationships. The utility company Centrica has a large numberof projects in the first and second round which will effectively be treated as phases of one hugedevelopment. The first two of these, Inner Dowsing and Lynn are being contracted together. Thismethod of integrating tendering is new to the industry and there has been much speculation as to theresults of it.

6.1.1 Scenario 1In this scenario the developer (an independent developer or a utility-led development team) awardsone main contract to the supply contractor, who is typically the turbine manufacturer. This contractortherefore bears the majority of the risk of the project’s construction phase and would effectively bethe contractor for all offshore procurement, installation and operations. Other work packages such asgrid connection would be tendered by the developer in consultation with the Distribution NetworkOperator.

Scenario 1: Scroby Sands Contracting

DeveloperTurbine

Manufacturer

OnshoreConstruction

Onshore CableInstallation

Onshore CableSupply

Substation/Grid

Turbine SupplyTurbine InstallationOffshore Cable SupplyOffshore Cable InstallationFoundation SupplyFoundation Installation

Figure 6-1: Contracting Strategies – Scenario 1

Impact on Scroby SandsThis strategy resulted in a high level of UK and East of England content within Scroby Sands relativeto other UK projects installed or contracted to date. For many of these companies, however, theScroby Sands project was one on which they lost money. This is the result of an immature industrywhere cost targets remain unrealistic. Subcontractors bidding to Vestas Celtic were left with littleroom for profitability on the project, the pay-off, however, being early involvement in the industry.

An overall UK content figure of 48% was achieved on the project (figure includes five years operation)as by using many UK subcontractors Vestas Celtic were able to achieve a high level of overall UKcontent. Key areas of UK content include project development, project management, Vestas Celtic’sUK turbine assembly plant in Campbeltown and the use of port facilities at Great Yarmouth andLowestoft.

SummaryThe strategy used on Scroby Sands resulted in a high level of UK content on the project but at afinancial loss for some of the subcontractors working on the project. This type of strategy is typical of



the first commercial scale offshore wind developments, but in the future it is less likely that such astrategy will be pursued in the same way.

6.1.2 Scenario 2In the second scenario the developer places a contract with an EPIC contractor partnered (throughsub-contracts) with a turbine manufacturer. The EPIC contractor would announce its intention to workwith a specified turbine supplier when it tenders. This partnership of manufacturer and contractorcreates a strong team and facilitates a balance between cost and risk for all parties involved.

The turbine supplier is responsible solely for the supply of the turbines (a five-year O&M contract isalso likely to be included). The main contractor therefore subcontracts the other fabrication andinstallation work depending on their own capabilities.

Scenario 2: EPIC & Turbine Supplier Joint Contracting

Developer EPIC

Turbine Supplier

Foundation supplyCable supplyTurbine installationFoundation installationCable installationOnshore works

Turbine supply


Examples of this type of strategy include the Barrow project, where Centrica will award the maincontract to a team consisting of Halliburton KBR and Vestas.

Potential Impact on Scroby SandsThe adoption of the above strategy on the Scroby Sands project would have reduced Vestas Celtic’srole on the project. Whereas Vestas were responsible for contracting out the majority of offshoresubcontracts for procurement and installation, their role would have been limited to solely supplyingturbines.

Under this scenario, EROWL would therefore have contracted in a EPIC contractor, such as Amec orHalliburton KBR, who would bid for the work with Vestas as a subcontractor. The successful EPICcontractor would then subcontract the individual work packages. This approach would therefore havereduced EROWL’s own involvement in the development of the project once the EPIC contract hadbeen awarded, though it is likely that the developer would wish to maintain control over a number ofstrategic contracts for control and timing reasons.

In terms of UK and East of England content it is hard to speculate how an EPIC contractor wouldsubcontract the work, even if (as is likely) the EPIC contractor was a UK-based company. UK contenton Scroby was high and although there are UK companies that could have completed the work thatoriginally went to Europe there is no guarantee that a UK EPIC contractor would award the work tothem. A UK-based EPIC contractor would, however, be expected to result in further value beingretained in the UK compared to, for example, a contracting strategy where the turbine manufacturerwas the main contractor.

The industry is already seeing the entrance of established oil and gas companies at all levels of thecontracting process from developers through to installation contractors. An EPIC contractor withsignificant experience in oil and gas in the North Sea would already have enhanced knowledge of, andaccess to, UK companies. This could result in a substantially higher UK content in projects.

SummaryThis approach to contract is an intermediary step between the early methods of contracting such asthat seen on Scroby Sands and the more advanced contracting expected in years to come. It offers abetter balance of risk and cost for all parties and is likely to become the most commonly adoptedapproach to contracting for the immediate future.



6.1.3 Scenario 3The third type of scenario sees the developer placing contracts individually for all parts of themanufacture and construction of the project. This approach requires a developer able to finance aproject’s development and construction without recourse to third party finance and which in themajority of cases would have some form of construction/contracting experience. The developer bearsthe risk in exchange for a more cost-efficient construction and a tighter control over the contractawards down the supply chain.

This scenario effectively assumes the emergence of ‘super-developers’ in the same style as themajor operators of the oil and gas industry. There are not currently any ‘super-developers’ identifiablein this context as developers have to date tended to take a ‘hands-off’ approach to construction, andfew major EPIC contractors have entered the industry as yet (although several will do in the comingyears). In offshore wind this approach is likely to first be demonstrated by a developer (or utility)partnering with a major contractor to form a strong development team.

Scenario 3: EPIC Contracting

Developer//EPIC

Turbine supplyTurbine installationFoundation supplyFoundation installationInfield cable supplyInfield cable installationExport cable supplyExport cable installationOnshore worksGrid connection


The UK’s Round 2 developments may in some cases take this approach. A potential example wouldbe the massive Beatrice wind farm planned off the coast of Scotland by Talisman Energy. Thisinnovative 1 GW project is already trying to fuse together offshore wind and oil and gasdevelopments.

This contracting approach is now common in onshore wind where the industry is relatively welldeveloped and experience is high. Offshore, however, project sizes and thus risks and costs arehigher, while experience is still limited. We expect some slight shift towards this final strategytowards the end of the decade, however in the meantime we expect a hybrid of Scenario’s 2 and 3 toevolve with the three principal contracts (the supply and installation of cables, turbines andfoundations) being put up for tender.

Potential Impact on Scroby SandsScroby Sands was only the UK’s second major offshore wind project and at the time of developmentand contracting this type of contracting strategy would have been unsuitable for the project. It placesa high burden of risk on the developer acting as the EPIC contractor; risk that they would have beenunwilling to take.

Instead of Vestas Celtic acting as the main contractor, a larger specialist company would have beenbrought in who would then be faced with subcontracting the entire project. To try and reduce risk,this EPIC contractor would then have had to balance experience with cost to choose subcontractors.Such a strategy would increase project viability as it lets cost be controlled, giving a degree ofcertainty to the developer and their financers.

SummaryThis contracting strategy is highly advanced compared with current practices and projects tendering insuch a way are not expected for some years. The risk on the EPIC contractor is large and the industryis currently lacking in sufficient experience to make such a strategy viable.



6.1.4 Scenario 4This last contracting strategy is fundamentally different to the others presented above. In it the mainconstruction contract is placed with a consortium of companies which would typically include turbine,foundation and cable suppliers with the potential addition of a main installation contractor to thegroup. This partnership of companies would then subcontract any remaining work (e.g. onshoreworks). This alliance style strategy is well-used in the oil and gas industry.

It would be possible for a key selection of companies to offer a complete construction package for anoffshore development. A further step forward would be the addition of development services into thecapabilities of partnerships – effectively meaning that a group of companies could take a project fromconception through to operation.

The advantages of this strategy are that the risk and cost of development are split fairly between theconsortium companies. By working together they are able to provide a solution at a very competitiveprice. The companies are also able to provide a guaranteed availability in terms of fabrication andinstallation. As the industry progresses it is expected that these types of alliances will emerge ascompanies gain experience of working with one another and realise the commercial value that jointtendering could have.

An early example of such a strategy can be seen on the Thornton Bank offshore wind farm which isplanned off Belgium. The C-Power consortium consists of Interelectra, Siif Energies, DredgingInternational and a number of financers. In this case, the consortium is responsible for both thedevelopment and construction of the project.

Scenario 4: Partnership Based Contracting

Developer

Partnership ofcontractors e.g.

Turbine SupplierFoundation Supplier

Cable Supplier

Turbine InstallationFoundation InstallationCable InstallationOnshore Works


Potential Impact on Scroby SandsThe use of this last type of contracting strategy on Scroby Sands would theoretically allow a higherlevel of UK content in the project than was achieved. This assumes that an alliance of companiescould be formed amongst regional and/or national companies. This is likely as there is a sufficientrange of expertise to fulfil much of the needs of the Scroby project.The main problem here is the lack of a UK-based turbine supplier. Whilst blades and towers can bebuilt in the UK there is not currently any turbine manufacturing capability based in the UK apart fromassembly (which is low in value). At the time of contracting the project the industry was not in asufficiently developed state to offer competitive partnership-based contracting. Fundamentally thiscomes down to a lack of offshore experience.

SummaryThis contracting strategy has the most potential for the offshore wind industry. It offers the bestbalance of risk and cost for all involved parties. Partnerships can be formed from regional and UKcompanies in order to maximise domestic content.

It is not believed that this type of contracting methodology will be seen in the UK until the secondround projects are tendered. This is, however, likely to be the strategy that results in maximum UKcontent. In the meantime the UK is expected to see the consolidation of some of the leading offshorewind contractors seeking to improve their scope of work through takeovers and mergers.

6.1.5 ConclusionWhilst the type of contracting strategy that is selected may affect both UK and regional content, thereare other influencing factors that are common to all the different scenarios. For example, themanagement of the design process, through the development phase and on to the detailed designwhich forms the basis of tendering, can have a direct effect on the opportunities open to UK and



regional companies to be aware of and tender for a role in construction. If the design process isopened up to include early input from various regional and UK sub-contractors/service providers,particularly in an attempt to reduce uncertainties over construction costs and schedules and to reducethe likelihood of tender reissues and revisions, then this may well cascade into increased involvementin the main project phase. This would of course result in a much more expensive developmentprocess for the project developer and involve a degree of additional risk taken before a project hassecured all necessary licences and consents.

Similarly, the timetable for tendering can be an influence. There is an acknowledged need for betterunderstanding of the timing and role of procurement pre-qualification exercises by the projectdeveloper and potential major contractors among UK companies in advance of the formalprocurement process for a specific project. In terms of the formal project tendering itself, a majorissue is whether the tender return period allows sufficient time for the contractor to review, sourceand include local sub-contractors in their bid.

Finally, another area that could be of influence, as previously mentioned, is standardisation ofapproach, and in particular standardisation of contracts. The increased transparency and familiarity ofstandard contracts could ease some of the burden of the costly tendering process and allow morecertainty, which through reduced exposure to risk will provide opportunity for cost reduction. Thisapproach would also help to encourage new entrants into the industry, who may at present bediscouraged by some of the complexities of existing contract requirements.





7 Forecast Round 2 UK Content

7.1 UK Round 2 Projects

Figure 7-1: UK Strategic Areas

The offshore wind farms planned off the UK are primarily located in three strategic developmentareas: The Greater Wash, The Thames Estuary and The North West.

For the purpose of this study all projects in The Thames Estuary and The Greater Wash are beingconsidered. Although in some cases the locations of the planned projects in these two areas aregeographically distant from the physically defined East of England region (Bedfordshire,Cambridgeshire, Essex, Hertfordshire, Norfolk and Suffolk) they fall within its area of influence, Eastof England companies will be tendering for contracts for these projects and the region’s ports are wellsuited to the requisite construction work.

The East of England has a total of approximately 6 GW of capacity planned which will come fromapproximately 1,700 turbines (exact capacity and numbers depend on turbine sizes chosen). Totalcapital expenditure for all Round 1 and 2 projects is forecast to reach approximately £7.4 billion.



7.1.1 Docking Shoal

Docking ShoalLocation Greater Wash - 19km

off Hunstanton, NorfolkDeveloper Centrica / Amec

Construction 2009 Owner/Operator CentricaOnline 2010 EPC n/aCapacity (MW) 500 Turbine Installation n/aNumber of Turbines 100-125 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 750Turbine Rating (MW) 4-5 Planning Status Licence - Dec 2003Foundation Type Monopile/TripodWater Depth (m)

Contracting Status Not begun

The initial licence for this 500 MW project was awarded in December 2003 as part of the UK's secondlicensing round. Centrica are to be the owner of the wind farm and will co-develop the project withAmec, who may take an EPC role on the wind farm.

Centrica will effectively be treating the Lynn, Inner Dowsing, Lincs, Docking Shoal, and Race Bank asphases in one development and aim to get the projects built as quickly and cost effectively aspossible by grouping together key contracts. Any contractor awarded work for Lynn/Inner Dowsing istherefore expected to be well positioned to gain future work in other local projects. Their closeproximity also means the projects can benefit from prior environmental work already carried out onother Centrica assets.

Recent details suggest that Docking Shoal will be developed as two phases, Docking Shoal 1 andDocking Shoal 2. No further details have been made available – the two ‘blocks’ could be developedsimultaneously or as separate developments.

7.1.2 Dudgeon EastDudgeon East

Location Greater Wash - 28kmoff Cromer, Norfolk

Developer Warwick Energy Ltd

Construction 2009 Owner/Operator Warwick Energy LtdOnline 2010 EPC n/aCapacity (MW) 300 Turbine Installation n/aNumber of Turbines 60-100 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 350Turbine Rating (MW) 3-5 Planning Status Initial licence granted.

Application 2006Foundation Type Steel tripodWater Depth (m) 17 - 22


Warwick Energy were awarded a licence for the Dudgeon East site in December 2003 as part of theUK's second licensing round. However, this site is outside of the UK's territorial waters and thereforerequires the current Energy Bill to be passed by parliament if they are to proceed. The 300 MW site,located in water depths of between 17 and 22 metres over a seabed of sand on chalk, is considering100 3 MW turbines, or 60-75 4-5 MW machines. Warwick hope to submit an application in 2006.

Warwick is considering synergies between wind and gas production for the Dudgeon site, as theproject is sited on a gas discovery of an estimated 50 billion cubic feet of the same name held by thecompany. Whilst not previously judged as commercial, the gas may be recoverable in the future astechnology improves and costs fall. Development of the gas field could ease the later development ofthe wind farm and vice versa, in terms of infrastructure, operations and maintenance.



7.1.3 Greater GabbardGreater Gabbard

Location Thames Estuary - 26kmoff Felixstowe, Suffolk

Developer Greater GabbardOffshore Winds(Airtricity & Fluor)

Construction 2008 Owner/Operator Greater GabbardOffshore Winds(Airtricity & Fluor)

Online 2010 EPC FluorCapacity (MW) 500 Turbine Installation n/aNumber of Turbines 100-139 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 550Turbine Rating (MW) 3.6-5 Planning Status Initial licence granted.

EIA underway. App -Q3 2005

Foundation Type MonopileWater Depth (m)


The Greater Gabbard wind farm is under development by Airtricty and Fluor (under the name GreaterGabbard Offshore Winds Limited). The project was a successful bidder in the UK’s second round ofoffshore wind farm leases.

The Greater Gabbard project is located approximately 26 km from the Suffolk coast and comprisesone site located in the outer Thames Estuary, on two sand banks known as the Inner Gabbard andThe Galloper, an area currently used for the dumping of material dredged from shipping channels.These two thin strips of turbines are right on the 12 mile territorial limit.

Work on the EIA began in early 2004 and will take 15 months to complete. An application to build willsubsequently be lodged in the summer of 2005. Initial consultations have already begun with the localcommunity, the fishing industry and environmental experts over the scheme. Consultations are due toend in 2005.

Assuming 3.6 MW turbines are used, the site will have 139 turbines, however, it must be assumedthat the developers are considering larger machines which should be available at that time. A phaseddevelopment strategy is likely, with Fluor likely to take on an EPC role (possibly in a joint role with aturbine manufacturer). No detailed information about these phases has been released at present.

If approval is successful the team expect work to begin on the site in 2008.

7.1.4 Gunfleet Sands IIGunfleet Sands II

Location Thames Estuary - 7kmoff Clacton-on-Sea,Essex

Developer GE Gunfleet Ltd

Construction 2007 Owner/Operator Project will be soldOnline 2007-8 EPC GE Wind (with ?)Capacity (MW) 64 Turbine Installation n/aNumber of Turbines 16 Foundation

Installationn/a

TurbineManufacturer

GE Wind Total Cost (£m) 77

Turbine Rating (MW) 4 Planning Status Initial licence granted.Full app being prepared

Foundation Type MonopileWater Depth (m) 8

Contracting Status Contracting not begun– may carry over phase1



Current plans for GE Wind’s 64 MW extension to the Gunfleet Sands project suggest 16 turbineseach rated at 4 MW will be installed in 2007. The development of Gunfleet Sands II is expected to beclosely linked to the development and construction of the first phase project.

Gunfleet Sands I is currently in the contracting phase and GE are looking for an owner for the windfarm before construction begins. Any future owner would presumably be offered Gunfleet Sands II aspart of any deal made. A joined-up approach to the construction of the two projects would bebeneficial in terms of cost, although Gunfleet Sands II has not yet submitted a full application. GEWind are fully expected to be using their own turbines on the project as they will on the first phase,but on this project a 4 MW machine is expected.

Gunfleet Sands II has the potential to be the first round two project installed in the UK, dependingupon GE’s success in finding a buyer for the first phase of the project.

7.1.5 Humber GatewayHumber Gateway

Location Greater Wash - 10kmoff Spurn Head, Yorks

Developer Humber Wind Ltd(United Utilities & GREP)

Construction 2008 Owner/Operator United UtilitiesOnline 2009 EPC Vestas likelyCapacity (MW) 300 Turbine Installation n/aNumber of Turbines 60-100 Foundation

Installationn/a

TurbineManufacturer

Vestas likely (GREP) Total Cost (£m) 350

Turbine Rating (MW) 3-5 Planning Status Initial licence granted.App. under preparation.



United Utilities and GREP, were awarded this 300 MW licence in December 2003 as part of UK'ssecond licensing round, under the name Humber Wind Ltd. Construction was initially planned for2007, but is expected to slip into 2008, with the developer aiming for a one season installation of the60-100 turbines.

The water depth at the site is shallow (12-14m) meaning monopiles are likely, although GBSfoundations could also be possible. The project will be built on the seabed (a firm boulder clay), ratherthan a sandbank and at the nearest point the coast will be just 8 km away (visual impact could be aproblem as Spurn Head is a Heritage Coast site).

Two offshore substations are initially planned, and power will be exported to the grid at 132kV. A fullapplication is expected by the end of 2005, with environmental impact assessment studies alreadyunderway, which if achieved could lead to commissioning being complete by mid 2008.

Vestas are the likely turbine supplier for the project and could act in an EPC role.



7.1.6 Lincs (Inner Dowsing II)Lincs (Inner Dowsing II)

Location Greater Wash - 8 kmoff Skegness, Lincs

Developer Centrica

Construction 2008 Owner/Operator CentricaOnline 2009 EPC n/aCapacity (MW) 250 Turbine Installation n/aNumber of Turbines 50-83 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 300Turbine Rating (MW) 3-5 Planning Status Initial licence granted.

App. under preparationFoundation Type MonopileWater Depth (m) 10-15


Offshore Wind Power (OWP) initially won the 250 MW licence for the Lincs site, which is effectivelyan extension to the Inner Dowsing project. Centrica assumed total ownership of the project inDecember 2003 after buying out OWP, and will effectively be treating the Lynn, Inner Dowsing,Lincs, Docking Shoal, and Race Bank as phases in one development.

The recently completed environmental impact assessment work on Centrica’s other assets will aidthe development of this project, with construction on this site potentially beginning as early as 2007.The application to build will be submitted in Q1 2005, with Centrica currently looking at between 50-80 3-5 MW turbines. Grid improvements are necessary, and one offshore substation will be built.

7.1.7 London Array – Phase 1 (LAWL)The London Array development is a 1 GW offshore wind farm planned for the Thames Estuary. Thewind farm was originally proposed by EROWL (formerly Powergen) and Shell, in association with Core(a private-equity consortium between Energi E2 and Farm Energy). The initial timetable called forconstruction in 2007, however, the project has now been split into three phases and will bedeveloped individually by two teams.

London Array –Phase 1 (LAWL)Location Thames

EstuaryDeveloper London Array West (EROWL

& Core)Construction 2007/8 Owner/Operator London Array West (EROWL

& Core)Online 2009 EPC n/aCapacity (MW) 300 Turbine Installation n/aNumber of Turbines 100 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 360Turbine Rating (MW) 3 Planning Status Licence granted. EIA &

consultations begun. Appunderway


Contracting Status Pre-qualification begun.Invitations to tender April 2005

The project was designed for 300 wind turbines, each up to 300ft tall, which would generate 1,000megawatts of electricity. Although the wind farm is to be built 12 miles offshore, the project willinclude an onshore substation, proposed for Cleve Hill, which will collect the generated power andfeed it into the electricity grid.

By August 2004, two full years of bird studies had been completed at the site. A met mast to recordwind speed data was erected at the site by Seacore in October 2004 using Seacore's own purposebuilt eight legged jack-up platform Excalibur as a stable working platform to install the 1.62m diametertubular steel foundation monopile. The met mast tower is equipped with anemometry, temperatureprobes and electronic recording and transmitting equipment.



London Array – Phase 2 (LAWL)Location Thames

EstuaryDeveloper London Array West (EROWL

& Core)Construction 2009/10 Owner/Operator London Array West (EROWL

& Core)Online 2011 EPC n/aCapacity (MW) 367 Turbine Installation n/aNumber of Turbines 73-122 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 440Turbine Rating (MW) 3-5 Planning Status Initial licence granted. First

phase EIA/planningunderway



The consultation process for the wind farm began in September 2004 with EROWL contactingcommunity and industry groups in the region. The consultation exercise is a precursor to seekingplanning approval from Kent and Essex councils in 2005. By engaging with the community thedevelopment team will hope to pre-empt any opposition to the project.

While the full application to build the wind farm is scheduled for submission mid 2005 there haverecently been major changes to the development strategy. In January 2005, the project partners onLondon Array split the development and will progress as two separate development teams. EROWLand Core have formed London Array West Limited (LAWL) and will build the first phase of up to 300MW and a further phase of 367 MW at a later date. Shell will focus on a 333 MW phase of theproject.

LAWL have begun the pre-qualification process for their first phase calling for up to 100 turbines,60km of 33 kV infield cabling, 50 km of 200 kV export cable and a substation. Invitations to tender willbe sent out in the first week of April 2005.

London Array – Phase 3 (Shell)Location Thames

EstuaryDeveloper Shell

Construction 2009 Owner/Operator ShellOnline 2010 EPC n/aCapacity (MW) 333 Turbine Installation n/aNumber of Turbines 111 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 400Turbine Rating (MW) 3 Planning Status Initial licence granted.Foundation Type MonopileWater Depth (m) 8




7.1.8 Race BankRace Bank

Greater Wash - 24 kmoff Hunstanton, Norfolk

Developer Centrica

Construction 2009 Owner/Operator CentricaOnline 2011 EPC n/aCapacity (MW) 500 Turbine Installation n/aNumber of Turbines 100-125 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 600Turbine Rating (MW) 4-5 Planning Status Initial licence grantedFoundation Type Steel tripodWater Depth (m)


The licence for this 500 MW project was awarded in December 2003 as part of the UK's secondround, and was one of two new awards for Amec. This project lies outside of the UK's territorialwaters however new legislation due will allow development.

Amec later announced the sale of its 100% stake in Amec Offshore Wind Power Limited to Centricafor an initial cash consideration of just under £3.5 million and deferred consideration of up to £1million. Amec will continue to support the project under contract to Centrica, through the provision ofenvironmental, technical and management services.

7.1.9 Sheringham ShoalSheringham Shoal

Location Greater Wash - 18 kmoff Cromer, Norfolk

Developer Scira Offshore Energy(Ecoventures & SLP)

Construction 2009 Owner/Operator Developer to sell toowner

Online 2009 EPC n/aCapacity (MW) 315 Turbine Installation n/aNumber of Turbines 63-105 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 380Turbine Rating (MW) 3-5 Planning Status Initial licence granted.

App under preparationFoundation Type MonopileWater Depth (m) 15


Ecoventures and SLP Energy (under the joint venture Scira Offshore Energy) were awarded this 315MW site as part of the UK's second round of offshore wind farm licences in December 2003. Scirawill develop the project up to construction at which point it is likely to sell the asset to a long-termowner.

The project will consist of between 60 and 80 turbines, located in the Greater Wash, about 20 kmnorth of the Norfolk coast, in water depths of between 10 and 20 metres. The original tender wasbased upon 80 4 MW turbines, however, this remains flexible at this stage. The developers expectplanning permission in 2006, with the survey work necessary for the EIA having begun in 2004. Theproject is already targeted as a one season installation.



7.1.10 ThanetThanet

Location Thames Estuary - 11km off North Foreland,Kent

Developer Warwick Energy

Construction 2009 Owner/Operator Warwick may sell onOnline 2010 EPC n/aCapacity (MW) 300 Turbine Installation n/aNumber of Turbines 60-100 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 360Turbine Rating (MW) 3-5 Planning Status Initial licence granted.

App. being prepared.Foundation Type MonopileWater Depth (m) 12

Contracting Status EIA awarded May2004Contracting notbegun

Warwick Energy were awarded a licence for this 300 MW site off North Foreland in the ThamesEstuary as part of UK's second round. The developer was initially targeting a 2007 construction datealthough this is believed to be somewhat optimistic, and is expected to slip into 2009.

In March 2004 the UK Department of Transport published a report showing that many of the secondround projects will be located in areas of heavy shipping traffic. Although many sites were selected toavoid traffic some, including Thanet, are located in high-traffic locations, which may cause problemsduring the approvals process.

Warwick Energy awarded the environmental consultancy contract for the Thanet project in May 2004to Posford Haskoning.

7.1.11 Triton KnollTriton Knoll

Location Greater Wash - 30km off Mablethorpe,Lincs

Developer Npower Renewables

Construction 2010 Owner/Operator Npower RenewablesOnline 2012 EPC n/aCapacity (MW) 1,200 Turbine Installation n/aNumber of Turbines 240-300 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 1,450Turbine Rating (MW) 4-5 Planning Status Initial licence grantedFoundation Type Steel tripodWater Depth (m)


One of the biggest proposed projects in the world, this 1,200 MW giant is under development byNpower Renewables (formerly National Wind Power). It is located in the Greater Wash area, butoutside of territorial waters and will therefore require the current Energy Bill to be passed byparliament if the project is to proceed. The Energy Bill would also be a requirement for the requiredgrid capacity to be made available, while development will also depend on a favourable outcome ofthe 2006 review of the Renewables Obligation.

Realistically, this project belongs very much in the next decade and Npower Renewables willconcentrate on other projects first. Npower is aiming for consent in 2007, a bird study is underway,and a met mast is due for installation before the end of 2005. The very earliest construction couldtake place is 2009 (although 2010 is forecast by DWL), and it may be split over several seasons (e.g.250 MW a year).

In March 2004 the UK Department of Transport published a report showing that many of the secondround projects will be located in areas of heavy shipping traffic. Although many sites were selected to



avoid traffic, some, including Triton Knoll, are located in high-traffic locations, which may causeproblems during the approvals process. In Triton Knoll's case a large section of the southwest part ofthe project lies in a main shipping channel where over 1,500 ships a year pass.

The MoD have objected to the Triton Knoll project (along with many other second rounddevelopments).

7.1.12 Westernmost RoughWesternmost Rough

Location Greater Wash - 18 kmoff Aldbrough, Yorks

Developer Total

Construction 2009 Owner/Operator TotalOnline 2010 EPC n/aCapacity (MW) 240 Turbine Installation n/aNumber of Turbines 60-80 Foundation Installation n/aTurbine Manufacturer n/a Total Cost (£m) 290Turbine Rating (MW) 3-4 Planning Status Initial licence grantedFoundation Type Monopile or Steel

tripodWater Depth (m)


Total make their entry into offshore wind with this 240 MW licence awarded in December 2003 aspart of the UK's second licensing round. The site will use turbines between 3 MW and 4 MW in size,making a one season installation possible. It will be interesting to see the contracting strategy thatTotal adopt for the project, coming from and oil and gas background.

In March 2004 The UK Department of Transport published a report showing that many of the secondround projects will be located in areas of heavy shipping traffic. Westernmost Rough is one of thesesites, and such issues may cause problems during the approvals process.

The MoD have objected to this project because of perceived radar issues.



7.2 Typical Attributes of a Round 2 ProjectThe UK’s second round projects represent a fundamental step change from the first round projectssuch as Scroby Sands. Second round projects are typified by a greater number of higher capacityturbines in deeper waters further from shore. Round two projects will in most cases use turbines inthe 4 MW and 5 MW class in order to maximise project capacity.

Table 7-1: Typical Project CharacteristicsFactor Details

Project Capacity 500 MWNumber of Turbines 100 +Turbine capacity 4-5 MWWater Depth 20 metres +Distance from Shore 10 miles +Cable Type HVDCSubstation Yes, offshoreYear Online 2010Project Cost £550 million

These larger projects will in many cases require the use of an offshore substation. This representsanother opportunity for UK content. The other major change is the more widespread use of HVDCcabling. Whilst more expensive than the standard lower-voltage cables, they become increasinglycost efficient as the distance from shore increases.

For the purpose of this study typical characteristics of a round two project have been set as above.These attributes will be used to identify the key challenges of scaling-up and the capabilities of East ofEngland and UK companies in meeting them.

7.3 The Key Challenges of ‘Scaling-up’

The UK Offshore Wind Market – The UK will soon be the world leader in total offshore windcapacity when further first round projects are installed in the coming years. The first of the secondround UK projects are set to begin construction in 2007/8. UK waters are forecast to see a substantialamount of activity providing the key challenges of the industry can be overcome.

Some of the major challenges facing UK offshore wind relate to the sheer growth of the industry thatis expected, specifically in the issues surrounding the supply and demand of turbines, foundations,installation vessels and suitable ports.

Contract Strategy – The way projects are contracted is set to change as developments increase insize and value and experience is gained. Alternate contracting strategies are examined in Section 5 ofthe report in more detail.

The issues that need addressing within a contract centre on risk, project costs and securing supplies.At present contractors are faced with commercial pressures to achieve cost competitive quotescoupled with uncertainty over associated levels of risk. The offshore wind industry is immature and inmany cases the true cost of offshore development has not been fully realised, leading to examples ofcontractors bidding too low on contracts, resulting in financial losses for some companies keen toenter the market and subsequently limiting the perceived benefits of early-mover advantage.

First round projects have an approximate cost of £75 million each. For second round projects theaverage cost is expected to rise to approximately £550 million. The current trend of balance sheetfinancing will be superseded by project financing, although there is a great deal of caution amongstfinancers who are concerned over the levels of associated risk. This confidence will improve asfurther projects are built and are successful.

At present, individual supply and installation contracts are placed very late in the developmentprocess. With only a small number of projects approaching construction this year it has not causedany serious problems to equipment and service supply lead times. However, within a year theproblem could be significantly exacerbated as a larger number of projects are initiated within a climate



of limited contractor capacity and availability. Second round projects will therefore have to adopt acontracting strategy where contracts are awarded with a longer lead time if they are to secure thelimited fabrication resources and busy installation contractors in the high-demand market place.

Development contracting is expected to move from the current focus on the turbine supplier to beingEPIC based for the remainder of the first round projects. This approach will be employed for somesecond round projects but it is anticipated that the partnership/alliance strategy will increasingly beadopted.

Logistical – For the second round projects in The Greater Wash and The Thames Estuary strategicareas, the ports in the East of England are ideally located for logistical and construction bases.Lowestoft and Great Yarmouth are the two main ports that are actively seeking involvement in theoffshore wind industry, having already been the construction base for the Scroby Sands project. Asignificant proportion of the content for Scroby Sands came from the use of Lowestoft and GreatYarmouth as logistical bases for the project.

Great Yarmouth has long been planning the construction of an Outer Harbour. This developmentwould make the port an extremely capable construction base for the second round projects.Construction must be complete by 2008 for the project’s finance to be issued. There is some doubtover whether this timescale is realistic (although it should be noted that many round two projects arethemselves facing delays). If the East of England is to gain full value from the second round projectsthe Outer Harbour is essential. No other regional ports can realistically support the construction of thelarge round two projects scheduled for construction post 2007 in their own right and would have toform part of a multi-port logistics package with the attendant risks and costs.

The need for deepwater ports with significant laydown and pre-assembly facilities is very high.Mainland Europe has a selection of high-quality ports that are currently more suitable for an offshorewind base. The work will go to Europe if the UK and East of England cannot offer comparativefacilities.

Turbines – The second round projects off the UK will make use of the cutting edge in wind turbinedesign in an attempt to maximise a site’s total installed capacity and, therefore, output.

There are a number of important issues surrounding the use of 4-5 MW class turbines. The first ofthese concerns the supply of the turbines. Commercial production has yet to begin on any 4 MW orabove turbine, the only installed models are prototypes – one 4.5 MW turbine has been installed at anear-shore location off Germany for instance. There is therefore a concern as to whether the leadingturbine manufacturers will have advanced their designs to commercial production by the time theUK’s second round projects are at a contracting stage.

Secondly, the demand on the manufacturers to produce enough turbines will be extremely high.Many of the second round projects will feature hundreds of turbines and there will be multipleprojects entering construction simultaneously. With other European countries competing for turbinesupply contracts (Germany’s offshore wind industry will pick-up at the same time as the UK’s secondround is being built), there is a real question over the ability of the leading manufacturers to scale upproduction.

The turbine manufacturers are therefore faced with huge technological and production demandsbecause of the growing market and because of the industry’s constant drive for bigger and betterturbines. Although the industry is still young there has been a tremendous drive to using the highestcapacity turbines available. Project developers are so concerned with maximising site output that theyare pushing manufacturers to rapidly develop and manufacture the next generation of turbines. This iscreating a large amount of risk as the turbine manufacturers are effectively selling turbines straight offthe design board without extensive testing.

Foundations and Towers – The second round of UK projects will predominantly use steel monopileand steel tripod foundations. Monopile foundations are well proven in the industry whereas steeltripods have yet to be used. Monopiles can be used for sites up to approximately 25-30 metres ofwater depth. Steel tripods are required for deeper waters.

Manufacturing capacity for rolled steel offshore wind foundations and towers in Europe is low. Thereare only a small number of manufacturers currently working in the sector, creating a potential futurepinch point for the industry. Early contracting will be required to secure scarce manufacturing



capacity, especially as many of the plants will have their total annual output filled by a single windfarm.

Installation Vessels – The installation of the large-scale wind farms of the last four years has beenmet by the turbine and foundation installation vessels available in the marketplace. Jack-up rigs fromestablished oil and gas contractors installed the first projects, then saw specialist offshore windinstallation contractors such as A2Sea, Mammoet Van Oord and Marine Projects International enterthe market with purpose built vessels. These vessels have proved extremely efficient at installing the2-3 MW turbines on current waters.

Second round projects are far more challenging. The sites themselves are further offshore in deeperwaters. Additionally, the increased size, weight, and required lifting height of the next generation ofturbines will be problematic for installation contractors. Some of these contractors are planning toupgrade their vessels to cope with the deeper waters and larger turbines whilst others are buildingnew vessels.

With larger number of higher capacity turbines being installed and a larger total number of projectsbeing installed each season the demands on the installation contractors will be extremely high andalternative solutions involving a mixture of purpose built and existing vessels may need to beconsidered.

Steel – The price of steel is particularly important to the offshore wind industry, being the principalraw material used in the manufacture of steel towers, monopile and tripod foundations and transitionpieces. Any change in steel prices therefore has a considerable impact on manufacturing costs andtherefore project economics.

As the offshore wind sector really begins to take off, it will have a strong effect on the steel market.As an example, the UK’s Beatrice project is expected to use over 250,000 tonnes of steel for thefabrication of the towers and foundations. Beatrice is a 1 GW project that will use tripod foundations.Although it is someway off construction, and seems like a very large project, it is wind farms of thissize that will be the future of offshore wind. 5 MW turbines and tripod foundations will in timebecome common. The factor of steel price (and perhaps more importantly, steel supply) will beextremely relevant to the industry.

At the time of writing, steel prices have breached $700 per tonne, more than double the price twoyears ago. The gradual price rises steepened at the start of 2004 and grew at an increased ratethroughout the year. Many construction companies and manufacturers have been hit hard, with theincreased prices of their primary raw material affecting balance sheets significantly.

Current price rises follow a period of cheap steel supplies with steel famously having been quoted asbeing cheaper than potatoes in the past. Indeed, the price of steel has risen slower than the rate ofinflation since the 1980s. Current trends are a result of growing steel demand from southeast Asia, inparticular China, where huge increases for the last few years are driving the high prices. Demandincreased by nearly 40 million tonnes in 2003.

There are few signs that demand for steel has slowed in light of the higher prices. UK structural steelfabrications are at their highest levels of output since 1990. Availability of steel rather than its cost isthe prime concern of manufacturers.

7.4 Round 2 Capability Assessment and AnalysisThis section considers potential UK and East of England content in value and hours within a typicalround two project of 500 MW (the full attributes of which are presented above) under three scenarios.The scenarios show;

• High Case – the maximum level of content achievable by the UK and East of England• Proven Case – the proven capabilities from Scroby Sands scaled-up to a Round 2 project• Low Case – in which the major contracts are missed by the UK and East of England



7.4.1 High-Case - Maximum Potential ContentThese figures show the maximum perceived potential UK and East of England content possibleassuming; a UK developer, use of an East of England port and use of UK and East of Englandcontractors where possible.

Table 7-2: High-Case – Maximum Potential UK and East of England Value (£’000s)

£000s Total UK Potential UK %EofE

Potential EofE %Development Design 4,000 4,000 100% 400 10%Environmental Monitoring 500 500 100% 492 98%Insurance/Legal 12,000 12,000 100% 11,652 97%Surveys 750 750 100% 750 100%Project Management 11,000 10,900 100% 5,929 54%Detailed Design 6,000 6,000 100% 6,000 100%Procurement & Manufacture 301,250 131,000 44% 773 0%Transport & Delivery 7,500 7,500 100% 1,425 19%Onshore Pre-Assembly 16,000 14,400 90% 13,360 84%Onshore Installation 30,000 30,000 100% 30,000 100%Offshore Installation 130,000 130,000 100% 49,970 38%Commissioning 16,000 14,400 90% 14,352 90%Operations & Maintenance 45,000 38,500 86% 35,235 78%Other Misc. Costs 6,000 5,300 88% 5,286 88%

Total 586,000 405,250 69% 175,624 30%

With current capabilities the maximum potential content for a second round project is approximately£405 million for the UK. £176 million of this could be achieved by the East of England. This represents69% of the total project expenditure being secured by UK companies and 30% of the total awardedto East of England companies.

Whilst this is a high level of domestic content, there still remain limiting factors on UK industry. At thepresent time there are no UK-based turbine manufacturers. With the turbine being central to theoffshore wind supply chain and a major item of expenditure, the UK and East of England will thereforeautomatically miss out on a very significant amount of work and value creation.

Table 7-3: High-Case – Maximum Potential UK and East of England HoursHours Total UK Potential UK % EofE Potential EofE %

Development Design 73,118 73,118 100% 9,286 13%Environmental Monitoring 8,250 8,250 100% 8,162 99%Insurance/Legal 3,428 3,428 100% 3,260 95%Surveys 7,500 7,500 100% 7,500 100%Project Management 218,743 217,212 99% 101,808 47%Detailed Design 149,284 149,284 100% 149,284 100%Procurement & Manufacture 773,557 559,282 72% 17,018 2%Transport & Delivery 39,184 39,184 100% 8,307 21%Onshore Pre-Assembly 204,813 189,042 92% 165,284 81%Onshore Installation 423,801 423,801 100% 423,801 100%Offshore Installation 417,207 417,207 100% 299,555 72%Commissioning 236,552 201,069 85% 201,069 85%Operations & Maintenance 539,770 454,395 84% 421,020 78%Other Misc. Costs 104,226 83,798 80% 83,798 80%

Total 3,199,433 2,826,570 88% 1,899,152 59%

From a total of approximately 3.2 million hours involved in the development, construction and first 5year’s operation of a second round UK project, the UK has a maximum potential of 88% of this workwhich equates to approximately 2.8 million hours. 59%, or 1.9 million hours, of the work associated



with the project could be undertaken in the East of England. The gap between the UK content and thepercentage of that which is East of England content is due to one of the key weaknesses of theregion - the lack of manufacturing capability.

7.4.2 Proven-Case – Proven CapabilityThe proven-case scenario takes the proportion of UK and East of England content (in terms of bothvalue and man-hours) achieved on Scroby Sands and scales them up to a typical round two project.This assumes that the level of content achieved on Scroby Sands is replicable in a second roundproject.

Table 7-4: Proven-Case – Proven UK and East of England Value (£’000s)£000s Total UK Potential UK % EofE Potential EofE %

Development Design 4,000 2,637 66% 423 11%Environmental Monitoring 500 500 100% 426 85%Insurance/Legal 12,000 12,000 100% 1,423 12%Surveys 750 750 100% 715 95%Project Management 11,000 10,577 96% 5,320 48%Detailed Design 6,000 1,815 30% 972 16%Procurement & Manufacture 301,250 130,040 43% 62 0%Transport & Delivery 7,500 1,776 24% 337 4%Onshore Pre-Assembly 16,000 13,411 84% 11,738 73%Onshore Installation 30,000 30,000 100% 30,000 100%Offshore Installation 130,000 17,305 13% 2,203 2%Commissioning 16,000 11,697 73% 4,509 28%Operations & Maintenance 45,000 37,220 83% 33,593 75%Other Misc. Costs 6,000 4,926 82% 1,446 24%

Total 586,000 274,652 47% 93,169 16%

If contracts were placed on a typical round two project in the same way that they were on ScrobySands UK content could exceed £274 million, while the value of contracts placed within the East ofEngland would be over £93 million. Whilst this scaling up is unlikely to be replicated piece-by-piece onan actual project the potential has been established.

Table 7-5: Proven-Case – Proven UK and East of England Hours

Hours Total UK Potential UK %EofE

Potential EofE %Development Design 73,118 50,403 69% 9,279 13%Environmental Monitoring 8,250 8,250 100% 7,522 91%Insurance/Legal 3,428 3,428 100% 674 20%Surveys 7,500 7,500 100% 7,156 95%Project Management 218,743 208,168 95% 86,712 40%Detailed Design 149,284 44,613 30% 24,311 16%Procurement & Manufacture 773,557 546,032 71% 1,159 0%Transport & Delivery 39,184 11,633 30% 2,449 6%Onshore Pre-Assembly 204,813 178,380 87% 132,442 65%Onshore Installation 423,801 423,801 100% 423,801 100%Offshore Installation 417,207 128,210 31% 31,527 8%Commissioning 236,552 163,156 69% 96,552 41%Operations & Maintenance 539,770 444,643 82% 409,319 76%Other Misc. Costs 104,226 73,527 71% 26,522 25%

Total 3,199,433 2,291,745 72% 1,259,425 39%

In terms of man hours, a typical round two project developed, contracted and built in the same way asScroby Sands would result in almost 2.3 million hours of work for the UK, 72% of the total hours onthe project. East of England content is a large proportion of this with approximately 1.3 million hours,or 39% of the projects total hours.



7.4.3 Low-Case – A Missed OpportunityAs an alternative scenario the effects of major contracts not being placed in the UK and the East ofEngland, is examined below. This scenario assumes that a non-UK port, such as Rotterdam, is used inplace of an East of England port for construction and that there is no UK manufacturing andinstallation content on the offshore components of the project (i.e. turbines, foundations and cablingare made on the continent and installed by non-UK contractors). This low-case scenario does,however, assume that the majority of operations and maintenance is still conducted from the East ofEngland and a local base of operations is established within the region.

Table 7-6: Low-Case – UK and East of England Value (£’000s)

£000s TotalUK Potential UK % EofE

Potential EofE %Development Design 4,000 2,637 66% 422 11%Environmental Monitoring 500 500 100% 427 85%Insurance/Legal 12,000 12,000 100% 1,424 12%Surveys 750 750 100% 716 95%Project Management 11,000 9,580 87% 4,776 43%Detailed Design 6,000 1,080 18% 540 9%Procurement & Manufacture 301,250 0 0% 0 0%Transport & Delivery 7,500 0 0% 0 0%Onshore Pre-Assembly 16,000 0 0% 0 0%Onshore Installation 30,000 30,000 100% 30,000 100%Offshore Installation 130,000 0 0% 0 0%Commissioning 16,000 5,021 31% 2,575 16%Operations & Maintenance 45,000 32,473 72% 29,176 65%Other Misc. Costs 6,000 3,526 59% 805 13%

Total 586,000 97,567 17% 70,862 12%

Of a total expenditure on the project of £586 million this low-case scenario would result in just £98million, or 17% of the total project cost, UK content, while only £71 million, or 12%, of the total valueof the project would be sourced in the East of England. In the absence of regional involvement beingfacilitated through a decision to establish an operations base through a regional port a significantproportion of this 12% content would be under threat producing a worst case scenario with verylimited benefits being seen by the East of England.

Table 7-7: Low-Case – UK and East of England Hours

Hours Total UK Potential UK %EofE

Potential EofE %Development Design 73,118 50,404 69% 9,277 13%Environmental Monitoring 8,250 8,250 100% 7,521 91%Insurance/Legal 3,428 3,428 100% 674 20%Surveys 7,500 7,500 100% 7,156 95%Project Management 218,743 190,796 87% 73,116 33%Detailed Design 149,284 27,012 18% 13,506 9%Procurement & Manufacture 773,557 0 0% 0 0%Transport & Delivery 39,184 0 0% 0 0%Onshore Pre-Assembly 204,813 0 0% 0 0%Onshore Installation 423,801 423,801 100% 423,801 100%Offshore Installation 417,207 0 0% 0 0%Commissioning 236,552 63,843 27% 36,847 16%Operations & Maintenance 539,770 389,720 72% 356,750 66%Other Misc. Costs 104,226 51,482 49% 16,928 16%

Total 3,199,433 1,216,236 38% 945,577 30%

Even in this low-case scenario the hours of work done in the UK is 38% of the project’s totalwork, while East of England content is 30%, driven principally by onshore installation andoperations and maintenance related activities. This is a very high proportion and illustrates theregion’s capability to generate considerable value, especially in terms of employment, for theprojects scheduled to be built off the region’s coastline.



7.5 Forecast Content in East of England Round 2 ProjectsUsing the three scenarios for alternative levels of UK and East of England content in a typical Round 2project, market forecasts have been created for all 12 Round 2 projects defined as being within theEast of England’s area of influence. The forecasts below show forecast development andconstruction costs for second round projects. No data for operations and maintenance has beenincluded at this stage. Cost is attributed to the year the project is scheduled to come online.

7.5.1 UK Round 2 Content

0

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Figure 7-2: Forecast UK Content in East of England Round 2 Projects

Table 7-8: Forecast UK Content in East of England Round 2 Projects

Total forecast expenditure on the Round 2 projects in the two strategic areas of relevance to the Eastof England amounts to approximately £6 billion. The lowest likely content achievable by the UK isforecast to be £1 billion. If a similar contracting methodology to Scroby Sands was used, UK contentcould be as high as £2.8 billion. The maximum credible UK content is forecast at approximately £4.2billion.

The key area where the UK cannot compete is turbine manufacturing. This high-value activity is ofhuge importance because of its key role in the supply chain. Getting a turbine manufacturer toestablish a large-scale and locally sourced manufacturing presence in the UK would be extremelybeneficial. As an intermediate step, the establishment of further assembly plants similar to thatoperated by Vestas Celtic would ensure that levels of UK content across the industry will be moresecure.

The UK has sufficient fabrication and installation capabilities to cope with Round 1 projects but lacksthe both the capability and capacity to gain maximum attainable value from the Round 2 projects.There is currently not sufficient capacity amongst contractors to secure the forthcoming work andEuropean players will capitalise on this weakness.

£m 2008 2009 2010 2011 2012 TotalLow-Case 12 214 398 159 220 1,002Proven-Case 33 602 1120 447 619 2,821High-Case 49 889 1653 660 913 4,163

Total E of E R2 70 1,285 2,390 954 1,320 6,019



7.5.2 East of England Round 2 Content

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Figure 7-3: Forecast East of England Content in Regional Round 2 Projects

Table 7-9: Forecast East of England Content in Regional Round 2 Projects£m 2008 2009 2010 2011 2012 Total

Low-Case 9 155 289 115 160 728Proven-Case 11 204 380 152 210 957High Case 21 385 716 286 396 1804

Total E of E R2 70 1,285 2,390 954 1,320 6,019

From the total forecast expenditure on the twelve Round 2 projects within the area of influence of theEast of England, and assuming that all twelve R2 projects could be constructed using East of Englandports to provide the basis for minimal (operations base) to maximal (full regional content usingregional ports as construction and operations bases), the East of England value is forecast to bebetween £728 million and £1.8 billion. Scaled up levels of regional content achieved within ScrobySands on all Round 2 projects in the two strategic areas would result in a forecast total spend of £957million within the region.

Whilst these scenarios assume that the East of England has a role to play in all twelve R2 projects,even securing a minimal role in half that number would establish the offshore wind sector as asignificant industry within the region.

The East of England can attain a high level of content on the Round 2 projects but the region is limitedin terms of the areas in which it has the capabilities to work. Development design, surveying andproject management are, for example, strong areas for the region. It is, however, the high-valueareas, such as fabrication and offshore installation, where the East of England has not presentlycapitalised on the opportunities open to it. Whilst the East of England is home to some highly capableinstallation contractors, it lacks in particular contractors with a track record in foundation and turbineinstallation .

One crucial determinant of future regional content will be the use of a regional port as a pre-assemblyand construction base for projects. These tasks were completed in Lowestoft and Great Yarmouth onthe Scroby Sands project and resulted in a high level of local content. However, the region’s portsface tough competition from mainland European ports and other English regions; with the South Eastable to target projects in the Thames, and East Midlands, Yorkshire and Humberside and the NorthEast able to target projects in the Greater Wash, and without major improvements, such as GreatYarmouth’s Outer Harbour, the work is likely to go elsewhere.



7.5.3 Man-Hours on a Typical Round 2 Project

0

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EoE

Figure 7-4: UK and East of England Man-Hours for a Typical Round 2 Project

Table 7-10: UK and East of England Man-Hours for a Typical Round 2 ProjectMan-Hours UK EofE

Low-Case Content 826,516 588,827Proven-Case Content 1,847,101 850,106High-Case Content 2,372,175 1,478,132

Total Typical R2 Project 2,659,663Note: These figures do not include operations and maintenance

Total man-hours on the development and construction of a typical Round 2 project are forecast tototal over 2.6 million, of which the UK is expected to achieve between 0.83 and 2.4 million man-hours. The East of England is forecast between 0.59 and 1.5 million hours work on a typical project.

Proportionally these figures are much higher than those for the value presented above. The key areasin which the UK and East of England can achieve maximum content are mainly the most time-consuming ones such as design and project management. Onshore installation is a further work-package where the East of England is strong.

However, the UK and East of England currently lack capabilities in the highest value areas of windfarm construction but these same areas are those involving a proportionally low work load.

Therefore the UK and East of England can expect to achieve a consistently high level of work for theRound 2 projects even if it misses out on some of the most valuable contracts involved in fabricationand construction. The East of England demonstrated its abilities on Scroby Sands and has thepotential to scale-up involvement in its key areas to meet the needs of the Round 2 projects.





8 Intervention Strategies and Future Research

The Scroby Sands project represents a test case for assessing the relative recent success of UK andregional companies in securing work within the UK offshore wind industry and the robustness of thislevel of penetration within the emerging international offshore wind energy supply chain. Whilst thereare limitations on using the Scroby Sands project as a benchmark for future projects, it is important torecognise the value of using practical experience and project specific data to identify the lessons thatshould be learnt in developing strategies to provide the opportunity for significant and secure UK andregional participation in the growth of the offshore wind supply chain.

Current and future support at national and regional levels from the public sector for the growth of theindustry in terms of the economic development opportunity that it represents, as opposed to thecurrent market primarily driven by the national targets for renewable electricity generation (throughthe Renewables Obligation), will rely upon a detailed knowledge and understanding of the commercialfactors effecting the development of the UK market.�This will include the�challenges to significant UKand more localised participation in the supply chain, both through the current development of Round 1projects and scaling up for the much larger and technically complex Round 2 projects.

8.1 Business Development StrategyCurrent and future support for a significant, robust and growing level of UK and regional penetrationinto the offshore wind supply chain will need to continue to focus upon three complementaryapproaches:

• Support for UK companies that have already secured opportunities within the sector andmaintaining the robustness of early supply chain penetration.

• Engagement with UK companies who are aware of the sector and whose competenciesand capability should allow for their pursuit of supply chain opportunities, assisting them inunderstanding and reacting to industry developments and supporting them as they plan formarket entry.

• Exploring diversification opportunities for UK companies unaware of the sector, prioritisinggaps in the supply chain and key competencies and capabilities that could allow for a directtransfer of skills into the market.

Given the role of many non-UK companies in the development of the UK market, particularly withincomponent and equipment supply, support for inward investment and joint venturing will continue tobe an integral part of the overall strategy to deliver UK supply chain development.

Underpinning all business and industry development strategies is the need for detailed marketintelligence with widespread dissemination of information on the state of the market, the workings ofcritical industry players (notably: developers, turbine suppliers and major contractors), the practicalexperience of UK companies that have penetrated or are attempting to penetrate the supply chain andconsideration of the principal opportunities for, and challenges to, successful UK supply chaindevelopment.

8.1.1 UK: Principal Opportunities and ChallengesUK content was relatively high within the Scroby Sands offshore wind farm and was built uponsuccessful penetration of both equipment and service supply across all three phases of the project.Whilst the most significant phase in terms of overall contract value and man hours was the two yearconstruction phase, the level of UK company content in the development and operation phases of theproject should not be undervalued.Indeed, further support for increasing and maintaining UK content within the development phase isvital given the need for professional services in the form of environmental and technical assessmentsand surveys, legal and financial advice, and the relationship between development design and detaileddesign activities as a project moves into construction. The value of the contracts awarded to supportany project during its operation also have a significant effect on overall UK content although theirgreatest effect is at a local level. This is a significant opportunity for replication in the future both interms of contract value and employment.



The robustness of the levels of UK penetration of the Scroby Sands construction phase will be testedon future projects. This area is one of the principal challenges for maintaining relatively high levels ofUK content, as these early movers on the equipment supply side of the industry are subject toextensive financial risk in maintaining capability without a significant volume of contractingopportunities open to them and their experiences can act as a deterrent for other companies wishingto explore contracting opportunities in the future.

It is also noted that whilst these companies have secured opportunities for supply by becoming oneof a limited number of preferred suppliers for critical components, this is not a secure supply chainrole as cost competition will continue between these suppliers and their counterparts for eachindividual project. Opportunities to increase UK content beyond current capability will arise primarilyas and when inward investment or joint venture opportunities encourage the establishment of furtherturbine assembly plants or key component manufacturing.

With regard to the remaining Tier 1 categories in the construction phase for Scroby Sands, the role ofUK companies was principally dependent on the critical decision to use a UK port as the base ofconstruction logistics and the requirements for engineering support services to assist with thedetailed design, project management, onshore equipment assembly and offshore installationelements of the project. With the exception of project management, which by its very nature isdependent on the requirements of the project developer, national contributions in terms of contractvalue within these categories were far lower than those in man hours.

Such a trend reflects the role of UK companies at lower tiers of the supply chain, implying that thisarea represents both an opportunity for securing greater participation in the future as UK companiesbuild upon their experience to secure higher value contracts, and a challenge, given internationalcompetition in the provision of marine engineering expertise. The overall robustness of the levels ofUK content achieved at Scroby Sands in respect of future developments will be dictated by the needfor individual contractors and developers to secure these engineering services from UK companieswith expertise in relevant fields, particularly oil and gas industry experience.

The challenge for maintaining and further developing these areas rests fundamentally on the need toinfluence the choice of developers in securing a UK construction base and in ensuring that UKcompanies with the necessary expertise and technical competencies are able to market their servicesto the project developers and principal contractors. It is apparent that current UK penetration levels inall three phases of the project have been secured as a result of a number of companies making aconscious effort to develop sectoral experience and that these companies represent only a smallproportion of those with the technical competencies to secure contracts within the supply chain.

With the exception of Procurement and Manufacture, where penetration levels are not expected torise without significant interventions to secure additional component manufacture or turbine assemblywithin the UK, all other areas of the supply chain have the potential to be developed, or where alreadysignificant content levels have been achieved, secured. The critical opportunity for futuredevelopment based upon the experience at Scroby Sands is that of offshore installation which standsclear from all other categories in terms of the potential to secure a significant increase in UK contentin a high value area of the construction phase.

The relative effect on UK content of contracting approaches is less clear and is likely to require furtherresearch. Future contracting strategies within the industry are likely to offer the opportunity forgreater UK participation, however, intrinsic issues such as the complexities of procurementprocedures, engagement with suppliers by developers during the development and detailed designphases of a project and tendering timetables all represent challenges to UK companies.

8.1.2 East of England: Principal Opportunities and ChallengesEast of England content was a significant component of overall UK content in the Scroby Sands windfarm, however, regional contributions were highly dependent upon the key characteristics of thisproject, notably the decision to secure Project Management from a local company and theestablishment of regional ports as construction and operations bases. As a proportion of overall UKcontent, high levels of regional participation were achieved in the development and operation phasesof the project and as for the UK as a whole, it is these areas which represent the principal opportunityto increase and maintain regional content within future projects.



Whilst the region was successful in offering a diverse range of professional and technical servicesduring the development phase, it was the operations and maintenance phase which was the largestsingle contributor to regional content showing the value of securing local ports to provide logisticalsupport to the project. However, regional content in the Construction phase was limited by therelative weakness in securing contracts within the high value Tier 1 category of Procurement andManufacture given limited equipment supply or key component manufacturing capabilities within theEast of England. The challenge for the region is, therefore, to examine whether this can be addressedby indigenous companies diversifying from similar manufacturing activities or by inward investmentand joint venturing initiatives.

The role of regional companies within other Tier 1 categories in the construction phase reflects thecritical decision to use regional ports as the base of construction logistics. Scroby Sands alsodemonstrates the ability of the region, primarily through its extensive oil and gas capability, to offerengineering support services to assist with project management, onshore equipment assembly andonshore installation elements. Regional companies face the same challenge and opportunity as at awider UK level in marketing their key capabilities to developers and contractors, building often uponstrong local knowledge and relationships with regional ports and developing their role from provisionof labour intensive activities at lower tiers of the supply chain to develop the experience necessary totender for higher value contracts.

It is, however, difficult to determine how robust regional penetration of the supply chain across allthree phases of any development will prove to be. The principal observation is that the primaryregional benefit accrues from the opportunities for local company involvement driven by securing theuse of local ports as the centres for logistical activities during the construction and operation phasesof any given project.

Table 8-1: East of England Potential Capability – Tier 1 ComponentHigh Medium Low

EnvironmentalMonitoring Project Management Development DesignSurveys Offshore Installation Procurement & ManufacturingInsurance / Legal Transport & DeliveryDetailed DesignOnshore InstallationOnshore Pre-AssemblyCommissioningOperations &Maintenance

As with UK content, current regional penetration levels in all three phases of the project have beensecured as a result of a small number of companies making a conscious effort to develop sectoralexperience and that these companies represent only a small proportion of those with the technicalcompetencies to secure contracts within the supply chain. The greatest challenge at a regional level inconverting potential capability and known competencies into contracting opportunities for regionalcompanies is the establishment of a consolidated base of experienced suppliers able to raise theprofile of the industry and stimulate greater regional participation.

With the exception of Procurement and Manufacture, where penetration levels are not expected torise without significant intervention to secure additional component manufacture or turbine assemblywithin the region, the majority of other areas of the supply chain have the potential to be furtherdeveloped. The most prominent Tier 1 categories for future development in the region includeInsurance / Legal, Detailed Design and Offshore Installation, reflecting the wider UK position.Contracting issues are expected to mirror those noted for the UK as a whole, although given that thelikely market entry opportunities for regional companies will be at lower tiers of the supply chain,market intelligence will be critical.

8.2 Action PlanExtensive UK and regional economic benefits could be accrued if the Scroby Sands experience can bereplicated for future Round 2 projects. Indeed, these levels could even be exceeded if current UK and



regional capabilities were realised, however, there are significant challenges to be overcome if ScrobySands is to be considered a benchmark rather than a high watermark for supply chain penetration.Limited economic benefits, as illustrated within the Low Case scenario, will largely be a result of afailure to establish and secure UK and regional content in the critical Tier 1 categories of Procurement& Manufacture and Offshore Installation, and the knock-on effect of decisions to use non-UK ports asthe base for construction logistics on Tier 1 categories which are primarily related to engineeringsupport services.

Interventions to secure maximum UK and regional content in future developments will require actionprimarily at a regional level, although there are a number of critical areas where national action will benecessary. In any event, it is imperative that there is continued and strengthened collaborationbetween regions and coordination through national Government and national agencies, includingindustry trade associations.

8.2.1 UKStrength of the UK Market – government support remains fundamental to offshore wind activity,and will continue to be so for the foreseeable future. As such, it is seen to be vital that the UKGovernment continues to show commitment to the sector and maintains market conditions that willsupport the transition from Round 1 projects such as Scroby Sands to larger and more technicallycomplex Round 2 projects in the period up to and beyond 2010. Such support is vital to theeconomics of the sector, both in terms of project financing and creating the confidence amongsuppliers for required long-term investments.

Manufacturing Capability – the key weakness of the UK supply chain in the offshore wind sector isthe limited level of manufacturing capability in terms of key component manufacture and turbineassembly. Addressing this structural weakness will require interventions across the UK withextensive intra-regional collaboration and coordination at a national level, primarily throughencouragement of inward investment by wind turbine manufacturers, but also through continuedsupport for those UK equipment supply companies that have already succeeded in penetratinginternational supply chains.

Research and Development – it is widely accepted that the UK market will not evolve unless it isable to address the technical challenges presented by the transition to larger projects which areintended to deliver the bulk of planned capacity. Direct support from Government for innovationwithin the UK supply chain will aid in ensuring that such projects are economic and also strengthenthe opportunities for UK companies to secure a prominent role in the delivery of this capacity.

8.2.2 East of EnglandIt is anticipated that regional supply chain development activities will broadly fall within the followingfour categories:

• 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.

This support must have as its core assisting regional companies in understanding how to enter thesupply chain to offshore wind developments and how to better develop both their position within thesupply chain and their offering to industry. This can be achieved through the dissemination ofinformation as to market opportunities and potential means of market entry, through initiatives suchas the development of a regional resource to monitor OJEC notifications.

Further initiatives are also required in facilitating the capture and dissemination of lessons learntthroughout the supply chain in both project implementation and product innovation and will beprimarily addressed by an ongoing review of Round 1 and Round 2 projects as they are developed.

It is also essential that business support agencies continue to seek to bring together the supply chainwithin this emerging industry by facilitating a high level of business-to-business contact and initiatingdialogue throughout the supply chain and with key industry players, notably project developers, majorcontractors and turbine manufacturers. Such relationship building will not only facilitate regional



suppliers’ access to project supply chains but also assist in developing the various synergies that areapparent throughout the supply chain to offshore wind and other related industries.

The final fundamental area of business support required within the region relates to the facilitation ofpotential inward investment into the region and the development of public sector infrastructure. Thekey area of required inward investment relates to the potential location of manufacturing capabilitywithin the region though such investment decisions are by their very nature fraught with intricacy.

The development of regional infrastructure is perhaps the most likely means of short term strategicsupport within the East of England with the construction of Great Yarmouth’s Outer Harbour and theOffshore Renewable Energy Centre in Lowestoft. The Outer Harbour holds particular significance, aswithout the implied significant investment in regional ports the East of England runs the risk of losinga significant proportion of the content realised within Scroby Sands where the ports of GreatYarmouth and Lowestoft were used as construction bases.

8.3 Recommendations for Future ResearchAs the Scroby Sands project is only the second Round 1 project to be constructed in the UK, it wouldbe advisable for further supply chain analyses to be undertaken for other UK Round 1 developmentsin construction or which have been commissioned, using the methodology devised for thisassessment. This would provide comparative assessments of the levels of UK and regional supplychain penetration experienced and to confirm if critical issues such as decisions over centres ofconstruction and operation logistics are giving rise to similar effects.

The analysis of Scroby Sands has required a number of assumptions in respect of the operation phaseof the project. Whilst a five year period was used in this study to reflect the relationship between thedeveloper and Vestas Celtic, who, as turbine supplier, are providing ongoing operation andmaintenance support for the project, further work should be undertaken to assess the true life costsof operating and maintaining offshore wind farms.

The findings of this report underline the importance of the Tier 1 category of Procurement &Manufacture. This is a high level assessment and further analysis of the breakdown of expenditurerelating to the procurement of component parts and manufacture of nacelles utilised within past,present and future offshore wind developments would allow for a more detailed assessment of theopportunities and challenges to higher levels of UK content in this area of the supply chain.

The potential effect of contracting strategies on the level of UK and regional content is also still opento question. As the UK market develops and significant number of Round 1 projects are developed,placing greater pressure on the supply chain and requiring greater collaboration between developersand suppliers, the relative effects of more open tendering procedures and a variety of contractingapproaches will become apparent, confirming whether it is the contracting strategies or other factorswhich are having a bearing on opportunities for greater UK content.



9 APPENDICES

Appendix 1:

Scroby Sands Supply Chain Analysis – Contract Hierarchy

Scroby Sands – Supply Chain Analysis Draft Report


2.11

E.ON UK Internal 2.22.1

2.1 Project Management Vestas Internal 2.22.1.1

Development KBR 2.22.1.2

Phase

2.12

E.ON UK External Vestas Internal 2.22.2.1

HS&E 2.22.2.2

Electrical Interface Design 2.22.2.3

2.21 2.22.2 Monopiles 2.22.2.4

E.ON UK Internal Design Tower Structure 2.22.2.5

Tower Internals 2.22.2.6

Nacelles 2.22.2.7

2.22 SCADA 2.22.2.8

Vestas Site Surveys 2.22.2.9

1.0 Misc 2.22.2.10

Total Project Cost

2.23

Hogenboom UK Vestas Internal 2.22.3.1

2.22.3 Monopiles 2.22.3.2

Procurement & Manufacture WTG Towers 2.22.3.3

2.34 Nacelles 2.22.3.4

Pirelli Blades 2.22.3.5

HV Cables 2.22.3.6

Misc. 2.22.3.7

2.2 2.35

Construction EdF

Phase Vestas Internal 2.22.4.1

Onshore Construction Base 2.22.4.2

2.36 Offshore Installation Vessels (2) 2.22.4.3

Environmental Monitoring Transport & Delivery 2.22.4.4

2.22.4 WTG Onshore Fit-out 2.22.4.5

Construction Temporary Navaids 2.22.4.6

2.37 Export Cable Installation 2.22.4.7

Insurance Inter-Array Cable Installation 2.22.4.8

Scour Protection 2.22.4.9

Commissioning 2.22.4.10

2.38 Documentation 2.22.4.11

Other Misc.Costs Misc. 2.22.4.12

2.31

E.On UK

2.3 2.32

Operations Vestas

Phase

2.33

ode

2.34

Other

Scroby Sands Project - Supply Chain Study

Overall Project Cost Hierarchy (Tier 1/Tier 2)

Scroby Sands – Supply Chain Analysis Draft Report


2.22.3.4

Item No Sub-Component Item SupplierQuantity (Per

Unit)Cost (Per Unit) £000s

Est. Mhrs. (Per Unit)

No. of Units Total Cost £000s Est. Total Mhrs. UK Content (%)

1 Generator A.N.Other 1 xx.x yy.y 30 30xx.x 30yy.y 102 Gearbox3 Hydraulic System4 etc.

Notes:

Sheet No: - of -

Remarks

Scroby Sands Project Supply Chain Study

Detailed Component Cost Breakdown (Tier 3)

Parent Item Nacelles Tier 3 Reference





Appendix 2:

Catalogue of Energy Industry Classifications





Introduction“Offshore Oil & Gas Regional Information Gap Analysis”, a study produced by Douglas-Westwood Ltd(DWL) for DTI in January 2004, showed there to be a considerable variation in the amount and quality ofinformation available on the energy industry both in the regions and indeed the UK as a whole – issuesthat DTI are seeking to address.

One specific problem that was identified was a lack of comparable information on companies activewithin the energy industry, the business sectors they specialise in and their geographic distribution.Therefore, it is difficult to determine with any accuracy the economic importance of the energy industryto regions and communities. Some level of mapping has been undertaken for the upstream oil & gassector, however, this is primarily based around determining the number of companies located in politicalconstituencies and does not indicate their nature and true geographic distribution.

At present, the UK Standard Industry Classification of Economic Activities (UK SIC(92)), provides a broadcoverage of supply chain activity, however, in seeking to capture the full range of company capabilitiesserving each and every industry it lacks the level of detail to fully reflect the specific competencies of thesupply chain to the energy industry.

In contrast, current energy industry directories maintain a level of detail which while useful whensearching for a highly specialised product are impractical for other purposes. For example, one suchdirectory subdivides “cables” into 58 different products and services, while “consultants” are divided bysubject sub-divisions. In total, this directory has 7,000 company entries in 3,200 categories, with themajority of categories populated by just a single company (possibly caused by companies’ own definitionof their activities).

An example of how the information need may be met is the internet-based supply chain mapping system‘Mapergy’, established by the East of England Energy Group (EEEGR) for the East of England energyindustry. This is driven by an underlying database of some 2,500 companies and enables their actualdistribution by geographic location (postcode) to be clearly displayed. In order to further develop thissystem, it was thought necessary to code the companies according to their activities, with for example‘project management’ companies servicing the ‘Oil & Gas’ or ‘Wind’ industries being displayed as such.However, for this to happen there is a need to produce a set of keywords to classify activities ofcompanies in the energy supply chain in a pragmatic fashion. This could begin in oil & gas and extendthrough to renewables and nuclear related activities.

Aims & ObjectivesThis study was commissioned by the EEEGR and completed by DWL in December 2004. The projectrequired the creation of a “pragmatic” coding system to be applied to all companies identified, orseeking, to be working within the supply chain to the energy industry. The framework created will act asa means of facilitating the identification of specific capabilities of companies servicing one or moresectors and enable the effective segmentation of the industry.

This is to be achieved through the creation of three independent, relational datasets, structured as akeyword listing based on a maximum of 150 categories, with each dataset to be supplemented by aglossary defining keywords where appropriate. The three independent relational datasets will be:



1. Industry Sectors – Oil & Gas, Wind, Solar, Nuclear, etc2. Industry Roles – Operator, Service Provider, Support Organisation, etc3. Industry Classification – Drilling & Wells, Installation & Commissioning, etc

The coding system will be supplemented by suggestions of the key industry metrics that should berecorded within supporting databases to facilitate attempts to perform a consistent and repeatableanalysis of the nature and scale of activity within any supply chain to the energy industry (full details ofwhich are available from EEEGR upon request).

ApplicationHaving established an appropriate framework of use the catalogue of categories will then be integratedinto EEEGR’s ‘Mapergy’ system and made available to all POWER project partners as a means ofproviding a common terminology in completing their country specific supply chain studies. It is alsoenvisaged that such a system will be complementary to work being developed to better identify skillssets against the capabilities of the industry.

In creating such a system care has been taken to deliver upon the specific project brief provided byEEEGR. However, given the depth of knowledge and experience within the energy industry, as soon asany list is prepared for use, others will seek to redefine or amend. It is therefore acknowledged that anycoding or classification system will never be completely accurate or practically usable.

Whilst we would caution against wholesale additions, both DWL and EEEGR positively encourage goodand critical feedback to improve the initial listings. Any such feedback would be tackled thus:

1. Acknowledge feedback2. Review proposed addition against definitions3. If definitions change add appropriate activity

Implementation116 categories have been created, comprising 11 Sectors, 10 Roles and 95 Classifications. A listing ofcategories follows, and a glossary of the terms used and example of the system in operation can beobtained from EEEGR upon request. Companies are required to select (or be placed within) the Sectorthey are servicing (i.e. Oil & Gas), the Role they perform (i.e. Engineering) and the Classification whichbest describes their activities (i.e. Fabrication & Construction).

Following further testing the categories are currently being applied to all companies within the East ofEngland identified, or seeking, to be working within the supply chain to the energy industry as part ofDWL’s ongoing work within the POWER project. Once successfully applied to the East of England, andfully integrated with Mapergy, it is intended the system be made available for use in other regions, bothwithin the UK and further a field with further potential to transfer the framework to other national andEuropean Regional Development Agencies and Trade Associations envisaged.



Category ListingSector Role Classification

Bio Fuels Consultant Academic Institution Biomass Design Accountancy, Financial, Insurance & Tax Geothermal Engineering Anchors & Moorings Hydro Installation Architectural / Building Materials Hydrogen / Fuel Cell Manufacture / Supply Bearings & Transmissions Nuclear Operator Bio Feedstock Offshore Wind Research & Development Bolting, Fixing & Fasteners Oil & Gas Service Buoys & Buoyancy Materials Onshore Wind Support Organisation Business Development Solar Training & Education Cables & Connectors Wave & Tidal � Cases & Packaging

� CertificationChemicals, Oils & PaintsCommunication SystemsCompressorsComputing & Information TechnologyControl Systems, Topsides & SubseaCooling, Heating, Ventilation & Air ConditioningCorrosion ProtectionDecommissioning & AbandonmentDiving & Underwater ServicesDrilling & WellsDynamic Positioning SystemsElectrical Equipment, Materials & ServicesElectronicsEnergy ConservationEnergy Conversion ProcessesEnginesEnvironmental Assessment & MonitoringExploration & ProductionExplosivesFabrication & ConstructionFeasibility / Front End StudiesFoundations & PilesFreight, Logistics & TransportationGas TurbinesGears & GearboxesGeneratorsHazardous Area Equipment & ServicesHeaters, Heat Exchangers, Furnaces, Boilersetc.Hoses & FittingsHydraulics & PneumaticsHydroelectric TurbinesInspection & TestingInstallation & CommissioningInstrumentation



InsulationIntegrated ServicesInternational TradeLand & PremisesLegalLegislation & RegulationsLocal AuthorityMachine ShopsMaintenance, Modification & OperationMarket ResearchMarketingMaterial & Product HandlingMediaNavigation AidsNetworking & EventsNon-Metal Materials (Plastics, Composites, etc.)Patent, Trademark & CopyrightPersonnelPhotovoltaic (PV) Systems & SuppliesPipes, Pipelines & RisersPorts & Supply BasesProcess ControlProject ManagementPropulsion SystemsPublications & Technical ManualsPumps & AccessoriesResearch & DevelopmentReservoir EngineeringRopes (Wire & Synthetic)Rotor BladesROVsSafety, Security & FirefightingScour ProtectionSeals & GasketsSeismicSignsSteel & Metal MaterialsSubsea Production & ControlSupply Chain ManagementSupport VesselsSurvey & PositioningTechnology ServicesTrade AssociationTrainingValves & AccessoriesWaste ManagementWeldingWind Turbines & TowersWorkshop & Hand Tools



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