Out-Law News 2 min. read

New "industrial strategy" for offshore wind will boost UK supply chain, says Government

The Government has published a long-term "industrial strategy" for the offshore wind industry, aimed at growing the UK's manufacturing supply chain so that more of the work and jobs are done at home.

Business Secretary Vince Cable said that, if successful, the strategy could result in "something approaching the 70% that we already see in the oil and gas sector of supply chain made in Britain".

According to the document, UK offshore wind has the potential to create 30,000 jobs and contribute £7 billion to the economy by 2020, based on the installation of 16GW of generation capacity within this timeframe. Increased manufacturing exports could add even more to those benefits, the Government said.

"We have more offshore wind power than the rest of the world combined and, if we get it right and strike now, we will also see this new technology creating thousands of jobs here as well," Cable said.

"The commitment and partnership that this strategy represents is an important step in giving the industry more confidence to invest here in Britain; build factories, increase capacity at ports, develop skills and carry out high-end research to tackle the problems posed by the unforgiving offshore environment," he said.

The strategy sets out practical measures intended to develop and grow a competitive UK supply chain, combined with a number of Government investment commitments worth £66 million. It will be led by the Offshore Wind Industry Council; a newly-established partnership with the industry chaired by Keith Anderson, head of Scottish Power, with support from various Government departments.

Financial commitments include £20 million from the Regional Growth Fund to establish a new 'manufacturing advisory service' to support the UK supply chain; and a further £46m over five years to establish an Offshore Renewable Energy Catapult Centre, to help companies bring new products to market by working with industry, government and academia. A new Offshore Wind Investment Organisation will be established by UKTI to attract inward investment to the UK, while the industry will be encouraged to share advance information with the supply chain about their procurement plans.

The Government has also proposed requiring developers of offshore wind farms above a certain size to produce a supply chain plan before they can apply for a Contract for Difference, the new financial support mechanism for low carbon energy projects which will be established when the Energy Bill becomes law. This plan would have to set out how the company's project and procurement approaches would encourage a wider, more diverse supply chain and support innovation and skills.

However, energy and competition law experts at Pinsent Masons, the law firm behind Out-Law.com, warned that this proposal could delay development by creating additional demands on the supply chain. In addition, the Government would have to be careful not to infringe EU law, they said.

"In the same way that a 'Buy British' campaign funded by the Government would fall foul of EU rules on the free movement of goods on the basis that it would be a discriminatory barrier to trade, there are some limits under EU law as to what the Government could require in terms of mandating local sourcing or employment as an eligibility condition for subsidies or for consenting purposes," said EU and competition law expert Alan Davis.

Planning and energy law expert Gordon McCreath added that it was "essential" that the Government did not seek commitments from developers that could "inhibit expansion of a burgeoning industry that can further diversify the UK's energy supply".

"We're yet to see the detail of exactly what will be required of developers," he said. "What does seem clear is that developers applying for consent can expect to see more local authorities using this Government policy to require binding commitments to foster local employment on their projects. The level of that commitment will be a matter of negotiation but it is likely to be strongly influenced by what central government requires under the 'supply chain plan'."

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