Siemens finally settles for Hull
Fri, 28 March 2014
The recent announcement by engineering giant Siemens that it has finally decided to build its offshore wind production and installation facilities in Hull UK has been met with much acclaim and considerable relief locally.
When, after a near four year campaign by local council and business leaders, Siemens finally announced to the world it was going ahead with ambitious plans to build its next generation SWT-6.0-154 6MW offshore turbine at Hull, the industry was on something of a knife edge. Many within the industry had been warning that mixed signals about political belief in offshore wind could divert investment to areas of less risk, a similar situation also being experienced in Germany. A number of UK projects were either cancelled or reduced in size and it would perhaps not have been unreasonable for Siemens to conclude that going ahead with the Hull project would, in the cold light of day, not be a wise business decision.
The company has now, in no uncertain terms, put everyone’s mind at rest. Michael Suess, CEO of Siemens AS Energy Sector saying: “We invest in markets with reliable conditions that can ensure that factories can work to capacity. The British energy policy creates a favourable framework for the expansion of offshore wind energy. In particular, it recognizes the potential of offshore wind energy within the overall portfolio of energy production."
The detail was even better than anticipated. Initially it was thought just nacelles would be manufactured at Alexandra Dock. Siemens has, however, announced a revised plan including complete wind turbine production over two sites: the previously announced Green Port Hull construction, assembly and service facility and a new blade manufacturing facility in nearby Paull. Over a hundred similar locations across Europe were considered before Siemens decided to invest £160m across the two locations in Hull, its port partner ABP investing a further £150m in the Green Port Hull development. Up to 1,000 jobs will be created directly, with additional jobs during construction and indirectly in the supply chain.
When debating the subject of UK offshore wind, the lack of home-grown content is a popular topic. While true that the ‘bits you can see’ will likely not originate from the UK, the country does have a significant stake in the bits you can’t see, including support services and office based industries.
A look at the map of proposed offshore windfarms in Europe, particularly the North Sea, clearly illustrates the geographical significance of the location of Hull, the Humber and surrounding regions. Potential opportunities from the three major Round 3 Zones: Dogger Bank, Hornsea and East Anglia, not to mention developments elsewhere in Europe and globally, could result in significantly more UK sourced content with those bits that can be seen.
Analysing the finer detail and considering what finally prompted Siemens to give the nod to Green Port Hull, other than provided in their announcement, involves a number of complex related factors. As mentioned above, up until the announcement, the industry was sending urgent warning messages about their perception of the climate for long-term investment in the industry. Siemens state the Hull decision is part of their global strategy, but that aside, it follows that it clearly now concludes a positive view of at least the UK branch of Europe’s offshore wind industry.
A number of factors will doubtless have featured in the overall debate within the Siemens boardroom. The company points out that the offshore wind market in Great Britain has high growth rates, with wind power having doubled within two years to roughly 10GW. By 2020 a capacity of 14GW is to be installed at sea alone, with projects for just over 40GW currently in long-term planning. The industry has also now had time to digest the implications of Electricity Market Reform (EMR), Feed-in Tariffs and Contracts for Difference replacing Renewable Obligation support mechanisms. EMR is the cornerstone of the government’s Energy Bill and will have been a key consideration in Siemens analysis of future market conditions, remembering that if no one builds windfarms, no one will buy their turbines.
EVENTS DEAR BOY
Some sources suggest it was British Prime Minister Harold Macmillan who in the late 1950’s, when asked by a journalist what he considered was most likely to blow his government off course, answered: “Events dear boy, events.” Recent events on the global stage have put the spotlight back on an important selling point for renewables as part of the UK’s energy mix – security of supply. While it may apply less to the UK than other countries, a significant amount of Europe’s gas supply comes via overland pipeline from Russia. Recent events in Ukraine and Russia’s annexation of Crimea have focused attention on the potential vulnerability of Europe’s gas supply to events largely out of its control. Even perceived risks to gas supply availability and subsequent price instability will have political significance if it ends up with domestic energy consumers.
Of course electricity generation comes from many sources but the subject’s volatile nature means renewables, and in particular offshore wind’s role within the energy mix, has been strengthened by events. Perhaps the last word should go to RenewableUK’s chief executive Maria McCaffery who said: “This is a major coup for the British wind industry. It’s the green-collar jobs game changer that we’ve been waiting for. This is just the start – where Siemens are leading, a cascade of others will follow – and we’ll see very significant growth in the UK supply chain."