Offshore wind policy statement: consultation analysis

4. Economic opportunities - supply chain

The current state of the Scottish supply chain

Q13: What areas of the Scottish supply chain do we excel at, and what could we do better?

Twenty-one respondents left comments at question 13.

Strengths in the Scottish supply chain

Engineering and project development expertise

Project development expertise in the Scottish supply chain was the strength most frequently mentioned by respondents. For example, competence and expertise in engineering, environmental and development services were praised. A few highlighted the well-established developers that exist in Scotland.

Some described Scotland's strength in engineering at length, specifically, in relation to design and fabrication. It was observed that Scotland has a wealth of experience in marine engineering, with examples of success in this area. Data, communications and mooring expertise were other areas of expertise highlighted by respondents.

Other strengths described in supply chain development stages were; small fabrication and components supply, modelling and commissioning, installation, opportunity identification, procurement and construction.

Professional services

Legal, environmental and financial consulting services were noted as assets to the Scottish supply chain by some respondents. These comments were mostly brief and highlighted that these can continue to play a key role in the development of the offshore wind sector. Other consulting services mentioned by a few respondents were; technical, commercial, intellectual, property, risk assessment and diligence.

Strengths in local supply

Workforce skills in remote areas and the benefits to local communities were highlighted by some respondents. A few described the jobs created to service existing facilities; one urged the SG to recognise the skills and facilities that already exist in remote communities and to encourage developers to exploit these when creating new projects. They offered suggestions about how this could work in practice. One organisation's detailed response outlined their contribution to energising local supply chains, signposted to the SG for review.

Operations, maintenance and port facilities

A small number of respondents highlighted expertise in operations and maintenance. These comments were typically brief. One respondent suggested Scotland has outstanding quayside facilities and should build upon these to ensure that towers, full jacket foundations and component parts can be manufactured there.

Other comments from a small number of respondents were strengths within vessels and access to offshore services. Innovation in science and research and development was highlighted as a key asset by a few respondents.

Areas in which the Scottish supply chain could do better

A long term or holistic view

The prevalent theme in discussion of areas for improvement was in long term or holistic thinking in future developments. Some respondents requested long-term thinking in the investment into infrastructure development, particularly facilities and capabilities, as well as consideration of the full life cycle of projects instead of just the initial stages. A few highlighted the importance of investing in early action to identify local supply chain opportunities for floating projects and to ensure their commercial success. One respondent specified they would like to see a holistic approach to subsea infrastructure development.

Fabrication and installation

Issues with installation and fabrication were outlined by some respondents. This was particularly in relation to creating a standard of fabrication that could compete internationally and on a large scale. There were suggestions that this would require significant investment to enable Scottish suppliers to compete with more advanced manufacturers outside of the UK. Others commented that larger scale fabrications in relation to floating wind would need improved. One respondent gave a detailed comment outlining the ways in which the supply chain could improve its construction and installation capabilities, which has been shared with the SG for consideration.

Utilising existing skills, expertise and facilities

A few respondents urged the sector to recognise opportunities that already exist in Scotland in relation to facilities, for example, developers and supply chain manufacturers in Aberdeen. One respondent suggested the skills development landscape in Scotland is well placed to deliver the resource required for operations.

There was comment on maximising the opportunity to develop skilled, long-term employment and one outlined an opportunity for enterprise agencies to keep an updated register of the supply chain skills profile across Scotland, to allow developers to gain a scope of the skills they can access locally. Another urged the SG to grasp the opportunity to create employment by investing in local communities.

Other suggestions made by small numbers of respondents included improving the construction of Special Operations Vessels (SOVs) heavy lifting vessels, and transport or installation vessels. A few called for better price competitiveness on the fabrication of jackets, and locally manufacturing these as well as turbine foundations.

Developing a competitive advantage

Q14: Where are the new areas that Scotland can develop and exploit a competitive supply chain advantage?

There were 22 responses to question 14.

Developing floating wind

Offshore floating wind was the most frequently mentioned area of competitive advantage for development. In this discussion, the need for funding and further development of offshore floating wind was described. One respondent suggested a number of opportunities in floating wind for the Scottish supply chain which have been signposted to the SG for consideration.

Two respondents also commented on the role for the SG in fostering innovation in offshore wind, they suggested that this is required to determine which aspects of the supply chain can support floating offshore wind to maintain cost competitiveness. Another highlighted SG incentives like the Growth Partnership Fund, noting this could be well placed to focus efforts on areas where Scottish projects are leading, and where existing capacity lies.

Specific skills or areas of expertise that could be exploited

Some respondents outlined specific skills or expertise to maximise supply chain advantage, for example: bottom and middle Wind Tower Geometry (WtG) tower section production; battery fuel and cell storage; green hydrogen; secondary steel or transition piece manufacturing and mooring specialisms. A few respondents also highlighted the opportunities in operation and maintenance skills to service the offshore sector for the duration of projects as a benefit.

Active industrial policies from SG and UK Government

Industrial policies which enhance competitive advantage were called for by some respondents. In this discussion, collaboration between industry and government was highlighted as a way to optimise opportunities. One respondent offered examples from other countries; describing strong state support for manufacturers and developers, successful policy interventions to ensure demand for wind power in domestic markets. They argued this has led to success for local supply chains elsewhere. Another respondent advocated for public ownership and investment.

Assessment of gaps in the UK supply chain

There were several suggestions that identifying and capitalising on any gaps or bottlenecks present in the UK supply chain would boost competitive advantage. It was suggested that coordination with UK industry groups would be crucial in identifying these gaps. One respondent asked the SG to establish key ports for decommissioning and recycling components within the North Sea as these are likely to be in high demand.

Hydrogen industry

The development of the hydrogen industry was discussed as an opportunity for increasing competitive supply chain advantage by some respondents. They highlighted that hydrogen deployment opportunities could be maximised through further investment in infrastructure and storage as well as increasing demand for applications of hydrogen. A few gave examples of how a hydrogen economy could be developed in Scotland including supplying hydrogen from an offshore hydrogen super grid, and using offshore wind to generate zero carbon hydrogen from electrolysis for use in the gas distribution network.

Port infrastructure development

Upgrading port infrastructure was an area that was discussed by some respondents. The east and west coasts of Scotland, and deep-water facilities, were areas of focus suggested by a few. They outlined that revitalising port infrastructure in fishing towns could bring economic prosperity to these areas. Two respondents specifically mentioned the support received for Aberdeen Harbour South and suggested this kind of development could be replicated across Scotland. A few respondents outlined that ensuring developments are constructed in the right timescale is essential for cost-competitiveness.

General comments about overlap with Oil and Gas industry

General comments were shared by a few respondents about the potential to exploit existing opportunities present in the O&G industry. They outlined existing expertise, high end technical services, UAV, data collection and communications as areas that could be used to develop a competitive supply chain. The overlap between the two industries was discussed as beneficial to capitalising on these opportunities.

Data collection

A few respondents highlighted the value of data collected on turbine operations, for example, environmental conditions (and met-ocean sensing) and records of repairs and maintenance. They noted this data would be instrumental in the future development of offshore wind projects. Respondents suggested that this could offer Scotland a chance to commercialise this data and become a world leader in this field. Two others would like to see innovation in data processing and collection.

Tendering challenges

Q15: What are the main challenges a company faces when tendering for a contract?

There were 14 responses to question 15.

Existing synergies

Some respondents described difficulties in accessing existing synergies or relationships between manufacturers and suppliers. Others highlighted the complex contractual arrangements between suppliers and manufacturers and the inherent risk and financial liabilities that discourage partnership working. One of these went further to outline the difficulty for a new entrant in gaining contracts as package managers often rely on trusted supply chain relationships.

Competing internationally

State aid for companies based abroad was mentioned by a few respondents. They suggested that this gave overseas companies a competitive advantage over those based in the UK. Respondents would like to see the SG and the UK Government continue to assess areas for investment to improve competitiveness in local supply chains.

Tendering processes

Accessing tender processes was described by a few respondents as a challenge. One highlighted that the supply chain needs insight into upcoming procurements, access, and knowledge of the process in a timely manner. Another addressed the capabilities of SME's in meeting the pre-qualification requirements for tenders, especially when considering smaller lots, they also outlined that SME's often miss out on large scale projects. One more respondent, an energy supplier, outlined challenging pre-tendering issues like; having sufficient finances to cover contract securities, being able to compete due to reliance on labour and the availability of that labour and the capability to deliver contracts.

Assisting the supply chain to secure contracts

Q16: Subject to procurement law, what more should government and its agencies do to assist the supply chain secure contracts?

There were 22 responses to question 16.

Developing a policy and regulatory framework

Many respondents urged for the development of a clear policy and regulatory framework to provide certainty for the supply chain. One respondent suggested that this would enable planning to reach targets and enable coordination the location of cable infrastructure. It was also suggested that incentives could facilitate the supply chain to participate in reviews of their capabilities to identify strengths and weaknesses resulting in a better understanding of the market. A few respondents argued that any reviews could be supported by the UK's Department for International Trade.

Encouraging partnership

A prevalent action outlined by respondents was for the SG to better promote the local supply chain's networks and capabilities by initiating partnerships. Some of respondents left general comments asking the SG to foster supply partnerships from early stages. Another respondent referred to a response given at question 15 about their own approach to partnership, the 'supply chain alignment model', which they suggested should be adopted by all developers entering ScotWind, and could be coordinated by the Clusters to ensure a structured programme of engagement between projects and local suppliers. One respondent went further to request the development of a skills profile for the local supply chain to help both developers and Tier 1 contractors gain an immediate understanding of what skills they can access from local supply chains.

Providing incentives or investment

Government investment was outlined by some respondents as an action that could assist the supply chain to secure contracts. Some suggested support could be offered in areas like port and manufacturing facilities, as this could also attract companies to establish operations in Scotland. A few respondents observed that supporting hybrid (fixed and floating) projects could facilitate deployment and best fabrication processes before the wider rollout of commercial floating wind. Others made general calls for the SG collaborate with the industry to deliver joint investments in infrastructure development.

Support the activity of the Offshore Wind Growth Partnership

The Growth Partnership was established as part of the Offshore Wind Sector Deal. Some respondents made brief comments urging the SG to continue to engage with and support this partnership.

Government interventions to facilitate international competition

A few respondents would like to see a more interventionist approach from the SG to support the Scottish supply chain in international markets. One respondent suggested this could be achieved by ensuring that suppliers can win projects in procurement processes, rather than imposing local content requirements.

Highlighting opportunities

Timely knowledge of upcoming procurements was described as an important contributory factor in contract success by a few respondents. They suggested government agencies should support the local supply chain to highlight opportunities, offer advice and enable partnerships. Two of these respondents furthered the suggestion that partnering, joint venturing and risk sharing in financing arrangements would be useful when considering procurement opportunities.