BiFab: intervention analysis

Economic Appraisal: Benefit Assessment – Offshore wind supply

Step 1: Strategic Benefit

SG anticipated significant growth in the offshore wind sector. As a key part of the Scottish offshore wind supply chain, BiFab was considered to be ideally placed to capitalise on the growth of this sector by bidding for a number of high value contracts. At the point of the first intervention BiFab had or was targeting contracts with the BOWL, NnG and Morll projects, which were estimated to deliver 2GW of power by 2023.

Step 2: Theory of Change

i. Strategic Driver

Offshore wind developments require BiFab support for completion

ii. Intervention

Provide loan to BiFab to prevent firm going to administration

iii. Enabling Change

Promotes confidence in the supply chain for offshore wind

iv. Outcome

BiFab complete contracts and offshore wind sites become operational

v. Impacts

Additional energy capacity is provided by the completed offshore wind sites

Step 3: Achievement of benefit

• The BOWL contract was completed by BiFab in May 2018; however, there were delays and cost overruns during completion, which meant additional SG funding was required to complete the contract.
• The completed wind farm has an installed capacity to generate 588MW of renewable electricity per year and is expected to be operational for 25 years.

Approach to monetising benefit and counterfactual case

• Determine the amount of additional offshore wind capacity created by the Beatrice Wind Farm.
• For the counterfactual case, determine assumptions for the completion of the BOWL contract had BiFab gone into administration.
• Use these assumptions to compare completion dates for the BOWL contract with the counterfactual case, to determine additional capacity delivered by the intervention.
• Estimate the potential value of delays based on the wholesale energy price.

Step 4: Review the additionality of the intervention

• By supporting BiFab in 2018, SG ensured that the company remained operational and therefore could meet requirements related to the BOWL contract. The last of the wind turbines were installed in May 2019. During 2020, Renewable Obligation Commitments highlight that 2.4m MWh of energy was generated over the period, it is assumed that a similar amount of energy was generated during 2019.
• In the liquidation scenario, we have considered the impact of a three, six or nine month delay to the project that could have occurred had BiFab gone into liquidation in 2018 and therefore could not have completed the project. This would have prevented the final installation at the Beatrice Wind Farm and would have delayed installation beyond May 2019, reducing generation capacity by either 600,174MWh, 1,200,348MWh or 1,800,521MWh across the three delay scenarios in the liquidation case. For the managed administration scenario, we have assumed there would have been no delays to project completion.
• The intervention in BiFab therefore helped advance capacity in the offshore wind supply. Had three, six or nine month delays occurred in the case of liquidation, it is estimated that the value of energy lost would have been £23.8m, £47.5m or £71.3m.