Importance of Local Content in the Offshore Wind Industry

OPINION EDITORIAL

1/5/2024

With a global target set to triple the capacity of renewables by 2030, the race is on for countries to launch projects that can accelerate the transition to clean energy sources, and offshore wind is one of the key sectors that is critical to this development.

According to Rystad Energy, the total global capital expenditure on offshore wind is likely to more than double from US$46 billion in 2021 to US$102 billion in 2030; among which, the capital expenditure in Europe is expected to reach US$53 billion by 2030. This reflects the significant increase in capacity installations within the region, thereby cementing Europe’s place as the global leader in offshore wind. Having generated over 26 GW of operational capacity, Europe currently leads the world with more than 50% of the global total.

These capital-intensive offshore wind projects usually require heavy upfront investments, which can be prohibitive and unsustainable to the developers. Therefore, government support, especially in the form of financial incentives, tax credits, or subsidies, is critical in helping developers offset the initial costs. In exchange, they embed local content requirements (LCRs) in the agreement with offshore wind developers, as a way of stimulating the domestic workforce with the creation of local “green” jobs for the design, construction, and operation of wind farms, hence contributing to the overall economic growth.

What is Local Content?

Local content in the context of the offshore wind industry refers to the use of goods, services, and personnel from the region where the offshore wind project is located. Therefore, the LCRs set by governments underscore the extent to which the development, construction, and operation of offshore wind projects have to incorporate components, services, and expertise from the host region. Adhering to these requirements is crucial for project developers to secure the necessary financial incentives and regulatory permits from the state governments.

Why is Local Content Important in Offshore Wind?

The focus on local content in the offshore wind industry can bring several important benefits, which include:

💰 Economic Impact: It ensures that the economic benefits generated by offshore wind projects stay within the region. This includes job creation, business opportunities, and the growth of local supporting industries. By sourcing materials and services locally, offshore wind projects contribute to the development of the economy, creating jobs and fostering a sustainable economic base.

💼 Job Creation: By prioritising the use of local content, offshore wind projects contribute to the creation of jobs in the region. This not only includes jobs directly related to the construction, operation and maintenance of the wind farm but also in the supply chain and supporting industries. As such, they benefit the local workforce and help to reduce unemployment rates, while stimulating economic activity.

🔄️ Technology and Knowledge Transfer: Involving local industries in offshore wind projects facilitates the transfer of skills, technology and expertise. This knowledge exchange is essential for building a capable workforce that can gain the ability to manufacture and maintain offshore wind infrastructure, potentially fostering the growth of a sustainable industry cluster to support future developments and operations.

🚢 Supply Chain Resilience: Depending on local suppliers for components and services can enhance the resilience of the offshore wind supply chain. It reduces dependence on international sources and can be advantageous during times of global disruptions or logistical challenges. Relying on a diverse range of local suppliers can also help mitigate risks associated with global supply chain disruptions.

🌍 Reduced Environmental Impact: Sourcing materials locally can not only reduce import and transport fees, but it also contributes to a lower carbon footprint from the construction and maintenance of offshore wind farms.

Advocating Local Content for the Successful Growth of the Offshore Wind Sector

The importance of local content for the offshore wind industry lies in its ability to stimulate economic growth, create jobs, facilitate technology and knowledge transfer, enhance supply chain resilience and reduce environmental impact. With considerations covering the economic, social and environmental aspects, they broadly align with the sustainable development goals and help create a positive impact on both the industry and the communities hosting these projects.

In the UK, for example, the Offshore Wind Sector Deal launched in 2019 established the sector’s aim to increase the UK content from 50% to 60% by 2030, hence driving growth in the UK’s manufacturing base. Taiwan’s LCRs for the offshore wind industry, on the other hand, span 5 categories, which include power facilities, underwater foundations, wind turbine components, marine engineering, and industrial design. The first three categories are required to reach 60% of the applied capacity, while prioritising local maritime engineering services and locally manufactured components.

Understanding the importance of local content in the success of offshore wind projects, Cyan Renewables taps on years of experience operating offshore vessels in countries with strong local content to provide partners with the local know-how to navigate the respective LCRs in different countries. By offering the necessary platform and consultancy services, as well as facilitating and interfacing with the local parties, Cyan Renewables can help partners reduce operating risks and assist them to launch in high-growth offshore wind markets that usually adopt punitive approaches to LCR implementation.

Therefore, by advocating the significance of local content, Cyan Renewables serves as a catalyst in ensuring the success of offshore wind projects, thereby contributing to a greener tomorrow built on sustainable, renewable offshore wind energy.

Enquiries: corporatecomms@cyanrenewables.com

(Source: Cyan Renewables | LinkedIn Post | All News)