Following a positive Autumn Statement, next month’s Spring Budget must focus on investment in projects, supply chain, ports and skills to realise the economic potential of the energy transition.
When we talk about the benefits of UK’s ambitious offshore wind targets, many people focus on decarbonisation, cheap power for consumers and energy security. However, as RenewableUK is pointing out to the Chancellor in our Spring Budget recommendations to Treasury, a huge benefit of the UK’s transition to clean power which is still underestimated is the scale of the economic opportunity.
For example, the offshore wind sector alone is already set to deliver an additional 70,000 jobs throughout the country by 2030. By developing our domestic fixed and floating offshore wind supply chain, the UK could see a thriving industrial ecosystem worth up to £92 billion in GVA by 2040. The UK also has the opportunity to capitalise on being a front runner in supply chains and expertise for emerging technologies like green hydrogen, tidal stream and floating offshore wind, and to export these to other markets.
There is a risk that these benefits may not be realised if we do not double down fast - the race to decarbonise is happening across the world, putting pressure on supply chains and workforces, and leading to shortages, unless there is a huge increase in investment to meet the demand.
In response, the USA and the EU have introduced compelling incentives to encourage investment in their own domestic supply chains. For example, the US’s Inflation Reduction Act offers tax credits for the US manufacturing of wind turbine components, worth US $160 million for each new 1GW fixed bottom wind farm and US$180 million for a new 1GW floating wind farm, while the EU’s Wind Power Package proposes to double the EU Innovation Fund to €1.4 billion to help finance investments in new factories, infrastructure and workforce.
The Autumn Statement was a welcome step forward in attracting investment to the UK’s renewable energy industry and its supply chains. RenewableUK had been pushing for several of the key measures which were outlined by the Chancellor in November, including the £960 million for the Green Industries Growth Accelerator (GIGA) fund - an allocated grant fund to supporting clean energy manufacturing investment - which will help supply chain companies looking to firm up their business case for new investment in the UK. The Government must use the upcoming Spring Budget to build on the positive measures announced last year.
Firstly, the Chancellor needs to set out how GIGA will be spent - particularly how the headline funding will be divided between the different low carbon technologies. By the end of the decade, offshore wind will become the UK's largest source of electricity - the key technology in decarbonising our energy system. Commensurate to that scale, our view is that £300-400m of GIGA funding should be used to support investment in new manufacturing in the UK offshore wind supply chain.
Another critical area for timely investment is in port upgrades. The Floating Offshore Wind Taskforce has found that investment in port infrastructure necessary to enable the UK to manufacture and assemble turbines for our pipeline of floating wind farms would result in the employment of up to 47,000 people by 2030. The Chancellor could commit to new grants, revenue guarantees or policies to overcome current market failures and unlock private investment to upgrade ports around the country into new industrial hubs.
The Treasury should help to set the parameters for this summer’s Contracts for Difference auction to maximise the amount of new clean energy capacity we can secure this year, unlocking billions of pounds of inward investment and creating certainty for supply chain investors. The Chancellor could also introduce new incentives to encourage training, retraining and upskilling of new workers in clean energy technologies.
In these crucial next few months, with the upcoming release of the sector’s Industrial Growth Plan and the publication in March of further key details of the next Contracts for Difference auction, industry stands ready to work with Government and seize the economic benefits we are offering this Spring.
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