How the UK’s New Offshore Wind Support Signposts the Sector’s Future

The U.K. is putting together plans to scale its fleet of offshore wind projects from today’s 10 gigawatts to 40 gigawatts by the end of the decade.

This week, Prime Minister Boris Johnson said the next renewables auction round would support twice as much capacity as the last one. Offshore wind dominated the 2019 renewables tender, taking 5.5 GW of the 5.8 GW awarded. A new £160 million ($207 million) fund was also created to support the development of new port and manufacturing facilities to underpin that 40 GW target. A separate 1 GW target for floating offshore wind was also revealed.

With costs falling quickly in recent years, other priorities now have room to breathe.

As the largest end market for offshore wind, the U.K. is a bellwether for the sector at large. So what can we learn from the new support?

1. COVID-19 shifts focus from cost to jobs

The contracts for difference (CFD) program offers a guaranteed “strike price” per megawatt-hour. If wholesale prices fall below that level, the government makes up the difference. If the wholesale price is higher, the project owner pays back the extra profits. The first CFD round in 2015 backed EDF’s Neart na Gaoithe project with a strike price of £114.39 per megawatt-hour. Fast-forward four years and the winning projects in 2019 had strike prices as low as £39.65 per megawatt-hour. That’s lower than wholesale prices are forecast to be once the projects are operational. That means they won’t cost the government anything.

The next round will also be a competitive tender, and it is very likely that, again, the winning projects won’t cost the government anything. Søren Lassen, head of global offshore wind research at Wood Mackenzie, told GTM the package of measures unveiled by the U.K. government showed that driving down cost was not the primary objective.

“A lot of the focus is on jobs. That’s, of course, partly driven by COVID-19, which has really shifted the balance toward job creation,” Lassen said. The decline in costs was to some extent predictable; the natural next question for governments is how else they can add value. Local manufacturing content and local jobs are an obvious answer, one that is amplified by the economic impact of the pandemic.

2. With subsidies in the rear-view mirror, attention turns to scale

One surefire way to continue driving down costs is to continue scaling up the market. In Europe, at least, market visibility is increasing — beyond the U.K., Germany and France have also grown their offshore ambitions.

Germany revised its 2030 target from 15 to 20 GW and France from 6 to 8.75 GW. The Netherlands is targeting 11.5 GW, and Poland plans 11 GW of deployment.

And those numbers may continue rising, with the EU (which excludes the U.K.) estimating that by 2050, it could need as much as 450 GW of offshore wind to achieve its economywide net-zero ambitions.

3. Floating is happening

Floating wind projects have been deployed at pilot and demonstration scales, but the addition of a new 1 GW target for 2030 means the U.K. can now offer some certainty to developers such as Total, Shell and Equinor, which have all made plays in the floating wind arena. Trade body RenewableUK believes twice that level of deployment is possible. A CFD carve-out for floating wind has been proposed by the government, and Scotland’s seabed leasing round, which is still underway, includes zones set aside for the emerging technology.

Jua“The announcement on floating wind is another indication that this is not all about price anymore,” said Lassen. This is especially true in Norway and the U.K., where decades’ worth of marine-engineering expertise and infrastructure from the North Sea oil sector is looking to diversify. Oil services giant Wood, formerly the Wood Group, derived 96 percent of its revenue from the oil sector in 2014. That’s now down to around one-third.

4. Major supply chain investments are coming

In the U.K., big promises about local content in the offshore wind sector have been undermined by developers struggling to find competitive local alternatives.

This could change. In August, the South Korean steel giant SeAH Steel signed an agreement with the U.K. government to develop a monopile foundation facility in the country; exactly where in the U.K. has not yet been decided. Until now, foundations have frequently been outsourced to yards in China, Indonesia and the UAE, leaving British companies and trade unions frustrated. Now an Asian foundation supplier is planning to come and set up shop in Europe.

“It’s been challenging to attract players across the ocean,” said Lassen. “We’re now starting to see movements across the world, with players from Asia looking to break into [the European] market. This is an interesting move.”

The £160 million fund offers manufacturers, including turbine and blade makers, the change to supersize using subsidies. Landowners and businesses with quayside facilities in the order of 200 hectares are asked to apply on the condition that they can support 2 to 3 GW of annual production and be at least partly operational by 2023.

5. Brexit shadow diminished

The U.K. and EU are still negotiating a trade deal, and until details are released, forecasting the impacts are, at best, guesswork. That uncertainty alone casts a shadow on investment in the U.K.

With a number of offshore wind markets looking for capital, alternatives are out there for would-be investors. But the strength of the CFD and its revenue guarantee has ensured that interest in the U.K. market has remained high. The most recent Dutch tender, a zero-subsidy round, proved less popular, with just two consortiums taking part.

Lassen said Brexit hasn’t diminished Wood Mackenzie’s view on deployments by 2030.

“We’ve had 40 GW [forecast] for a while, and that was irrespective of Brexit. I don’t see it as a deal-breaker in this sense,” he said, adding that the renewed commitment to the CFDs, including the increase in capacity on offer, will help to erode some Brexit doubts where they do exist.

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Portland awards itself a participation trophy for climate

Portland is utterly failing to reduce greenhouse gas emissions from transportation, but not to worry, its ticking lots of boxes in its bureaucratic check-list.
The city walks away from its 2015 Climate Action Plan after an increase in greenhouse gases, but promises to do better (and more equitably) in the future.
Portland’s greenhouse gas emissions increased by 440,000 tons per year, instead of decreasing as called for in its 2015 plan.
Increased driving due to cheap gas has wiped out all the city’s climate progress in other sectors in the past five years.
We’re frequently told that when it comes to dealing with climate change, if our national government doesn’t step up (and it hasn’t under the current administration), not to worry, because the nation’s cities, and the mayors who lead them are as green as can be.
To be sure, mayors have loudly proclaimed their commitments to (future) greenhouse gas reductions, and fealty to the Paris Climate Accords, but rhetoric and pledges are one thing, and lower rates of carbon emissions are another. While plans are nice, we really need to be focusing on the results that the plans are producing.
When it comes to Portland, one of the self-proclaimed leaders of North American climate change cities, the results are disappointing, and the explanations are, at best, disingenuous.
Portland was one of the first cities in the US, to adopt and explicit grenehouse gas reduction goal in 1993.  The city’s website boasts:

Portland is tackling climate change head on. We were the first US city to adopt a carbon reduction strategy in 1993, and our cutting-edge Climate Action Plan put us on a path to reducing emissions by 80% in 2050.

Noble and far sighted, to be sure, but a quarter of a century later, how is the city doing in actually, you know, reducing greenhouse gases?
The answer to that question is supposed to be spelled out in a progress report on the the city’s adopted 2015 Climate Action Plan. The city’s Bureau of Planning and Sustainability last month published “final” report card on the city’s efforts. But rather than being an honest report card, the document amounts to the bureaucratic equivalent of a third-grade participation trophy. The city congratulates itself for its efforts, but the true test of progress, a reduction measured in tons of carbon emissions, shows the plan has been a failure.

The  city’s “Final Progress Report” almost completely glosses over the failure to cut emissions modestly in the past five years, and now the City has quickly moved on to a much more ambitious interim goal to cut greenhouse gas emissions by 50 percent from 1990 levels (up from 40 percent), in its new Climate Emergency Declaration.
Let’s get to the heart of the matter:  The key element on the plan is reducing emissions.  Here’s the report’s summary of our progress:

The 2018 data also shows that carbon reductions have started to plateau and that current emissions trends are not sufficient to meet the needed reduction targets that need to be achieved. To achieve the goal of a 50% reduction in carbon emissions by 2030 as identified by climate science, local emissions must be reduced by an additional 31% in the next 10 years. This is a daunting task.

Actually, the report doesn’t present the actual emissions data; instead, it links to another report (the September 2019 report we wrote about here) that has the  data, and that report includes data only through 2017.
A checklist isn’t a climate strategy
The bulk of the city’s self-congratulatory report card consists of describing a laundry list of 247 actions that were mentioned in the previous climate action plan, and briefly rating each as either complete, on track or “facing obstacles.  The actions include sweeping and important policies that would make a big difference (like Item 1H: carbon pricing, which is “facing obstacles), and administrivia, like planning for actions with minimal benefits (“Item 6B: explore options intelligent transportation system, complete).  Nothing in the report calculates or categorizes the impact of any of these individual actions on the region’s greenhouse gas reduction progress (or lack thereof).
Wow! 77% of 247 Actions are on track: But the one indicator that matters—carbon emissions—is going in the wrong direction. (Portland Climate Action Plan Report, 2020).
Put another way:  If you successfully implemented all or most of your checklist actions, and you’re not making progress on reducing GHG, then something is fundamentally wrong with your plan.
Plans have to be accountable, not just for endless checklists of busy-work tasks, but actually achieving measurable results. Ironically, the plan itself calls for more measurability, but as noted above, it simply failed to report the annual data showing that by the CAP’s own metrics, that its failing.
It’s the equivalent of a grade-school participation trophy:  The City and County laud themselves for implementing about three-quarters of their 250 checklist items, but gloss over the fact that greenhouse gases, particularly from transportation are rising.
In 2013, the base year for statistics used in preparing the 2015 Climate Action Plan, Multnomah County’s total emissions were estimated at 7,260,000 tons.  According to the latest climate inventory (linked to, but not actually quoted in the progress report), the level of emissions in 2017 (the latest year for which data is available), were 7,702,000 tons. (We dig into the detail of these estimates below). Thus, Portland’s  total GHG are higher in 2017 than in 2013 according to the city’s own numbers, i.e. since Portland adopted the 2015 plan we’ve made zero (actually negative) progress.  The report spins this as “plateauing” but we all know that unless we make steady progress in reducing GHG, the task becomes exponentially more difficult in the years ahead.  Nobody would call having your 8th grader still reading at the 3rd grade level five years later as “plateauing.”
Mission unaccomplished
Its clear from the tone of the report card, that the City is simply walking away from its 2015 plan–even though its substantive goals haven’t been accomplished.  The title of the report is “Final Progress Report.”  All of the references to the plan are in the past tense, for example:

The Climate Action Plan was an important roadmap over the last five years to help ensure the City and County continued their progress toward carbon reduction goals. The 2015 Climate Action Plan broke important new ground by including several important elements:
(Report, page 65).

City officials promise accountability, but if they simply walk away from plans after five years, without seriously acknowledging their failure, and analyzing the reasons for that failure, and begin by writing a new plan, de novo, as the city now proposes, there is no accountability. Moreover, the city’s “final report” disappears the few bits of serious number-crunching that were done in the 2015 plan, showing that we’d need to dramatically reduce vehicle miles of car travel in order to achieve our carbon goals.
The 2015 plan was explicit about what would be needed.  It laid out a carbon budget that did the math on what we would have to do to reach our goals. Specifically:

For example, by 2030 emissions from the building energy and transportation sector must be approximately 40 percent below 1990 levels (see Table 1). In 2050, residents must be able to meet all of their needs while using 62 percent less electricity and driving 64 percent fewer miles than they do today (see Table 2). (This also assumes a shift to cleaner electricity sources and more efficient vehicles.)
Climate Action Plan, 2015, page 19

In place of tangible, measurable indicators of progress toward our stated goal, the City’s climate emergency declaration offers  vague exhortations about future process.
As they walk away from the 2015 plan, there’s as yet  no plan to take its place.  There are vague statements about process going forward, descriptions of how the city might do something else, but few if any actual policies.  The City’s Climate Emergency Resolution directs BPS, by the fall of this year to “co-convene a process” to “identify and implement strategies that will advance a shared solution.”

BE IT FURTHER RESOLVED, that no later than Fall 2020, the Bureau of Planning and Sustainability is directed to work closely with other City bureaus, Multnomah County, frontline communities, and youth-led organizations to establish and co-convene a new and ongoing climate justice initiative that will provide a framework for government and community to work together as equal partners to identify and implement strategies that will advance a shared vision for climate justice and action;

But this new process and the plan it produces, and its specifics are in the future.  For now the city has simply closed the book on the 2015 plan, and awarded itself a participation trophy for having done so.
Portland’s 2015 Climate Action Plan has been an abject failure
Its important to look in detail at the data on carbon emissions in Portland for the past decade. They show that the city’s climate change efforts, so far, have failed.  In the three years prior to the adoption of the Climate Action Plan (2010 through 2013), the city managed to reduce greenhouse gas emissions by 250,000 tons per year; In the four years between the plan’s baseline and the latest available data, emissions have increased by 110,000 tons per year. In 2013, Portland GHG’s were 7.26 million tons; in 2017, they were 7.7 million tons, an annual increase of 1.5 percent per year, at a time the Climate Action Plan called for an annual reduction of 1.4 percent per year.
In the most basic sense, more greenhouse gas emissions mean your plan isn’t working. The plan characterizes this whopping failure as a “plateauing.”
It also conceals the failure by constantly referring to a 1990 baseline, rather than looking a recent trends (i.e. the past two, five or ten years).  In essence, the plan takes credit for emission reductions that happened in the two decades years before the 2015 plan was adopted (i.e. 1990 to 2010), and simply ignores the fact that Portland’s GHG are now going in the wrong direction.
Plateauing is a tacit admission of failure for a plan that depends on large and consistent reductions in emissions.  But, to be clear, emissions haven’t plateaued:  Portland’s total greenhouse gas emissions as calculated by the city, have risen by 440,000 tons between the CAP baseline year (2013) and the latest year for which data are available (2017).
It’s telling that the report includes no chart showing the needed path of emission reductions between now and 2030 or 2050.  Such charts are a staple of climate plans, including the 2015 CAP, which laid out this roadmap for GHG reductions:
The path laid out in Portland’s 2015 Climate Action Plan
If they’d replicated this chart, with data showing actual progress from 2013 to 2017, and showing their new, much more aggressive goal, it would look like this.
The 2015 Climate Action Plan, the 2020 Climate Emergency Declaration, and Reality
On this chart, the blue line shows actual emissions (as reported by the city), the 2015 plan (the orange line) and the 2020 Climate Emergency Goal (green line).  By 2017, in order to be on a path to achieving its 2030 goal, the City needed to reduce greenhouse gases by 25 percent below their 1990 levels; instead, as we’ve noted greenhouse gases rose, and were at 15 percent below 1990 levels.  The fact that the blue line is above the orange line shows the city isn’t meeting its previous goal.
And its worth noting just how much more ambitious the new goal of cutting emissions to 50 percent of 1990 levels by 2030 (and to zero net emissions by 2050) is.  The much steeper slope of the green line (the new climate emergency goal) implies a vastly bigger lift than the previous (2015) plan, the orange line. Meeting the 2030 goal will require more than twice as much annual reduction (110,000 tons vs 220,000 tons), each year, from now through 2030. The 2015 plan required that the City reduce its emissions by about 1.7 percent per year over 17 years to reach its goal of a 40 percent reduction; its new climate emergency declaration requires a 4.1 percent annual emissions reduction over the next decade to reach its higher 50 percent objective.
The city has raised the bar at exactly the time that its shown that its current efforts simply aren’t working. And unlike the 2015 plan, there’s no detailed calculation of how we’ll achieve this vastly greater level of emissions reductions. Recall that the 2015 plan said we’d need to cut driving in half to achieve a more modest goal over a longer period of time. If the city is serious about achieving this goal, as opposed to just posturing, its essential that they show how the goal can be reached. They haven’t.
What’s needed:  A laser like focus on reducing GHG from driving
The startling omission from the report is the fact that it’s been the increase in driving over the past five years that’s undercut our progress toward our stated climate change goals. The report neatly glosses over the fact that emissions, especially from transportation, are rising.  It presents one chart showing GHG in 2000 and in 2018 (the year of the latest GHG inventory) and omits data for individual years.

The City’s report  card makes it look as if very little has happened—the transportation emissions have gone up, and just a little  Leaving out the annual data conceals a much bleaker reality:  In the past five years, Portland has recorded huge increases in greenhouse gas emissions.  Here are the annual data from the independent, nationally-normed estimates prepared as part of the DARTE GHG inventory, showing the  Portland area’s greenhouse gas emissions from transportation. (These data are for the entire metropolitan area).

As we’ve noted before at City Observatory, the Portland made good progress until 2013, when increased driving due to cheaper fuel costs produced a surge in vehicle miles traveled and carbon emissions. Portland’s carbon emissions increased by 1,000 pounds per person annually between 2013 and 2018, more than wiping out all the other progress made in reducing greenhouse gases in other sectors.
Portland’s won’t make progress in reducing greenhouse gases until it finds a way to reduce vehicle miles traveled.  And it will need to reduce them substantially. As noted above, when it wrote the 2015 plan, the city did the math to figure out how big a reduction in driving would be needed.  Then, when transportation emissions were lower (and the city’s climate goals less aggressive) the city’s calculations showed we’d need a 62 percent decline in VMT. Our backsliding combined with a tougher goal means we’ll need to reduce driving even more to achieve the objective laid out in the Climate Emergency Declaration.
Dealing with climate change is a serious existential threat to humanity. Its good that the city is willing to acknowledge this, and that it has an important role to play in reducing greenhouse gases. This will be a challenging task, and it is not made easier by presenting reports that conceal fundamental failures to move forward, that hide key data and analysis that tell us where we really are, and which avoid accountability for failing to make meaningful progress toward our stated goals.

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