The past few decades have seen an intense effort to encourage investment in forward-looking renewable energy technologies, principally in onshore solar and wind generation. Over this time, a global supply chain that involves both large businesses and small and medium-sized enterprises (SMEs) has emerged to service these onshore projects. More recently, new technology is expanding our ability to harness offshore, marine-based renewables—specifically, offshore wind and tidal. In January 2020, the Hornsea 1 wind farm, 170 kilometers off the British North Sea coast, became the world’s largest offshore wind generator, with a capacity of 1,218 megawatts. In 2018, DAI’s research for Marine Renewables Canada found that places like the United Kingdom, South Korea, France, Indonesia, and the northeastern United States are home to marine renewable investments exceeding $500 billion.
For SMEs to participate in this marine renewables boom, they will need significant investment to help them adapt their services to an emerging subsector. Facilitating such investment makes sense because localizing supply chains can expedite delivery and reduce costs for the developer. Ensuring that project benefits are experienced locally tends to improve overall sustainability and underpin the social license to operate. Sourcing locally may also reduce the use of fossil fuels for transporting goods and people.
In fact, in many locations the groundwork has already been laid for this transition to marine renewables. Many coastal cities and portside towns where new projects are blooming already boast sizable oil and gas supply chains that employ tens of thousands of people. With appropriate support, this growing stream of renewables investment could and should become a source of market growth opportunities for those companies and communities largely dependent today on oil and gas—a dependency that increasingly looks like a vulnerability in light of the COVID-19 crisis and the global oil production wars.
Fostering local content and SME participation in this emerging energy space should be a priority for governments pursuing energy sustainability and new pathways to economic growth. If they are to seize this opportunity to refit an existing supply base, governments should take a systematic approach in collaboration with developers and operators. Here are four actions that should be part of that approach.
Photo of offshore windfarm in Skegness, England, by Rob Farrow. Wikimedia Commons, CC BY-SA 2.0.
Revise Supply Chain Categories and Competitiveness Criteria by which Supply Base is Measured
The relative immaturity of the marine renewables subsector means there is as yet no broadly accepted and streamlined way to measure the readiness of firms in the existing supply base. And the sheer diversity of new technologies—especially in tidal—makes it difficult to settle on the services, goods, and skills that might constitute industry standards. This landscape will consolidate as technologies are proven and more projects come online, but we likely won’t have global technical standards in place immediately.
Nonetheless, significant progress in setting new competitiveness criteria for those seeking to work in marine renewables has been made in both Atlantic Canada and Mexico, where the business communities have partnered with government to identify a preliminary list of supply chain categories that can then be assessed. In both jurisdictions, this work has been based on the supply chain categories and criteria used to qualify suppliers and workers in the oil and gas industry.
Map Suppliers and Workforce Against New Set of Qualification Criteria
The next step in preparing the supply base is building a foundation of data on the current capabilities of the local enterprises and workforce. This mapping exercise will be more difficult than it would be for the oil and gas sector, where we have decades of experience and established industry standards, and it will require a highly localized evaluation of craft skills to see how they square against the needs of new marine projects. But related analytical work already conducted in Atlantic Canada found that almost three-quarters of the traditional supply chain categories associated with servicing offshore oil and gas are applicable to marine renewables. Examples include work on the transmission infrastructure required to transfer energy back into the onshore grid.
An important component of such a mapping is estimating the market size and opportunities available for local enterprises, both locally and globally. Doing so will help to match supply with demand and pinpoint the growth opportunities for local suppliers.
Identify Competitive Features of Local Suppliers
Finding the capabilities that represent a competitive advantage for local SMEs will build their long-term resiliency to competition. These capabilities can be features such as location, technology, experience, workforce qualifications (including language and local training institutes), and reliability. The analytical mapping work should bring to the fore the unique capabilities, experience, and expertise of the supply base that can then be built on as assets in the marine renewable subsector.
Build an Ecosystem of Support
Many locales already offer support mechanisms for SMEs, ranging from financial instruments to in-person training and mentorship facilities. Most have yet to be retrofitted to accommodate the needs of the marine renewable supply chain and workforce. Using information gathered from the market, governments should partner with the private sector and universities to engineer an ecosystem of support for SMEs seeking to transition into renewables.
The support mechanisms should be built on the fundamental pillars of market analysis and information sharing. Making seminars, briefs, training, and other digital resources on this growing subsector available to SMEs is the most cost-efficient way to stimulate participation in the supply chain. Companies must first learn about this market, its technologies, its players, and the opportunities and risks it presents if they are to position themselves for new opportunities. Digital resources are particularly useful to SMEs given the COVID-19 pandemic, which is limiting traditional business-to-business interactions. More elaborate, enterprise-level technical support and capacity building could follow in due course.
Equally important will be for government to establish policies that encourage businesses to make the transition. Policy incentives can take several forms: grants to help qualifying SMEs invest in new technology, training, and systems; fiscal incentives such as tax deductions for investments in upgrades related to marine renewables; facilitation of partnerships such as joint ventures; brokering of outward trade missions and supplier forums; and network building events such as conferences and workshops. Industry advocacy may be required to strengthen the business case for relaxing some policies that restrict the percentage of energy coming from renewables. By demonstrating how marine renewable projects can benefit the local supply base (through job creation and SME inclusion), the value proposition for these forward-leaning energy investments can be expanded to include benefits beyond those related to climate change.
The global energy industry is going through seismic changes. In any radical market transition—be it the crisis-driven disruption of the COVID-19 pandemic or the long-term migration to more diversified and carbon-neutral energy sources—it is imperative that we build on the investments and expertise accumulated to-date. Not only because that approach is more likely to succeed and to be sustainable, but because it is more likely to ease the transition for affected industries and workers. The rise of marine renewables offers a timely opportunity to showcase this approach.