With the government’s renewed focus on upgrading national infrastructure, including the fast-track funding of large-scale projects, clean energy providers must ensure their supply chains and processes are fully optimised ahead of any increased demand.
Ofgem’s Accelerated Strategic Transmission Investment (ASTI) framework is enabling grid expansion by fast-tracking funding for major infrastructure projects. The first project to secure funding is Eastern Green Link 2 (EGL2), which will deliver a 2GW high voltage electricity superhighway cable link connecting Aberdeenshire and North Yorkshire. It is the first of 26 projects to secure funding through the ASTI framework.
Building on this positive news, a record 131 projects have been awarded state subsidy contracts in this year’s renewables auction round. Projects with a total energy-generating capacity of 9.6GW, including 5GW of offshore wind power, which is enough to power the equivalent of 11 million homes, will benefit from guaranteed electricity prices. Ed Miliband, Secretary of State for Energy Security and Net Zero, has described this as a ‘significant step’ towards achieving the Government’s goal for clean power by 2030.
Despite these signs of progress, there is still much work to be done. For example, the Government is intending to introduce planning reforms to streamline the approvals process for clean energy projects. The ban on onshore wind farms in England has been lifted and the formation of GB Energy is another positive sign that the Government is prepared to allocate public money to drive clean energy projects.
A key challenge for clean energy companies seeking to ramp up their energy-generating capacity is under-investment. While private funding exists for the right opportunities, uncertainty due to cost volatility, material shortages, a slow planning system and a national energy grid that is not fit for purpose have been holding investors back. Even once a renewable energy project has secured funding and is underway, it can take as long as 15 years to secure a grid connection.
With few sources of supply in the UK or Europe, materials and componentry are often sourced from overseas, which poses a risk to energy security. Makers of wind turbines, for example, are only able to source about 1% of their raw materials from the UK and/or the EU. Shortages of neodymium, praseodymium and copper are expected as the capacity ramp up gets underway. Logistical pressures are also mounting and a potential shortage of XL vessels for transporting offshore wind turbines after 2025 could drive up costs significantly.
Effective supply chain management has become a performance differentiator for companies looking to attract investment and secure a strong position in the UK’s clean energy market of the future. Without any clear winners in terms of the dominant sources of clean energy, companies must compete for funding by developing robust and resilient supply chains – with agility built in – and establish close partnerships with mission-critical suppliers. As the industry matures, it is likely that greater collaboration and cooperation will increase end-to-end supply chain visibility.
In the offshore wind sector, rotor blades are getting bigger, which is increasing demand for vital raw materials such as steel and copper – with the latter being used for cabling as well as grounding wind turbines from lightning strikes. However, these raw materials are much sought after on a global scale by manufacturers in established industries such as aerospace, automotive and battery manufacturing, where volume projections are larger and more reliable.
Against this backdrop of global competition, securing critical components and supplies to increase capacity is going to be incredibly challenging for renewable energy companies, and will require the backing of private and public sector investment. Process efficiency assessments using ‘Energy Twins’ (a form of Digital Twin) can help energy companies to gain transparency, optimise and modernise in a real-time virtual world, whilst data-driven demand forecasting models can help businesses to present their volume commitments to key suppliers in a compelling way.
The projected ramp up in demand for clean energy is unprecedented. Providers of solar photovoltaic energy, for example, are being challenged to increase their energy generating capacity from about 20GW in 2024, to 70GW by 2035. Other renewable energy providers face even steeper targets. This highlights the urgent need for more skilled people in areas such as project management as well as data capture and analysis, to support the industry’s rapid expansion. In a fast-developing sector, which lacks an established employment pipeline, it may be necessary to repurpose and upskill workers from other industries to meet demand.
From an engineering perspective, companies can secure an advantage when competing for investment by demonstrating their ability to harness advanced technologies and develop solutions that are more efficient, without impacting quality and durability. Design-to-cost engineering principles combined with digital twin technologies, for example, can help companies to trial switching a specific material or component and visualise the potential gains in efficiency and performance if the change was made permanent. These tech-enabled experiments can increase certainty and inform strategic decision-making.
In an industry that is facing a massive growth challenge, the most concerning factor is uncertainty about whether the national energy grid will be ready to fulfil renewable energy demand. Waiting for change is not an option however, and clean energy companies must fast forward their growth plans now to optimise their market position in the future.
Paul Cooper, director, and Gareth Hall, managing consultant, specialise in advising industrial manufacturers at management consultancy, Vendigital.
