By Jens Frederik Hansen,
CEO, A2SEA A/S

Local content legislation introduces requirements aimed at creating jobs, promoting enterprise development and accelerating the transfer of skills and technologies. It’s a strategic issue for the industry that presents both challenges and opportunities.

On an international scale, however, it may seem as if local content regulations are heavily weighted in favour of the host country, making project planning and execution for foreign-based suppliers much more of a challenge. In regions where the offshore wind supply chain is under-developed, wind farm developers are understandably nervous about entrusting their contracts to inexperienced suppliers who may not live up to volume, quality, timing or cost conditions once the project is underway.

On the whole, however, encouraging local content is healthy for the global offshore wind industry, bringing new entrants to increase competition, grow capacity, introduce innovation and, above all, to reduce the Levelised Cost of Energy. And a good local content strategy turns the company into a welladapted, agile player that can meet regulatory requirements, gather political and community goodwill, and protect its commercial interests.

WORK TO BE DONE

Of course, a properly executed local content strategy isn’t a quick fix. In fact, there’s a lot of work to be done. Beyond familiarising the company with relevant regulations, plans must be laid, resources assigned and a top-down message outlining the importance of local content must be communicated.

People and functional departments across the organisation need to get involved – and they need to demonstrate commitment to achieving a long-term local content capability rather than seeing the effort as a short-term activity to secure one or more important projects.

REALISTIC EXPECTATIONS

While there are plenty of benefits, there are also pitfalls for newcomers, who are seldom fully prepared for the realities of building local supply. For example, it takes time and resources to build up local capabilities, yet procurement departments tend to prioritise factors such as price and track record.

That’s too narrow for local content growth, which typically requires the utility to pay a premium, and to find other ways to evaluate recently established suppliers’ ability to deliver on their promises. Assigning smaller tasks within large contracts, for example, provides a chance for new suppliers to get their feet wet, and enables the utility to assess supplier performance at lower risk.

Realistic targets need to be determined to create a match between what the company would like the local supply chain to achieve and what can actually be achieved. Pressuring the local chain to perform to the same level as best practices in other regions may result in inefficiencies, bringing higher costs and endangering carefully cultivated local relationships. In the long run, having local suppliers will most likely pay back on such investments, but patience, understanding and adaptation are key to getting things off to a good start.

HELP ON THE WAY

It’s not just about foreign companies having to do all the hard work, of course. In the UK and Germany, for example, there are plenty of opportunities to kick-start the local supply chain with public sector support, lowering barriers to entry and easing the burden on foreign companies to nurture future suppliers.

There are many local suppliers, too, whose businesses already offer capabilities that can readily be adapted for offshore contexts.

So what does it take for local content to really work? First, the market has to be large enough to encourage and maintain businesses in the region to seize the opportunities. They need to know that, if they do things right, contracts will flow and there will be enough skilled manpower to enable them to execute those contracts. In turn, local suppliers must focus on becoming cost-competitive, stimulating innovation, providing high-quality, reliable products or services and developing the capacity required to bid for and win sizeable contracts.

Investments at local political level need to support these efforts, too. For example, component test and demonstration sites need to be set up, financing schemes need to be offered, and waterside infrastructure built to handle the giant turbines of the near future.

Local industry associations have a job to do, too, educating their members in understanding developer procurement strategies and other crucial mechanisms. There are many more challenges to overcome, of course. Training is another pressing issue, although companies have sprung up to handle this, particularly in the UK. And then there’s the need to measure and report on local content compliance.

WORKING TOGETHER

One way to solve the long list of challenges is for manufacturers to cooperate more closely. For example, by locating production or assembly facilities close to each other, coordinating procurement or conducting joint safety training. Clustering in this way can support sales efforts, reducing costs and strengthening the case for winning the next major contract.

LOCAL CONTENT AT WORK

• Siemens and Centrica have established O&M bases at the port of Grimsby in theUK, with some 30 O&M vessels operating from it to support Rounds 1,2 and 3.
• DONG Energy made a long-term commitment with Belfast Harbour to create the UK’s first dedicated port facility for offshore wind.
• Significant jobs and high UK content have been achieved in existing bases such as Barrow, Grimsby, Lowestoft, Mostyn, Ramsgate and Workington.
• MHI Vestas plans to manufacture blades on the Isle of Wight from as part of a programme to safeguard or create some 800 local jobs.
• A2SEA has asked a number of UK-based engineering firms to bid for sea fastening design for Dudgeon Offshore Wind Farm, and will be seeking local partners for fabrication and installation of the fastenings. Local content is a strategic focus for A2SEA.

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