Business Development, Market Analysis, strategy
Investment in the UK Off-Shore Industry
May 23, 2016 - Business Development, Market Analysis, strategy
This study investigated the opportunity for a company to diversify its activities and invest in the off-shore wind industry. Increase of public awareness in environmental protection drives an important demand for renewable energy (investment multiplied by ~7 in 10 years) and long term sustainable growth, so it can be a market opportunity as well support the Corporate Social Responsibilities and Green initiatives.
The study showed that the megatrends for the renewable energy in the UK market were favourable with the support of institutions (local and European) with the UK governments compelled to make renewable energy projects attractive to private developers and financiers so that projects would be competitive with other forms of energy. This study also showed a sharp increase in investment between 2005 and 2015 with an acceleration during the last five years, especially in wind power, with a surge in investment of 500%. Additionnally, renewable energy is well regarded by local population. Being part of this business can give a company an environmentally-friendly brand image
In addtion to it, the study highlighted that for the off-shore wind power, the cost of construction has fallen in the past few years allowing cost-effective construction of wind turbines, increasing their contribution in the energy mix, with more megawatts installed for the same price leading to enhanced margins driving high profit attracting investment opportunity. The study also showed that the Total Cost of Ownership is much lower for off-shore wind power than for the nuclear energy, as construction, operations and maintenance are cheaper for power companies. Additionally, nuclear energy requests special skills, whereas skills in wind power are more general, reducing cost per employee. As a result, the trend of investment in wind turbine capacity will continue to grow sharply in Europe in the coming year, especially with off-shore wind power investment growing after 2030, while investment in on-shore wind power decreasing past 2020.
As a conclusion of this study, the off-shore wind industry is seen as a promising sector and growing market in the UK, with an important increase in production by 2020. Additionally, this trend is sustained by the fact that the European Union targets to reduce carbon emission by 40% by 2030 and it can be only achieved by renewable energy. A governmental report states that in 2020/21, the offshore wind industry would deliver circa £7bn Gross Value Added (GVA) to the UK economy, representing an average market growth of 10% per year from 2015 to 2030. Moreover, off-shore wind industry presents lower industrial risks/pollution/waste than with nuclear/oil/gas power energy which makes it an attractive market. The UK off-shore wind industry therefore represents an interesting business to be invested by companies looking for growth and diversification.