3 Responses to Why Oil and Gas Companies Should Embrace Offshore Wind: Their Skills Could Lower Costs Sharply
Rather than being “job killers” that displace people working in the fossil fuel sector, clean energy investments are important ways to leverage the expertise of skills of workers in conventional energy.
A new report from Scottish Enterprise, The Guide to Offshore Wind and Oil and Gas Capability, finds exactly that.
By leveraging oil industry know-how, substantial cost reductions can be made in offshore wind. The report highlights the opportunities and benefits for the oil and gas sector to diversify into offshore wind development and estimates that over the average life cycle of a generic offshore wind farm, the oil and gas sector could deliver $517 million of savings. By leveraging the skills and knowledge from the oil sector, the researchers estimate that offshore wind costs could be cut by a fifth in just a few years.
Scotland aims to generate an ambitious 100 percent of domestic electricity consumption from renewable energy sources by 2020. And by announcing a $54 million offshore wind development fund yesterday, Scottish First Minister Alex Salmond aims to do nothing less than foster “a new industrial revolution” based on renewable energy. Salmond predicted 130,000 jobs will be created in the low carbon sector in Scotland by 2020 – double the current number.
Offshore wind is a key component of this low carbon power shift – a dramatic transition that might leave many in the fossil fuel sector fearing for their jobs. However, the study shows that workforce development gained through decades of investing in an oil and gas industry would not be lost in a transition to low carbon economy. Rather, those jobs would be applicable and beneficial to helping develop large scale industrial projects like offshore wind.
The guide examines the complete life cycle of an offshore wind project and highlights a wide range of opportunities where the oil and gas supply chain can add the greatest value. These are divided into “high potential” and “medium potential” opportunities and the value of each is calculated. The study determined that offshore wind energy costs could be cut by 12.6 percent if high potential skills like manufacturing offshore substructures and cable laying are transferred to the offshore wind industry. A more ambitious scenario involving cross-sector transfer of skills in both the high and medium potential areas – such as the ability to carry out environmental surveys – could further reduce costs by up to 20.1 percent.
This cross-sector transfer would greatly benefit the offshore wind sector by accelerating cost reductions through access to new supply chain capacity. At the same time, the offshore wind sector presents an exciting new commercial opportunity for the oil and gas sector.
The oil and gas sector should take note of these findings. While some companies are bringing their expertise to the renewables space, many others are staunch opponents to offshore wind. Just recently, Americans for Prosperity, an organization funded by the billionaire oil barons Charles and David Koch, funded an ill-conceived study of the economics of offshore wind in New Jersey.
While the US has yet to install a single offshore wind turbine, UK, Germany and China – the three largest offshore wind markets – will collectively install 11 GW of new offshore wind capacity in the next four years alone. That’s almost 83 per cent of the total global capacity. The UK is forecasted to be the largest market and is expected to build up to 32GW of offshore wind farms over the coming decades.
Scottish companies skilled in the oil and gas sector are already anticipating the economic prospects presented by offshore wind. Xodus Group, an energy engineering consultancy, has diversified from the oil and gas sector into offshore wind — a sector that now makes up more than $3.1 million of its business. Xodus predicts this will rise to $15.6 million by 2015. Colin Manson, Xodus Group’s CEO, says that “for oil and gas companies the opportunities in the low-carbon market, and specifically the offshore wind sector, are vast.”
For countries with a long history of oil and gas development, this report is proof that a transition from fossil fuels to renewables is not only possible, it’s a smart business move.
Kiley Kroh is associate director of Ocean Communications at the Center for American Progress.