Major players in the UK offshore wind market may be more open to signing deals with domestic suppliers due to recent volatility in the euro-sterling exchange rate.
Speaking at a conference organised by the East of England Energy Group (EEEGR), Areva UK business relationship manager, Andrew Fox, explained that the competitiveness of suppliers in euro zone countries wishing to supply UK projects has become less predictable, due to fluctuations in the euro-sterling exchange rate. When the euro rapidly and unexpectedly strengthens against sterling the competitiveness of importing goods and services from outside the UK diminishes.
One way large players, such as Areva, can reduce the risks of incurring currency exchange losses is to increase the proportion of their total UK offshore wind spend that goes to domestic suppliers. When UK suppliers are contracted to deliver goods and/or services for offshore wind activities in the UK, this allows the procurer to forecast more accurately its costs, suggested Fox.
While currency volatility can generate gains for companies, it can also result in losses of several percentage points, dragging down project profitability. Fox's comments suggest that a greater willingness to procure from UK suppliers on the part of offshore wind developers and turbine manufacturers active in the UK market may prove to be one side effect of recent instability of the euro against sterling.
* Commenting on the possibility that Areva is looking to invest in a production facility to supply the UK offshore wind developers, Fox noted that the company's primary wind interests currently focus on projects earmarked for waters off Scotland's east coast (Windpower Offshore 19-Jun-12). A nacelle and blade assembly facility may be on the cards, provided the turbine manufacturer wins sufficient orders from UK project developers. In addition, Areva is likely to establish local product service/O&M bases close to offshore wind farms deploying its 5MW turbines.
Areva operates a small turbine production facility at Bremerhaven, but this is not viewed by all at Areva as an appropriate location for expansion, Windpower Offshore understands (Windpower Offshore 27-Jun-12). It also plans to build a factory at Le Havre, from which it could ship components for assembly in the UK.