Breaking News

Tweet TWEET

Scotland Vies With England for $52 Billion Offshore-Wind Future

Scotland and England, haggling over the possible breakup of the U.K., are competing to create a hub for the country’s $52 billion offshore wind industry.

Leith, the port area of the Scottish capital, Edinburgh, and the northeast English coastal town of Hartlepool are vying for a 150 million-pound ($237 million) investment from Spanish wind-turbine maker Gamesa Corp Tecnologica SA. The local governments plan to lay the foundations for a concentration of skills and investment servicing North Sea wind parks just as Aberdeen transformed its economy with the oil industry.

“The U.K. should be the dominant world market for offshore wind by 2020,” said Ronan O’Regan, director of energy and utilities at PricewaterhouseCoopers LLP in London. Ports that secure the industry’s investment will likely see “a significant economic uplift,” he said.

Gamesa (GAM)’s decision may end up being a bellwether for the competing ambitions of Scotland and northeast England to become the center for the U.K.’s offshore wind energy projects. The industry may be worth as much as 33 billion pounds over the next eight years, according to the Carbon Trust, which was founded by the government to help reduce emissions.

The Spanish company may create as many as 1,200 jobs at a time when Britain’s unemployment is at the highest rate in 16 years, said Stuart Drummond, the mayor of Hartlepool, located 140 miles (225 kilometers) to the south of Edinburgh.

Big Opportunity

“The U.K. has the skills from offshore drilling,” said Gerard Reid, a renewable energy analyst at Jefferies International Ltd. in Frankfurt. “The opportunity for either England or Scotland is pretty enormous.”

Hanging over the decision is a debate about Scotland’s constitutional future and whether its economy can afford to go it alone. Scottish First Minister Alex Salmond plans to call a referendum on independence in 2014, the year Gamesa aims to produce turbines at its new British plant.

Gamesa, Europe’s third-biggest wind-turbine maker, plans to establish the factory, maintenance center and logistics operations in Britain as the nation ramps up wind-power production to 31,000 megawatts by 2020. More than half of that capacity, or 18,000 megawatts, is to come from offshore wind, up from about 1,500 megawatts now.

Gamesa is still analyzing the relative merits of Leith and Hartlepool and holding talks with officials, a company spokeswoman said on Feb. 15.

Attracting Jobs

Competition for the Gamesa project underscores the attraction of jobs in renewable energy on both sides of the border as U.K. Prime Minister David Cameron pushes through the deepest budget cuts since World War II.

It’s also a political issue as Salmond, the 57-year-old leader of the semi-autonomous government in Edinburgh, strives to make renewable energy a pillar of an independent economy. The Scottish government aims to get all its electricity from renewable energy by the end of the decade.

As well as onshore and offshore wind farms, the seas around Scotland have the potential to provide up to 25 percent of Europe’s tidal power and 10 percent of its wave power, according to Scottish Development International. Salmond has said the industry can generate 130,000 jobs.

About 1 billion pounds has been invested in offshore wind in Britain since April, U.K. Energy Secretary Ed Davey said on Feb. 9 after inaugurating the world’s biggest offshore wind farm, which is in the Irish Sea off Britain’s west coast. The money includes a Jan. 31 announcement that Samsung Heavy Industries Co. will base a 100 million-pound offshore wind project in Scotland, creating more than 500 jobs.

Turbines and Blades

Gamesa, based in Zamudio near Bilbao in northern Spain, would build and open the plant making turbines and blades by 2014, according Scottish Development International, the agency responsible for bringing in foreign investment.

“Gamesa is an important player in Scotland’s developing offshore wind sector and we continue to work closely with the company,” Tom Lamb, head of renewable energy at the agency, said in an e-mailed statement.

Hartlepool, an industrial port, is counting on its location and history. It could also do with the jobs. It has an unemployment rate of 12.6 percent, the ninth-highest of 408 municipal areas in Britain, according to labor data from the Office for National Statistics. Middlesbrough, 10 miles to the south of Hartlepool, has the highest rate, at 15.1 percent.

“We’re ideally placed geographically and we’ve got a legacy of heavy industry and construction,” Drummond, the mayor, said in an interview by telephone. Drummond, who lobbied last year for the Gamesa project in Madrid, said it would create between 800 and 1,200 jobs.

Independence Question

Gamesa’s decision will be made on purely commercial criteria and the spokeswoman declined to comment on how the prospect of Scottish independence would complicate that analysis. She also declined to be identified because of company policy.

CBI Scotland, the biggest business lobby group, and Scottish Financial Enterprise urged Salmond last month to spell out his positions on taxation, employment laws, public debt and the currency. Citigroup Inc. analyst Peter Atherton said in November that power companies should exercise “extreme caution” investing in Scotland until the political outlook becomes clearer.

The U.K. is meanwhile planning to install hundreds of giant wind turbines in the North Sea, accessed from both Leith and Hartlepool, as it looks to raise the country’s offshore generating capacity.

Drummond, who became mayor in 2002 after campaigning as the monkey-suited mascot for the local soccer club, said the town is in talks with Gamesa and “looking at ways of cutting down costs” to win the project.

Securing the wind-turbine project would help transform Hartlepool into a hub for renewable energy, he said. “It’s one piece of the jigsaw if we can get it,” he said.

To contact the reporters on this story: Rodney Jefferson in Edinburgh at r.jefferson@bloomberg.net; Ben Sills in Madrid at bsills@bloomberg.net.

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.