COLLABORATING FOR GROWTH - PLAYBOOK
This interactive guide forms a Playbook to support offshore wind developers in their activities drawing on best practice to support the growth of the UK supply chain and giving visibility to the supply chain of the types of interactions developers can engage in.
The Playbook draws out successful examples from a wide range of companies to demonstrate the types of initiatives which can be utilised by developers in supporting such growth. These activities will inevitably vary between projects and it is envisaged that more examples of different approaches will come to light as the sector continues to grow. This guide will continue to be updated over the life of the Sector Deal to include new initiatives and examples of best practice in industry.
COLLABORATING FOR GROWTH
Collaborating for Growth intends to capture the early engagement activities by individual developers with their existing and potential supply chain, and to promote and enhance these where possible.
These activities are intended to provide greater near-term visibility of the market and to support companies in making investment cases for enhanced supply chain capability that may be needed to help deliver UK contracts for UK projects. The activities that developers undertake in support of this workstream will be complementary to commitments made within Supply Chain Plans and many developers undertake such activities as part of normal project development.
TYPICAL UK PROJECT SUPPLY CHAIN PLAN ENGAGEMENT CONSTRAINTS
The Contract for Difference (CfD) mechanism which most UK offshore wind farms currently select to secure the price of the electricity they produce, influences the way in which offshore wind developers typically engage with the supply chain in the procurement process. In this process, offshore wind farm projects compete with each other (and other energy generation technologies) in a sealed bid auction process to secure a contract. This process has been very successful in supporting the significant cost reduction seen in offshore wind over the past decade by driving competition and ensuring developers build and operate projects as cheaply as they are able to, thereby delivering the best value to electricity bill payers. Certain elements of this process are time constrained and influence the way in which developers engage with the supply chain.
This in turn requires the procurement process for most major contracts to have been completed to such an extent to give this confidence. Given the complexity of these large-scale procurement processes, it is therefore common for these to have been initiated some time before the CfD auction itself. At this stage, discussions are particularly confidential given the competitive nature of the auction process. As a result, whilst all procurement processes are confidential, the external communication a project may be able to share in this period (pre-competitive auction) may be further limited and this can in turn influence the type of supply chain engagement conducted in this time.
The examples provided throughout this document should therefore be considered in this context - not all types of activities will always be suitable or possible. Whilst engagement might be recommended between Tier 1 contractors and sub suppliers, the developer is not always in a position to identify these Tier 1 suppliers at the point in time where it would be most beneficial for sub-suppliers to be engaging in this way.
To this end, whilst this document is intended to provide a useful set of examples of the types of activities that occur between developers and the supply chain, Tier 2 and 3 suppliers are also encouraged to proactively engage with the Tier 1 supply chain regardless of known project contracts as it may not always be possible to widely advertise opportunities for sub contracts ahead of contracting. However, wider development of and support for the supply chain will also be available through the industry-wide initiatives delivered by the Offshore Wind Growth Partnership (OWGP).
For offshore wind farms, the second route noted above would typically be met by a project passing a Financial Investment Decision (FID). Given the significant scale of investment in a typical offshore wind farm, both MDD routes will typically require a relatively high level of certainty on anticipated total costs.
This in turn requires the procurement process for most major contracts to have been completed to such an extent to give this confidence. Given the complexity of these large-scale procurement processes, it is therefore common for these to have been initiated some time before the CfD auction itself. At this stage, discussions are particularly confidential given the competitive nature of the auction process. As a result, whilst all procurement processes are confidential, the external communication a project may be able to share in this period (pre-competitive auction) may be further limited and this can in turn influence the type of supply chain engagement conducted in this time.
One particular example is around the time from contract award to what is referred to in the CfD as ‘Milestone Delivery Date’ (MDD), which is currently set at 18-months. At MDD, the project is required to have demonstrated its commitment to delivering the project through one of two possible actions;
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The 10% spend route – achieved through providing evidence of spending 10% or more of a project’s pre-commissioning costs; or,
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The project commitments route – evidence of project commitments such as a board resolution or supply contracts
