Now the hard work begins for UK's offshore wind industry

As Winston Churchill once observed, "it is not even the beginning of the end, but it is, perhaps, the end of the beginning".

Tomorrow, Prime Minister Gordon Brown is expected to announce the names of those firms that have successfully secured the rights to build the UK's next wave of offshore wind farms, the so-called Round Three projects that are widely regarded as the most important plank in the UK's strategy to dramatically increase its renewable energy capacity over the next decade.

But before the successful bidders put the champagne on ice, the Carbon Trust warned earlier this week that the hard work for those consortia that are chosen is only just beginning.

Careful targeting of sites and the development of new technology could reduce the costs of the UK's largest wind farm investment programme by up to £30bn, the Carbon Trust said this week.

As Benj Sykes, technology acceleration manager at the Carbon Trust observed, the goal of delivering 29GW of offshore wind capacity from the Round Three projects by 2020 is an engineering challenge equivalent to building eight Channel Tunnels in 10 years.

"Round three sites are in much deeper water and much further from the shore, " he said. "The scale of the challenges is massive and on a par with the early days of North Sea Oil."

In addition, the Carbon Trust predicts that the economic viability of the projects will effectively rest on the companies' ability to overcome these challenges, warning that depending on the effectiveness of the project management, the overall capital required for the scheme could range between £45bn and £75bn.

The greatest concern for the companies involved is that they are effectively embarking on a voyage into the unknown. The offshore wind turbines to be installed in Round Three are much larger and heavier than any that have been installed in UK waters in the past – most of the new turbines are expected to boast capacities of 5MW or above, compared to just 3MW in previous rounds.

Meanwhile, some of the proposed sites are up to 150km from shore, posing huge installation and maintenance challenges that are only amplified by the fact the turbines will be located in waters that are up to 60 metres deep – potentially three times deeper than existing offshore turbines.

As if these technical challenges are not daunting enough, there are also time constraints, with the industry estimating between one and two turbines must be installed each day if the UK is to meet its renewable energy targets. Currently, the less ambitious Round Two projects are installing turbines at a rate of one every two weeks.

The picture is muddied still further by concerns over the long-term economic viability of the projects. The government intervened last year to increase the financial support offshore wind farms enjoy - a move that many within the industry credited with saving a number of Round Two projects that had been in danger of being cancelled. However, the improved support on offer is due to expire in 2014, a year before construction work on Round Three projects is even expected to begin. The British Wind Energy Association has been lobbying hard for the government to provide absolute certainty to investors that adequate levels of financial support will remain in place for the next wave of projects.

As Andy Cox, energy partner at KPMG, told the Financial Times earlier this week: "This is a key question for anyone looking at financing Round Three projects: what will the subsidy regime look like?"

And yet, despite this myriad of obstacles, each of the nine offshore zones that are to be awarded by the Crown Estate tomorrow attracted multiple bidders, and there is genuine confidence across the industry that both the various technical challenges can be met and financial returns realised.

Central to the success of the projects, will be the development of a strong supply chain in the UK that will have to be built almost from scratch.

Following Vestas' controversial decision to close its facility on the Isle of Wight last year, there is a distinct lack of turbine manufacturers in the UK. However, both Siemens and GE are said to be eyeing up the Northeast for a potential turbine manufacturing base, while it was also announced that Clipper Windpower is to locate a blade manufacturing plant in the region alongside the expanded Narec testing facilities. Industry sources are speculating that a new UK turbine manufacturing facility could be announced tomorrow to coincide with the award of the Round Three projects, with one insider tipping Siemens as the most likely candidate for a new plant.

Meanwhile, the Carbon Trust is working with companies across the industry to overcome the various technical challenges the projects will face.

The government-backed company has a programme in place that aims to bring down costs in four key areas: foundation, configuration, access, and power transfer.

Improving turbine foundations offers the greatest opportunity for cost saving, given that foundations account for half the cost of installation. The Carbon Trust recently shortlisted four foundation designs to be used in round three, which it believes could reduce the cost of foundation installation by up to 20 per cent.

Configuring the wind farms effectively is also important, as studies have shown that turbines positioned behind others can lose up to 10 per cent of their power. The Carbon Trust is taking modelling data from a number of companies it is working with to more accurately help the industry model airflow and improve the design of windfarms.

Similarly, work is under way to identify technologies that will improve worker access to the offshore wind farms, and a number of alternatives to boat and helicopter trips are being considered, including sea bridges and the establishment of offshore living quarters similar to oil rigs.

Higher voltage sub-sea transmission cables could also play a key role in reducing the amount of power lost during transmission, and the Trust estimates that successful R&D into new lines could cut the overall investment required by £14bn. Meanwhile, recent plans for a North Sea power grid would also allow project operators to increase revenue by exporting unneeded power to the continent.

Developing new technologies in each of these areas represents a huge challenge, but with construction and installation of Round Three not set to begin until 2015, the consortia are unlikely to take final technology decisions until 2013 or even 2014, leaving a short window of opportunity in which to deliver genuine progress.

If each of these new technologies come together, Sykes believes the goal of 29GW of installed capacity could be reached by 2020. "There is a clear challenge to reduce the costs, but if we do I think it's possible," he said, adding that the successful execution of the Round Three projects has the potential to create around 70,000 jobs in the UK.