Firms embracing winds of change

For more than half a century the coal-fired power station stood like a grim sentry over the dockyard in the town of Methil, at the mouth of the river Leven in Fife, Scotland.

The plant's demolition last year was long overdue. It was built when coal was king and climate change barely a glimmer in the eye of campaigners. In a few months, a symbol of the new era of energy will take its place — the world's biggest windmill.

The prototype turbine will be installed a few hundred metres from the shore. It will be as tall as London's Gherkin tower, its diameter will be bigger than that of the London Eye, and it will be able to power 70,000 homes.

The big pieces will be built by Samsung, the Korean engineering giant. The guts of the machine — a 50-tonne gearbox — will be built by the former owner of Aston Martin.

David Brown, the company that owned the carmaker for 25 years until 1972, says this plunge into wind energy could transform its fortunes.

Four times as big

Ian Farquhar, managing director at David Brown's wind arm, said: "Within three to four years, this contract with Samsung means our company will be up to four times as big."

The wind lobby brandishes the 152-year-old manufacturer's conversion to the cause of renewables as an example of the manufacturing boom the sector has so often promised but failed to deliver.

Expect to hear more about companies like this. The government is putting the final touches to an energy bill that will determine how tens of billions of pounds in subsidies will be divvied up between developers for decades to come.

The competing industries — wind, nuclear and gas — have kicked their lobbying machines into top gear to ensure they get the biggest piece of the pie.

The bill is expected to be put to parliament in September, just two months before Methil's huge turbine is erected. Whether David Brown's role in the project proves an exception rather than the rule will hinge on the final shape of the energy bill.

Renewable UK, the industry body, last week sent a letter to Prime Minster David Cameron signed by 100 companies that promised to invest £50 billion (Dh184 billion) in new plants, ports and wind farms by 2020 if the government gives the industry what it wants — a continuation of generous subsidies until a proposed new regime takes its place.

Maria McCaffery, chief executive of Renewable UK, said: "With so many potential economic benefits at stake, companies such as David Brown will be watching the government's forthcoming energy bill closely in the hope that it will provide the certainty they require for the long-term sustainability of the industry."

Today, David Brown relies heavily on defence. Every British tank and navy surface ship contains one of its transmission systems. But the austerity cuts have hit defence spending hard.

Jim McColl, the Scottish industrialist with a fortune of £1 billion, according to The Sunday Times Rich List, bought David Brown in 2008 through his investment firm Clyde Blowers. He encouraged the company to get into the wind industry, which the government had put at the heart of its plan to overhaul the energy sector.

Farquhar said: "We launched an after-market business repairing wind turbine gearboxes, and we quickly came to realise that the incumbents were making some fundamental mistakes in their design, manufacturing and maintenance.

"We thought there was an opportunity to develop a new product that addressed the two key challenges: cost and reliability." David Brown signed its gearbox supply deal with Samsung last year.

The industry is approaching a moment of truth. The energy bill has proposed a new subsidy regime that is expected gradually to reduce support from 2015 onward.

Huge price tag

Today, an offshore wind energy producer is paid three times the average wholesale electricity price to allow utilities to recoup the eye-watering construction costs.

That upfront price tag is wind's biggest problem. An offshore farm costs up to six times as much as a gas-fired power station with the same capacity.

The benefit is that the "fuel" — wind — is free and not vulnerable to the geopolitical upsets that can affect the supply of imported fossil fuel.

Yet cash-strapped utilities have become cautious about spending their money. Eon, RWE (owner of Npower) and Scottish and Southern Energy have all cancelled plans to build new atomic plants in the past nine months because construction costs were too high.

Nuclear power is actually cheaper than wind, because big turbine farms will require gas-powered plants to fire up and provide electricity when the wind isn't blowing.

A report by AF-Consult, an independent research group, sparked controversy in March when it claimed that Britain could save £45 billion between now and 2020 if it did not build a single new turbine. Instead, the report suggested, utilities could build cheap gas plants and still meet Britain's 2020 emission reduction targets.

Aggressive response

The attack prompted an aggressive response from the wind industry, which argues that the report failed to account for the creation of manufacturing jobs, and for the increase in domestic energy supply that wind would offer.

The Department of Energy and Climate Change will soon publish the conclusions of a taskforce it set up to slash the cost of offshore wind power by a third by 2020. Central to the plan are bigger turbines — like the David Brown and Samsung giant — that promise to produce more power and break down less often.

— The Times Newspapers Limited 2012