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Question

Who is in prime position for the future of offshore wind construction?

Jamie Hughes's picture
Senior Project Engineer ONO

I’ve been at the forefront of Project Engineering in the energy sector, which has allowed me to be part of projects that have been considered first of a kind. With 15 years’ experience in project...

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Who is in prime position, for the future of offshore wind construction?

With forecasted growth to be 10-fold over the next 10 years. As an offshore contractor if you are not looking in this area for vessel utilisations you will be left behind.

Below are my thoughts on who is currently ahead of the game.

 

 

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There are suppliers of equipment, contractors for acquisition and installation of equipment, and operators of the installations.  As you suggest, the major oil companies are heavily involved as operators.  Equinor, the Norwegian Energy Company, pretty much missed the boat on shallow water, seabed offshore wind.  They are determined to dominate at least some markets for floating offshore wind.  It is a risky play, given the present relative costs of seabed vs. floating offshore turbines. But the prize may be commensurately large.

It is quite evident that the energy strategies need a thorough overhauling for the period 2021 onwards. The global energy scenario has been dented critically due to the pandemic and has also seem to delink the rich and the poor countries in their effort toward self-reliance and future projections.  While the poor countries may not have any option other than the existing local resources -Coal, rich countries can experiment on a few renewables especially Solar and Wind. 

The energy sector presents scenarios that could exemplify ‘stress test exit’ strategies and bounce back with a more resilient society in speeding up global energy transition.  Not that we did not have better options to Coal earlier, but pandemic seems to have triggered a quicker action.  However, it is not an easy task to achieve this as this has been an unprecedented situation.

The leap from a mere 1,47,962 MW in 2009 to 5,94,396 MW in 2019 is just an indication of the rapid pace of wind energy development and more importantly,  28308 MW accounts for offshore wind energy.  Offshore wind with its contribution of 6.1 GW in 2o19 played an important role in driving global wind installations.  This is a shift from Levelized Cost Of Generation (LCOE) towards long term sustainability of renewable – wind.  While 76 GW was the target for 2020, pandemic has dented the progress and we could expect a revised target for 2020-2024.

When we consider wind energy and especially, offshore wind, China seems to be far ahead of all the others with over one third of World’s capacity.  Gansu Province appears to be world’s largest onshore wind farm (7965 MW) almost five times larger than the nearest.  However, UK with a capacity of 6651 MW in 2017 followed by Germany (5411 MW) and China (2788) in 2017 were the rankings in 2017.

European countries (UK, Germany, Netherlands, France, Belgium, and Denmark as the sequence) fostered offshore wind industry growth exploiting high quality wind resources and at the same time, relatively shallow water which are ideal conditions.  This has helped them to reach 20 GW by 2018 end.  However, China took strides forward and stands among the leaders when they added 1.6 GW, the most by any country.

As it happens, with the demand for wind growing and at attractive pricing, many countries would love to adopt the technology to reduce the burden on the polluting resources as early as possible.  The investment on wind seems to match the capital spending on coal and gas over the same period.

Global scenario looks fluctuating though Europe stays as leader to 2040 as China is closing the gap.  State level targets in US could promote rapid growth in the coming decade.  India and Korea are entering the race with considerable groundwork in the offshore wind development.  This is further linked to handling the pandemic as the country which comes up with appropriate vaccine may take the lead and as it stands today, China, UK and USA are the fore-runners in this race.

Offshore wind based on strength of the wind and lower hourly variability may score over solar.  Offshore provides energy, consumes no water, plays as domestic energy source, create jobs and above all, environment friendly devoid of pollutants or greenhouse gases.

In the development of a large off-shore wind project, the primary "builder" is generally what I call the developer. This is the firm that puts together all of the important elements of a project - financing, off-taker (the electric utility or consortium that receives the power from the project), capital equipment suppliers, .and takes the lead on dealing with regulatory and political issues

In answering your question, I will stick to U.S. projects currently being built. - starting with the recent post (May) described and linked below.

A Wet and Windy Post: This post focused on updates for U.S. East Coast off-shore wind projects, and any advancements in products from turbine vendors that supply these to the aforementioned projects.

https://energycentral.com/c/cp/wet-windy-post

The East Coast is in the midst of many major developments, and Orsted appears to be the dominant developer. 

The West Coast requires more advanced technology than the East Coast due to deeper offshore waters. The description and link below (from about a year ago reviews the potential here). 

California Offshore Wind: In a recent post I indicated that there were no active projects on the U.S. West Coast. Although that is still basically true, there is quite a bit of early-stage activity on the California coast. This post reviews that recent activity, and possible barriers to future development.

https://www.energycentral.com/c/cp/california-offshore-wind

The California post has some links to an older two-part post in it that goes into more details about East Coast projects and political considerations.

-John

 

The top 3 companies are Siemens, Vestas, and GE Renewables.  When GE purchased Alstom Power, they got the offshore wind business.  The project off Block Island was an Alstom Offshore Wind project.  That puts GE in the lead for projects in New England.

Jamie - your details on the equipment and offshore construction experience is very aligned with my thinking.  Those firms that are already building and servicing in these harsh environments will be the ones that succeed. 

The second half of the answer is which companies will be able to develop and finance these projects to that they can contract with the firms that own the equipment and have the experience?  

I think that it is clear that the ability to complete these large offshore projects resides with the major oil companies like Shell, BP, Total, ENI, Chevron and even Exxon (have shown no interest).  Their experience building multi-billion dollar projects in harsh environment (like the North Sea) and running them for decades is directly applicable, the key question is whether the returns are there to justify their engagement.  

The leading offshore wind company (by project GW) is Orsted out of Denmark which has a legacy back to DONG which was an offshore oil & gas company.  

Unlike on-shore wind where the environment is relatively controlled and the supply chain very developed, offshore wind will be very remote and difficult to support and require much more engineering and risk evaluation/management.  It will require much more capital and more patient capital.  In the US, East Coast utilities want this higher capacity factor electrical supply but have no experience building in this environment.  I expect that firms like Orsted will develop, start construction and then sell these assets to the utilities, earning their premium for taking the early risk, they have already sold some assets from their portfolio.  The other off-shore oil & gas majors could use their existing offshore experience and work force to do the same thing, Shell is engaged in some of these early projects also.     

Jamie Hughes's picture
Jamie Hughes on Sep 3, 2020

Thanks for the comment.

On your second question, I agree, that Orsted is ahead of this game and others need to catch up. Looking at how Total has signed up for 2.3GW in Korea this week, does show how they do seem to be getting interested, but over time, we will see who else will get involved.

 

 

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