IN DEPTH: Iberdrola on the march offshore
From Belfast to the Baltic, Spanish utility giant Iberdrola is making its presence felt in the offshore scene.
With an offshore portfolio of about 12.5GW, of which 8GW is attributable, the whole sector — from manufacturers to contractors to governments — is watching Iberdrola’s every move.
Although the company was not one of the first big utilities to enter the offshore arena — Dong, RWE, Vattenfall and E.ON have had “steel in the water” for years now — it has been quietly working behind the scenes in recent years, setting up its offshore wind business division in Glasgow, building partnerships with fellow developers and suppliers, and acquiring assets.
It has also been bidding — and winning — in some of Europe’s biggest tender rounds, while simultaneously working on its own long-term technology solution for deep-water sites.
“They have been very cautious, and quite rightly so,” says a well-placed industry source who has been involved in negotiations with Iberdrola in the past. “They have been really watching and waiting to see how the technology develops and costs behave before they start building.”
Iberdrola — the world’s leading onshore wind developer, with more than 14.3GW installed — turned to offshore when its key wind markets in the US and Spain slowed dramatically, at the same time that it faced a Europe-wide squeeze on utility margins.
These pressures led to a far-ranging rethink of strategy last year. Capital expenditure has now been restricted, unattractive projects cancelled, and unwanted onshore wind assets in “non-core” markets are being sold off in a move to cut debt.
The company is also concentrating on countries where it can leverage its presence in distribution, transmission and traditional generation assets.
Wind-power investments are being slowed to €2.6bn ($3.5bn) for 2012-14, with total planned installations of 1.45GW. This compares to the construction of more than 1GW annually from 2009 to 2011 at a cost of €1.9bn a year.
But Iberdrola is not applying any brakes to offshore wind — which will account for about €1bn of capital investment over the next couple of years. And with the 400MW Wikinger project in the German Baltic Sea due to cost €1.6bn, the amount Iberdrola is set to spend on its current pipeline is mind-boggling.
“Since the PTC [production tax credit] extension was approved, we have had lots of phone calls asking whether we are going to speed things up again in the US, but we have had to tell people that the real push remains offshore, and that the US remains very tight for us because of shale gas,” says an Iberdrola official.
In Iberdrola’s current three-year investment plan, 45% of its renewables spending will be dedicated to the UK, which has been identified as the company’s key growth area (alongside, to a lesser extent, Brazil and Mexico).
Chairman Ignacio Sánchez Galán has stood out from the crowd in the UK by expressing strong confidence in the government’s much-maligned Electricity Market Reform process, and has built strong relationships in both Holyrood and Westminster.
Nevertheless, major challenges remain in the UK as the offshore industry ramps up to deliver significant increases in capacity over the next ten years, says Jonathan Cole, Iberdrola’s managing director for global wind. “Apart from country-specific challenges associated with the planning and permitting process [in the UK], grid, supply chain and financing require continuous focus,” he says.
Industry participants point out that it is by no means clear how the big offshore projects will be financed once Iberdrola reaches its capital-heavy construction phases.
Cole tells Recharge that moving ahead with massive projects in a period of relatively fast technical evolution — when turbines, foundations, vessels and electrical systems are all changing rapidly — is one of the biggest challenges he faces.
“Making fairly significant investment decisions in the face of those changes is a challenge,” he admits.
Iberdrola’s offshore-turbine selection policy is a key question for the company and potential suppliers alike.
Onshore, Iberdrola has historically relied on Spanish manufacturer Gamesa, in which it holds a 20% stake, although it has also awarded contracts in recent years to companies such as Siemens, GE, Suzlon and Alstom —although, curiously, never to market leader Vestas.
Offshore, it is a very different story, as Gamesa has fallen behind the leaders in bringing its planned offering to market.
Cole says that with so many models being prepared for the coming explosion of installations across Europe, Iberdrola has plenty of options.
However, he adds: “There is still a way to go before we have a properly competitive turbine market.”
For the first phase of the UK’s 389MW West of Duddon Sands zone, Iberdrola and partner Dong are using Siemens’ workhorse 3.6MW turbine.
In France, the Iberdrola/EOLE-RES consortium has teamed with French nuclear giant Areva’s wind subsidiary for the offshore tenders, with the latter already starting work on its planned turbine manufacturing facilities in Le Havre.
In Germany, Iberdrola grabbed the headlines in December by also awarding preferred-supplier status to Areva to provide its 5MW M5000 turbines to the utility’s 400MW Wikinger project — with Areva set to supply the machines from its Bremerhaven factory.
The decision was a blow to Gamesa — which had had its eyes on Wikinger for its forthcoming G11X-5.0MW model — although Iberdrola has said that it is also considering several Gamesa turbines at the site “as a complement”.
Gamesa is due to begin installing the prototype for the G11X turbine off the Canary Islands in the second quarter, roughly a year later than planned. It expects to have the machine certified late this year or early 2014.
Some industry officials have talked of an emerging alliance between Iberdrola and Areva, and Iberdrola feels comfortable with Areva’s scale and balance sheet — as well the track record it has built up for the M5000. Areva officials point out that, in contrast to many of its competitors, it is already in a position to supply turbines in large quantities, and has clear plans to ramp up industrial capacity at its planned plants in France and Scotland.
Iberdrola officials in Madrid are quick to dampen down talk of an alliance with Areva, saying Iberdrola is “not about to get into bed with anyone” and wants a range of options for its offshore projects.
The officials say that they want Gamesa to do well, but they emphasise that Iberdrola will award contracts on a project-by-project basis.
The big prize for potential suppliers is the 7.2GW East Anglia Round 3 zone in the UK’s North Sea. Officials say that Iberdrola and its project partner, Vattenfall, will almost certainly use more than one manufacturer, given the scale of the project.
The uncertainties remain huge. “For these really big UK projects it’s still like looking into a crystal ball,” says an official from one of Iberdrola’s turbine suppliers.
“If they want to keep to anything like the timelines that they are talking about, they will need to be constructing different blocks within the project simultaneously with different turbine suppliers, and the capacity from manufacturers is not there.”
An official from a rival supplier says: “For the most part, we are talking about turbines that don’t exist from factories that haven’t been built yet, by companies that are still waiting to commit.”
One thing is clear, however. In the coming years, every manufacturer offering an offshore turbine will have its eyes firmly fixed on Madrid and Glasgow.
WADING INTO THE DEEP
In a long, narrow wave tank run by the Spanish Ministry of Defence, a four-metre-tall floating wind turbine model rides the swell, writes Darius Snieckus.
It is a 1:40 replica of the design that Iberdrola is counting on to carry it into Europe’s deep waters, beyond the reach of the monopile- and jacket-based turbines that will be used for its current 12.5GW offshore pipeline.
The company is working on two floating wind turbine concepts, one a 2MW, the other a 5MW. Both employ a tension-leg platform (TLP) foundation, which has been used by the offshore oil and gas industry in water depths of over 1,400 metres.
“Offshore wind is very important to our group and, in this context, deep water is an area where we are looking to provide solutions for future power generation for our customers,” says Iberdrola head of offshore technology Juan Jesús Amate LÓpez. “Sustaining a pipeline of offshore wind in the long term requires floating foundations. It will mean we can develop a large number of sites that otherwise we could not [with fixed foundations].”
“From our modelling, we think that [a project using its 5MW TLP turbine] in 80-100 metres of water will be competitive with projects [using fixed foundations] in 30-40 metres of water.”
The 5MW machine is under Iberdrola’s wing as part of the Ocean Lider project, a 20-company super-group with a €30m ($40m) budget and a further €15m in EU grant money.
Designed to operate with its floating hull half-submerged, the turbine’s TLP foundation is based around a slender upright cylinder with an X-shaped pontoon base that is moored to the seabed by four groups of steel-wire tensioned tendons fitted with suction anchors.
The 2MW floating turbine is the brainchild of the Flottek project, a consortium of seven companies and four research institutions headed up by Spain’s Gamesa.
The engineering appeal of the TLP concept is the stiffness of the tendons, which absorb most of the vertical motion created by waves, making the unit very stable in strong winds and high seas.
The other main attraction of the design is the low installation price. Each unit can be fully built at a quay or dry dock, then fitted with a turbine and towed out to site to be hooked up to a pre-installed mooring spread.
The installation can take place in just two or three days — using low-cost tugs to tow turbines to site.
By comparison, fixed-foundation installations require half a day per monopile, seven days to fit and grout each transition piece, and up to a day and a half to fit each turbine. All of this requires expensive jack-up vessels that can cost more than $300,000 a day to hire.
“After operational stability, this is the main cost driver to my mind: having a concept that can be fully assembled onshore, floated out and self-installed,” says Amate.
Tests at the ministry’s CEHIPAR (Canal de Experiencias Hidrodinámicas de El Pardo) model basin and at the Higher Technical School of Naval Architecture and Ocean Engineering at Madrid University have been encouraging.
The models were put through their paces in a “perfect storm” of simulated environments and survival conditions modelled on sites in the UK North Sea and the North Atlantic. Facing waves the equivalent of 30 metres high, the scaled TLP concept kept the turbine nacelle within three degrees of vertical at all times.
“From our tests, we can see the TLP has a better dynamic response than other floating solutions — the wind turbine has to withstand no rotations [around the vertical axis], there is almost total heave [rise and fall] cancellation and very low displacement [amount of water displaced by the structure], and this is without an active ballast system, so there are lower operational risks,” says Amate.
Iberdrola reckons the full-scale version of the 5MW floater will be less expensive, pound for pound, than a Statoil Hywind or Principle Power WindFloat of the same capacity.
Now that model testing has wrapped up, Iberdrola is pressing ahead with detailed engineering for demonstrator units, and it is vetting five bespoke installation concepts, including one with a U-shaped barge.
The company is also looking beyond standalone floating wind turbines, with an engineering team fleshing out a three-armed clamp-on wave-energy converter that would be fitted to the tower at water level to generate extra electricity.
“The deep-water areas are there to be developed. Round 4 [of the UK’s offshore programme] is coming,” says Amate. “By the 2020s, we will need floating wind turbines to be de-risked and ready. Even the roughest calculations of the potential for floating wind turbines tell you the market will be huge.”