OPINION: Johannes Kammer

Johannes Kammer, Vattenfall's team lead for LEC management

Johannes Kammer, Vattenfall's team lead for LEC management

In all offshore wind markets, the challenge of LEC (Levelised Energy Cost) reduction has been clearly set for the industry.

The German Offshore Wind Energy Foundation concluded that cost reductions of one-third can be achieved by 2023 in conditions of consistent technology development and a deployment of 9GW capacity in Germany.

In the UK, the Crown Estate Pathways Study in 2012 concluded that significant cost reductions are also possible across most sectors. But are the underlying volumes of deployment going to be realised in the expected timeframes?

And if not, what can industry do to achieve and exceed these targets in a cost effective way?

With one of Europe’s largest offshore portfolios in development, construction and operation (over 1GW either post-final investment decision or already in operation) Vattenfall is well positioned to use our portfolio to achieve meaningful LEC reductions and share key learnings with the industry on cost reductions that can realistically be achieved.

Cost reduction is driven by volume, which creates efficiencies in manufacturing, R&D investments in new technology, and healthy competition in the supply chain. Furthermore, as more projects are finalised and operate reliably, risk – and therefore the cost of capital – will decrease.

Without significant pipelines, both from each developer and the industry as a whole, the significant potential achievable through volume deployment is at risk. This will limit developers and supply chain to a technical transfer from one project to another while optimizing the solution.

With DanTysk now under construction, Vattenfall will take our 10 wind farm into operation this year, and the project is already making a crucial contribution to our and industry’s experience in LEC reduction. LEC reduction is a strategic priority for Vattenfall, and our programme pulls in experience from across the business to identify and implement cost-reduction levers which can be controlled by Vattenfall directly or require joint realisation with partners.

It almost goes without saying that location is a factor determining the LEC. Geography defines the distance to shore, water depth and soil conditions, as well as the wind, and therefore has massive influence on a project’s cost structure. Optimizing this is left to wind farm design, technical solution and construction and operational excellence.

For DanTysk, we had a clearly defined area which defined the maximum number of turbines which could be installed. Fortunately, the DanTysk site allowed for wide spacing between the turbines. This is unlike many other German sites where the permitted area forces WTG positions close to each other – a positive when considering O&M synergies across multiple sites, but a challenge when considering wake effects.

For DanTysk, we see potential LEC reductions achievable through ‘clustering’ when adding further wind farms in the SylWin area in the North Sea.

As portfolios develop and grow in Germany, and as the UK Round 2 sites move into operation and UK Round 3 sites mature, finding the best sites will become increasingly difficult. This presents a fresh challenge for industry as it looks to achieve significant LEC reduction – projects must look elsewhere. Industry will continue seeking to meet this challenge, but it is the consumer who would ultimately benefit from the lower LEC that could be achieved if more optimal sites could be made available.

On the technical side, smart consideration of turbine technology taking into account site-specific conditions – not just the newest turbine on the market – will help sustainable reductions on LEC. Potentially rapid cost reductions achieved by new technologies may be outweighed by the increased risk premium priced in by investors.

Perhaps less conventionally thrilling but more practical cost-reduction levers on a project level can be achieved through a close assessment of foundation design.

Vattenfall has reassessed the dimensions of TP platforms, steel quality requirements and load iteration processes, and the use of bolted flange connection instead of grouted connections to reduce our LEC.

Equally important to cost reduction in development and construction is the operational phase of a wind farm, for example ensuring fast accessibility using an offshore accommodation platform as we have done at DanTysk or improving blade protection systems to cut expected repairs works.

Of course, the achievement of significant cost reduction curves can only be founded on a stable political framework with long-term regulatory certainty.

Investments cannot be made in the supply chain and necessary R&D activities without this long-term view. The announcement of Siemens’ intention to build a turbine factory in the UK is very welcome, not just for the UK but for the whole European industry, as this gives confidence to the industry and will help to encourage new entrants to the market.

It’s clear that Vattenfall and industry have a long way to go – the industrial scale deployment of deep-water offshore wind only started a few years ago.

But I am confident that Vattenfall and the industry have accepted the LEC reduction challenge, and are already making great progress in meeting it.

Johannes Kammer is Vattenfall's team lead for LEC management

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