Europe is in the midst of an energy crisis, brought on by Russia’s war against Ukraine. This sudden and tragic situation might have been more manageable, had it not been for the most significant change in the continent’s energy policy ever, which was already well underway. What the Germans appropriately call “Energiwende” encompasses an energy transition with a massive step-up in the electrification of society. EU government response has included setting stratospheric targets for the expansion of offshore wind, being in many cases the most competitive, cleanest, and readily available form of new power generation at utility-scale.
The offshore wind industry already has its challenges. Developers compete in a race to the bottom to deliver cheaper and cheaper power, while the turbine OEMs’ P&Ls are deep in the red and five-out-of-six tier-1 contractors are currently loss-making or just breaking even. The decade-long singular focus on lowering levellised cost of energy surely is an important part of the explanation, alongside lenders driving risk down the supply chain hierarchy – though contractors which have taken on unsustainable risk also have to take some of the blame.
Look at how the offshore wind sector has behaved over the years: an industry characterised by serial production of repetitive tasks, yet seemingly incapable of standardisation. Solutions change from one project to the next, even with the same developer, and sometimes solutions even vary within the same project. The consequence is that developers and contractors go through a new learning curve every time, starting at dismal productivity levels which become decent at the end of the project, only to start all over again.
The greatest contributor to the lack of standardisation in our industry is the drive for ever-larger turbines. This entails a redesign of all the other component parts. Foundations become larger and cables thicker. Hordes of engineers are deployed to solve the new technical challenges. The entire logistical chain, including ports, transportation and installation vessels, is pushed to the limit and beyond. The ripple-out can be seen in a dramatic capacity reduction in the supply chain. As components grow in size, fewer and fewer facilities and vessels are able to handle them. This all adds up to an enormous increase in risks in the form of ‘hidden’ costs.
With 100 foundations today being hammered-in per vessel annually, how can industry install 1,500 wind turbines yearly from 2026?
The offshore wind industry is already short of materials and has a shortfall of manufacturing capacity, people, funding, ports and vessels – all of which will be made worse by the forecast doubling of the number of turbines to be deployed at sea every year in coming decades. With turbine nameplates hovering around 15MW in the second half of this decade, a number of assets are going to be rendered obsolete due to component sizes. Let’s remember for one, that there will only be 5-10 vessels in the water by 2026 that will have the might to install monopiles of between 2,000-2,500 tonnes, and the lead time to design and build a new vessel can be as much as five years.
With 100 foundations today being hammered-in per vessel per year, how can industry expect to install upwards of 1,500 wind turbines predicted yearly from around 2026? As foundations installed determines the number of cables and turbines that can be installed, there is a real danger that supply chain capacities will be developed unevenly in the different segments.
It is abundantly clear that the industry’s supply chain is suffering from significant under-investment. However, it seems that manufacturers and contractors now refuse to build much more on speculation in fear of building too small. For new investments to be committed, solid and long client commitments beyond one project will be required alongside suitable funding support and a level of certainty that component sizes will not outgrow the assets in the foreseeable future. Only then could investments in additional capacity reach meaningful levels.
To stand the slightest chance of achieving the European targets for offshore wind in fierce – and growing – competition with other regions of the world, the industry will need to standardise and stop all unnecessary distractions. Turbines should remain in the 12-15MW class and not grow any larger. This could easily be achieved if legislators set a maximum tip height accordingly. With stability in the technology deployed over time, the industry would remain on the same learning curve and could become supremely streamlined, supported by long and solid commercial commitments along with the funding support that will stimulate new investments and build strength-to-strength on this industrial growth.
Until the above challenges are addressed, European ambitions for offshore wind will not be met and governments would therefore be well-advised to defer the closure of old power plants until wind power plant at sea has begun delivering replacement generation capacity.
· Torgeir Ramstad is executive advisor at Denmark-headquartered offshore wind consultancy Green Ducklings