MONEY MATTERS
FEATURE SPONSOR
OFFSHORE WIND SPENDING SET TO AVERAGE ALMOST €15 BILLION PER YEAR OVER THE NEXT TEN YEARS
The low carbon drive and the need to replace older power plants mean that the UK and many other European markets require new generation capacity from a variety of sources including offshore wind. Douglas- Westwood (DW) forecast global offshore wind installation levels averaging just over 3,000 Megawatts (MW) per year over the next ten years. This capacity equates to annual spending of around €15 billion per year, an attractive market for incumbents and new entrants alike.
CHALLENGES
Despite the undoubted growth potential, there are a number of challenges facing the sector, the most pressing being the high cost levels. At the present time, the cost of energy for offshore wind is significantly higher than for conventional thermal plants (gas and coal) and even onshore wind. This means that offshore wind requires financial support to be economically viable. In a time of austerity and rising energy bills, it is important that this requirement for financial support falls over time.
UNDERSTANDING COSTS
To understand the cost of energy challenge, one must look at its major components including the initial capital outlay (Capex), and the ongoing cost (Opex) of maintaining the asset. Capex rates have escalated significantly over the last five years, but appear to be levelling off at a rate of €3.75m per Megawatt. Opex levels are harder to judge due to limited real-world experience. However, what is clear is that a series of major issues have been experienced such as poorly manufactured foundations, and defective wind turbine blades.
COST REDUCTION OPPORTUNITIES There are a number of avenues open for cost reduction in the offshore wind sector including use of larger wind turbines tailored to the offshore wind environment, increased levels of competition in the supply chain, and more efficient installation methods.
With regards to wind turbines, European project developers are now starting to specify models with capacities of 5 MW or greater. At the present time, developers are starting to gain experience with the first 5 MW wind turbines with an expectation of moving to 7.5 MW turbines in the medium term. While a clear growth trend has been experienced, it is important to note that commercial deployment has always been slower than expected.
COMPETITION
Competition is also ramping up with major industrial groups including Alstom, Areva, Mitsubishi, Samsung and Siemens all developing very large offshore wind turbines. Competitive intensity and technology options are also increasing in the area of foundations supply.
SPECIALISED INSTALLATION VESSELS In order to increase offshore wind construction efficiencies, a new fleet of highly specialised installation vessels have been built. The new-build construction cycle has been so intense that there are currently concerns that there is oversupply in the market. While vessel capacity has increased, concerns remain that there is insufficient standardisation in terms of installation methodology.
Douglas Westwood
www.douglas-westwood.com Click to view more info
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