achieving this will be recognising, and benefitting from, ‘lessons learnt’ – utilising knowledge and experience acquired from both early offshore wind projects and the oil and gas sectors.
FALLING COSTS
The most significant development facing the offshore wind sector in the past year has been that of rapidly falling costs, which represents both an opportunity and a challenge. Offshore wind made headlines in September 2017, when Contracts for Difference (CfD) auctions saw the cost plummet to £57.50 per MWh, close to half of the £92.50 / MWh promised to the contractors of the new Hinkley Point C nuclear power plant. The offshore wind world greeted this decline in cost jubilantly – and rightly so.
However, while falling costs are proof of the enormous strides in economy and efficiency which are being made in the industry, they necessarily pose a challenge to developers of offshore wind projects, who have to contend with squeezed margins. This cost pressure will inevitably be passed down to the supply chain, and it is likely that marine contractors – for example, owners of OESVs – may
struggle as developers push for lower prices on contracted work.
From an insurance perspective, this introduces the risk that corners may be cut, or that quality standards may slip as a result of this pressure, resulting in a greater risk to projects. To combat this, it is essential that open and transparent communication is prioritised and encouraged between investors, developers, supply chain workers (including maritime contractors) and insurers. By sharing lessons learnt and communicating pain points, we can deal with these worries and risks, before they have the chance to damage this flourishing industry.
LESSONS LEARNT
Communication is particularly necessary to reduce the frequency of subsea cable incidents, which accounted for 77% of the total global cost of offshore wind farm losses in 2016. The occurrence of these incidents threatens to increase, as the decrease in offshore wind costs manifests itself in financial pressure on project supply chains.
As GCube discussed in our 2016 report Down to the Wire, the causes of cable faults can be
grouped into three categories: environmental (for example, an encounter with unexploded ordnance (UXO) or a poor choice of cable route), equipment (for example, substandard design, manufacturing or materials) and installation.
This last category includes causes which are largely attributable to maritime contractors, and which account for the bulk of cable losses. GCube has estimated that 67% of subsea cable incidents are caused by contractor error, which can include anything from deficient planning, and lack of knowledge and skills, to inadequate risk identification and the development of cable loops while laying is taking place. Crucially, one cause is poor communication, highlighting the need for transparency and communication between all parties involved in a project, to ensure its success.
NEW TECHNOLOGIES
Meanwhile, the financial pressure on developers and supply chains is compounded by new, relatively untested, and increasingly ambitious technological developments. Take, for example, the move towards ever-larger
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