Manufacturing
and larger and larger vessels will need to be built in order to construct increasing huge turbines offshore. “Installation vessels will typically cost around $400–500m if built in the EU or US,” he says, beginning to illustrate the challenge inherent to this demand. “Meanwhile, day rates, prior to 2022, were typically around 200–250K – this implies that the vessels can be profitable in eight to ten years. “Yet, if we look at the turbine technology evolution, it is between four and five years. So, [new] vessels will be redundant in five years, before they break even,” Barla concludes. “This is a big risk for the industry – [which is why] the vessel bottleneck is more pronounced than other components.”
“[Chinese turbine manufacturers] come into the European market with cheaper turbines, looser standards and unconventional financial terms.”
Guy Willems 16MW
The single-unit capacity of the biggest currently functioning wind turbines – Goldwind’s GWH252-16MW and Mingyang Wind Power’s MySE 18.X-28X. Offshore Wind
36
Consequently, he adds, having a cap on turbine size may not be the single right solution to tackle this challenge. “Developers will need larger rated machines to lower the costs. The regulators must ensure that there is sufficient project pipeline available for the supply chain to invest into new facilities [or] expand existing facilities to meet the demand. “If the supply chain, including the vessel owners, have sufficient volumes, then they would be happy to provide equipment for the next-generation turbine technologies. So, easing the permitting process, streamlining the auctions, renegotiating the power purchasing agreements with the offshore developers and increasing the price levels – baking in the increased costs of input material including commodities – will be some of the solutions to address the challenges.” While offshore turbine order intake for OEMs more than doubled in the first three quarters of 2023, compared with 2022 – a record – Barla points out that developers are also cautious when it comes to signing and locking turbine purchase agreements (TPAs), as the equipment will be delivered three to four years after the contracts are closed. “It is very uncertain for the OEMs to account for the direction of the cost evolution,” he adds. “One of the ways to mitigate this challenge is that the developers and OEMs might enter into contracts that are indexed to raw material prices and commodities – [for example] the shared pain shared gain model. If prices rise, both parties share the risks and if the costs come down, then both share the gain.”
Undercut by China
At the same time, the industry also faces the longer-term threat of Chinese wind turbine
manufacturers undercutting domestic operators, which has greatly contributed to the challenges facing European wind energy.
“[Chinese turbine manufacturers] come into the European market with cheaper turbines, looser standards and unconventional financial terms,” claims Willems, noting that in some cases they “are offering wind turbines at prices up to 50% cheaper than what European turbine manufacturers can offer at the moment. [They] have also made use of financing mechanisms that European OEMs cannot offer, among them deferred payments of up to 3 years on wind turbine orders.” Barla, however, is less concerned over any threat posed by Chinese turbine manufacturers and doesn’t necessarily think the market will open up for Chinese OEMs – not least because of their limited track record in the European wind space. “Until the end of 2022, more than 80% of the Chinese 30GW cumulative fleet [of wind turbines] had been sub-6MW machines,” he explains. “Chinese OEMs only installed 6–8MW machines in the past two to three years. So, they lack a track record regarding the 14–15MW machines Western developers are choosing.” Moreover, 6–8MW machines – and more recently 8–10MW options – are more relevant in lower wind speed areas such as South Korea, Japan and Vietnam, which are all markets Chinese OEMs have been focusing on. “Geopolitical decisions will also play a crucial role in these projects,” Barla adds. “Large infrastructure projects, such as offshore wind, will undergo stringent scrutiny with regard to security, digital security, HSE standards [and so on]. So, it makes it slightly challenging for Chinese companies, [and as a result] markets like the US, and conventional northern and western EU markets, may not be target markets for Chinese OEMs.” Similarly, regional content policies also have a large role to play, as Chinese OEMs seeking to operate in the EU will likely be required to invest in manufacturing facilities in Europe first. If this occurs, the cost benefits attributed to Chinese machines over Western ones will decrease, forcing developers to rethink their long-term strategies. With all of this in mind, it would be no exaggeration to say the wind industry is facing headwinds – with many of the issues now firmly entrenched. With a bottleneck over offshore construction inevitable due to a lack of installation vessels, a temporary ban or similar restriction on further wind turbine growth would go a long way towards providing the sector with the time to address gaps in its supply chain. Even if China’s turbine manufacturers steer
clear, the demand is there for larger turbines – it’s on the industry to resist the call. ●
World Wind Technology /
www.worldwind-technology.com
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