Many countries have pinned their hopes on offshore wind as they seek to green their energy supplies or move away from nuclear power. There are more than 850 offshore projects worldwide (see map). Only Europe so far has significant experience in building and operating commercial offshore windfarms, with a total capacity more than 4GW installed. However, strong ambitions exist in the Americas, while in China construction has started and there are plans to install more than 20GW in the coming years.
The European Wind Energy Association (EWEA) is hoping for a total installed capacity of 40GW by 2020 and 200GW by 2030. If those targets are to be reached, the newly installed capacity of about 1GW annually has to grow significantly. To date, construction of offshore windfarms has not lived up to its promises.
There remain many uncertainties regarding economics and project success. The rapid advancement of immature offshore wind technologies, a lack of standardisation, inadequate planning, as well as a still emerging supplier landscape, have made it difficult for owners to meet expected performance targets. Many projects are currently delayed and face cost overruns or grid connection issues, others are postponed indefinitely. With the beginning of construction in regions outside Europe, the supply chain will be put under even more stress. There will be global competition for suppliers, vessels, technologies and know-how.
Furthermore, projects in Europe face ever increasing complexity as water depths, distance to shore and seabed conditions become more challenging and lead to higher cost and uncertainty in construction. Distance to shore mainly influences installation time, operation and maintenance conditions and turbine accessibility. Far-from-shore projects in deep waters require larger turbines and energy output to be economical.
This is important for project comparison. Alpha Ventus and Baltic 1 in Germany range from 20 to 45 meters in depth and are out 56km. Alpha Ventus is currently the furthest windfarm to be operated from shore globally. Both projects faced significant delays due to grid connection issues. Even though offshore projects in the UK are typically closer to shore and in shallow waters, Thanet faced a two-year delay due to turbine design immaturity. Projects in the UK will also move further from shore and to deeper waters in the near future, which will increase complexity and construction time significantly.
Besides technology, owner structures and delivery models impose challenges for projects. Owners and developers have tried multiple concepts without one emerging as a favoured solution for all circumstances. Project management and execution models vary and are often disintegrated across owners, developers and suppliers, creating a difficult working environment for all.
For good reasons, offshore wind projects often embrace experience from the offshore oil and gas industry. Both industries share the harsh offshore environment, high standards for health, safety and environment, and complex technologies with high upfront capital investments.
Yet there are also substantial differences. Oil is an expensive product with a high return on investment and prices have quintupled in the past 50 years, while electricity is regarded as a pure commodity with volatile prices. The high investment cost in oil and gas exploration and underperforming wells is compensated by a few successful wells. In nuclear and offshore wind, unsuccessful projects often leave the owner with substantial damage.
Typically, nuclear and offshore wind are seen as competing technologies, which investors have to choose between. Yet both industries have faced similar challenges and in learning lessons for offshore wind it might be valuable to look at an industry traditionally considered an antagonist of renewables: nuclear.
Nuclear new-build projects are comparable to offshore in complexity, capital intensity and safety regulations. They also have a long history around the globe. However, this history has not prevented recent projects from suffering problems all the way to project cancellations. Nuclear projects face many challenges similar to those in the offshore industry (see box).
Although many challenges still exist in some projects, the nuclear industry has reacted by developing stringent programmes aimed at avoiding the most common reasons for project failure. It would be presumptuous to claim offshore risks can be completely mitigated by drawing on nuclear lessons, but their likelihood and impact can be reduced, making offshore investments more attractive and economically sound.
Successful owners must first become intelligent customers with a full understanding of the supply chain and the organisational capability to orchestrate all suppliers and stakeholders. They must start a project by having the end in mind – an eye to ultimate commercial operation. Planning, procurement and project execution must be clearly geared towards a safe and high-performing plant. The interdependency of permitting, design engineering and procurement must be handled by having rigorous configuration management in place. This will ensure consideration of relevant requirements in all areas.
The chosen delivery model should be fitted to the genuine capabilities of the owner, balancing engineering, procurement and construction components and other contractual approaches. Suppliers can be asked to work on an early works agreements basis and share risks with the owner.
Project development and execution will rely on well-defined processes, procedures and instructions, allowing for a standards and routines-based organisation. An integrated management system and uncompromising fleet management will be the backbone for high performance.
Michael Kruse is a principal and Julia Heizinger a consultant at Arthur D Little
Nuclear challenges
· Weak planning, lacking one fully integrated, logic-tied and resource-loaded master schedule allowing easy follow-up of activities along the critical path
· Advancing technology maturity during requirements specification, design engineering and procurement to ensure safe and reliable technology availability at the start of construction
· Misjudgment of owners’ and suppliers’ capabilities with regard to their relative role in the project, leading to wrongly shaped work packages for all involved parties
· Dependency of the new build on external issues such as grid connection and state policy, which may cause delays and project cancellations
· Inability of the project to develop a routine and standards-based organisation.
This article first appeared in Utility Week’s print edition of 1st February 2013.
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