Look at the headlines around the offshore wind market and you’d be convinced that the sky is falling in.
Cancelled projects, installation over-runs, revised auction models and above all higher supply chain costs are conspiring to suggest that the sector in crisis.
But this is an industry that could realistically grow fourfold by 2030 even if 50% of tabled projects are cancelled tomorrow and eightfold if they all proceed.
There is still a huge amount to be positive about, but this doesn’t mean that changes shouldn’t be made or improvements encouraged.
Here are five suggestions as to how the sector can shake off its growing pains and emerge into maturity.
More Transparency
Non-Disclosure Agreements are a standard component of business and everyone, ourselves included, abides by them.
But is a mechanism that can hinder a service provider having conversations about project finance with their bank really contributing to moving the process forward?
© Supplied by RMIMany vendors are operating under the equivalent of a super-injunction, with a code of silence covering every aspect of a contract.
In a sector where auction bidding and a public desire for cleaner energy are pushing demand, more open discussions would speed up learning and solutions, driving cost savings and innovation.
Better Bidding
Seeking competitive bids from the market is also standard procedure, but collecting three bids doesn’t guarantee the chosen vendor can actually do the job well or for the price quoted.
In some cases, vendors and supply chain managers may not speak once the bidding process has started; the lack of communication is unhealthy.
Often, the way specification or requirements are written, usually without enough detail, leaves too much margin for error or interpretation, leading, on occasion to disingenuous bidding.
Instead, if it was ‘goal-based’ then the vendor could demonstrate exactly what solution they propose to meet the requirements.
Location, location…
As previously noted, installation projects are hampered by short term project timescales.
Developers often work on the assumption that they can install 60 to 70 foundations in a summer and the same in turbines the next year.
This increases ancillary costs for workforce resources, rents and leases that would be lower if booked for longer.
© Supplied by Forth PortsThinking bigger and longer term, developers could also look to manage their operational risk by moving assets and personnel to fulfil projects in other locations while conditions allow or work with others to bring packages of work to their locations.
Equality of opportunity
The evolution of windfarm projects is making investment in vessel assets more complicated and unbalanced.
The decision to build a Service Operations Vessel – or other offshore tonnage for this purpose – is an easy one given the 10-year maintenance contracts on offer.
The decision to build a Windfarm Turbine Installation Vessel must be taken against the prospect of working at maximum capacity for six or seven months but potentially standing idle for the next six months until the project starts again.
Finance models are not designed to support these short operational windows. The net effect is higher rates and reduced competition.
How long is too long?
This imbalance between investment decisions and asset employment reflects the tenure of contracts that developers are prepared to grant.
The use of short term contracts over long term commitments stifles innovation and slows down the mass production and commodification needed to reduce costs down and keep them there.
The windfarm sector needs a degree of standardisation and automation that cannot be achieved by applying the techniques and approaches that have marked the first 20 years of development.
This uncertainty – not about demand but about the financial and operational risks – is likely to see more companies withdraw from the supply chain and possibly more projects cancelled as exposure becomes unacceptable and investors in projects and the supply chain, increasingly get cold feet.
