Offshore wind has gained a significant level of political support over the past 12 months, with the UK leading the way in project awards.
Between now and 2020, developers have proposed up to 125 gigawatts (GW) of capacity in the North Sea and Baltic Seas, up to 35GW in North America and as much as 31GW in Asia. These figures exclude projects already under construction.
Within the next decade, the sector hopes to instal collectively, some 46,000 turbines.
Governments around the world have responded with various subsidies and incentive schemes, hoping to entice developers into establishing projects.
However, despite such support, offshore wind will remain challenging to execute over the next 10 years, unless suppliers are able to meet high levels of demand.
Based on today’s figures, out of the total number of offshore wind projects proposed by 2020, ODS-Petrodata forecasts that about 60GW, or 14,500 turbines, will actually be installed worldwide.
This forecast is pessimistic due to a number of factors:
Financing is still a significant hurdle, and the cost of offshore wind is still expected to go up in the short term. ODS-Petrodata estimates an annual industry capital expenditure (CAPEX) of EUR$5.6billion (£3.8billion) in 2010, and annual CAPEX in excess of EUR$10billion (£8.55billion) by 2012.
Credit markets are tighter than ever, meaning developers have to approach and coordinate more banks and credit agencies. For instance, developer C-Power has signed agreements with seven different commercial banks to finance $950million (£812million) for its Thornton Bank wind farm in Belgium.
In addition to financing challenges, supply bottlenecks are evident throughout offshore wind today, and these bottlenecks make development a serious test of project management and technical skills. While some are expected to ease within the next five years, more are due to appear in their place.
In its second International Offshore Wind Market to 2020 report, ODS-Petrodata has taken a look at supply and demand trends across five key areas: turbines, foundations, cables, operations and maintenance, and installation. Conclusions drawn include:
An oft-discussed bottleneck, the availability of installation vessels, is expected to ease starting in 2012. Based on the units already under construction, ODS-Petrodata expects the wind turbine installation fleet to expand by 77%.
If some further expected contracts and vessel build options are exercised by the end of this year, the fleet could expand by 91% by 2012.
The majority of these newbuilds will be vessels bespoke for the installation of foundations and turbines, and their average CAPEX is about $138million (£118million), due to owners selecting Asian yards.
The crane capacities of these new vessels are expected to be at least 800 tonnes, their operational water depths will start at minimum 40m (130ft), and their payloads reach up to 6,000 tonnes.
These features will allow the new fleet to transport, lift and instal larger turbines in deeper waters. The average turbine size is forecast to rise from just over 3MW to 4.5MW in 2020, based on projects’ proposed turbine ratings.
Though some vessels in today’s fleet are expected to retire to operations & maintenance (O&M) or to return to the civil construction and oil and gas sectors, if projects are built to schedule, these new-builds will go a long way towards meeting the range of 20 to 30 vessels required through 2020.
Very little competition exists in the wind turbine foundations market today. Few yards and suppliers offer services, and many have established joint ventures in order to meet project demand.
Developers and turbine manufacturers, such as Scottish & Southern Energy and Vestas, have taken steps to ensure they secure supply with manufacturing frameworks and development programmes.
However, more suppliers have begun to emerge over the past year to market monopile and jacket foundations. These yards are expected to take a few years to establish themselves, but are in a good position to win future contracts considering the level of demand for the structures.
Monopiles are expected to dominate foundations demand until about 2015, when installations begin move into water depths of greater than 40m. At water depths between 40m (130ft) and 70m (230ft), developers worldwide begin to look for jackets and tripods.
Several European windfarms have been planned far from shore, some with distances of more than 100km (62 miles). Given that offshore wind turbines must send electricity back to land in order to fulfil their intended purpose, export cable connections are essential. However, many projects planned at least 50km (31 miles) from UK and German shores are due to be built around the same time, and these projects will require DC connections to minimise power losses.
The demand for HVDC (high-voltage direct current) cabling could create a supply bottleneck as early as 2013/2014, if UK and German projects are built to schedule.
Though seven suppliers worldwide are capable of HVDC production, only three have won contracts to date, with estimated 2015 production capacities of 1,000km (620 miles) a year. However, if the UK’s Round 3 projects alone ultimately require 5,200km (3,231 miles) of DC cable, and their construction takes place between 2014 and 2020 as currently scheduled, those projects will face stiff competition from German grid managers, which are keen to establish DC offshore wind connections.
Demand for export cables in general – both AC and DC – is expected to decrease competition between suppliers. Although more than a dozen AC suppliers exist today, the majority of projects planned worldwide within the next 10 years will require AC connections to shore; therefore, ODS-Petrodata sees a high enough level of demand that competition will decrease.
Suppliers able to address these bottlenecks over the next decade, as vessel owners have begun to do, will allow project developers more flexibility with infrastructure and costs. Those suppliers will also be in the best position to take advantage of the potential contracts, and profits, available in the offshore wind sector.
ODS-Petrodata publishes its second International Offshore Wind Market to 2020 report this month. Contact Barry Young: byoung@ods-petrodata.com
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