Countries in North Western Europe are becoming increasingly dependent on offshore wind as an electricity source. At the same time, risks are growing as the industry is “pushing the boundaries” by reducing costs while going further out to sea for more complex projects in deeper waters. Experts from DNV GL, the largest international independent advisor in offshore wind, talk about what they see as the major risks going forward – from cable failures and hurricanes to financial and political risks. “The days of experimentation are over.”
Offshore wind in Europe looks like a real success story. Cumulative capacity has been rising steadily from almost nothing five years ago to some 13 GW today, supplying 1.3% of total EU electricity demand. In some countries the contribution of offshore wind is significantly higher: in Denmark 14.9%, the UK 5.6%, Belgium 2.8%, according to 2016 figures from WindEurope.
The story of offshore wind in Europe is only just beginning
At the same time, costs have come down spectacularly – by some 46% over the last five years, making offshore wind already cheaper than new nuclear power.
But the story of offshore wind in Europe is only just beginning. Costs need to be further reduced, to make offshore wind competitive with coal and gas fired power too. And capacity is expected to grow more than five-fold to some 70 GW in 2040, if all the plans that are now on the table will be realised. By that time, countries in North Western Europe may obtain as much as a quarter to a third of their electricity from offshore wind, making the sector an absolutely vital part of the energy chain.
But is the industry able to handle this growth? How safe is it for countries to rely on offshore wind to such a large extent for their power needs? There have been reports in the press about cable failures that have set some alarm bells ringing. Energy Post spoke to a number of experts from DNV GL Energy, which is involved as technical consultancy and certification company in 95% of the offshore wind farms in the world.
The challenge is twofold, says Thomas Boehme, Senior Principal Engineer with DNV GL in France. “On the one hand, we are pushing the boundaries of what is technically possible: we are moving further away from shore, in deeper waters with more severe marine and wind conditions.”
The first offshore wind farms were built in the easiest locations, explains Boehme, close to shore in shallow waters. The North Sea is actually a relatively shallow sea, ideal for offshore activities. But the industry now has to move to more challenging locations. Other seas, e.g. France’s part of the Atlantic Ocean, the Mediterranean, or the seas around the U.S. or Japan and China, tend to be much deeper. In water depths of 100 metres or more, it makes more sense, in fact, to build “floating” wind turbines, says Boehme. “They are the next exciting new development in offshore wind technology.”
On the other hand, says Boehme, the offshore wind industry is engaged in a titanic effort to bring down costs. So far, it has succeeded in this spectacularly, as this chart from Bloomberg New Energy Finance (BNEF) shows:
Erecting turbines in the seabed now costs an average $126 per MWh, according to BNEF .“That’s below the $155/MWh price for new nuclear developments in Europe and closing in on the $88/MWh price tag on new coal plants.”
Indeed, recent bids for offshore wind farms in Denmark and the Netherlands were won at prices as low as €73 and €55/MWh, indicating costs are already significantly lower than reported by BNEF.
But to continue to reduce costs will not be so easy anymore. “The industry is maturing”, notes Simon Cox, Head of Offshore Projects at DNV GL Energy, who works in the UK, Europe’s biggest offshore wind market. “We will see a slowing in the rate of cost reduction. We can’t expect to reduce costs by another 40% in the next five years.”
The three biggest contributors to cost reduction have been bigger turbines, advances in the offshore supply chain and lower cost of capital, says Cox. Some of these improvements are running up against their limits – and the cost of capital may rise if interest rates go up.
This means that to reduce costs further, the industry needs to go through a process of industrialisation, say the DNV GL experts. Processes and procedures need to be standardised so that they can be delivered as efficiently as possible, on time and within budget. “The days of experimentation are over”, says Boehme.
Increase in claims
The question is – can the industry maintain its quality standards under these challenging conditions?
Recently, insurance companies have publicly voiced complaints about the many failures in the cables of offshore wind farms. One British insurer said they had seen a “huge increase in claims” as a result of problems with cables. They partly attributed this to the aggressive cost reduction efforts in the sector.
Boehme, who is a specialist on cables, says he recognises the problem. Indeed, he notes that it is not new: “Around 2011, insurers already voiced similar complaints.” For DNV GL, that was a reason to start a Joint Industry Project (JIP) to tackle this problem. “We worked with many industry partners to develop guidelines and in 2014 published a recommended practice for cables,” says Boehme, who led this initiative.
What they discovered, he says, is that although problems with cables usually surface during installation and operations, they are ultimately caused by poor design and planning. Boehme: “Suppliers sometimes do not understand the environment in which the cable systems must function. The waves, the current, the stresses involved.”
“In the telecoms sector, they have repair vessels that tackle cable failures anywhere in the world. Given sufficient critical mass, this may also be an option for the offshore wind sector to consider”
This happened frequently with medium-voltage cables, he says, typically operating at 33 kV and now also 66 kV, which connect turbines with each other or with the offshore substations. “These are usually supplied by companies that have no further role in the installation process and sometimes there is a lack of knowledge how to handle them. The installation of high-voltage cables, which connect substations with the shore, is usually part of a larger installation contract, in which the manufacturers of the cables control the entire process. They have had fewer problems, though the consequences of an export cable failure are greater.”
For this reason, DNV GL’s recommended practices took “a lifecycle view”, says Boehme. “To make stakeholders aware that they should focus on improvements in the early stages of the project. This avoids much higher costs later on.”
Despite the recent negative publicity around cables, the JIP’s efforts are already showing results, Boehme thinks. “Things still go wrong sometimes, but you have to consider that there have been many more turbines built. Insurance is usually sought for cable installation, while other components may be covered through contractual agreements.” Boehme has noticed that European practices, such as described in ‘his’ recommended practice, are already being referred to in contracts, even in places like Korea and the USA.
What if a hurricane sweeps through the North Sea? Could that cause the lights to go out once offshore wind farms supply a large part of our electricity?
According to Hans Cleijne, Head of the Renewables Advisory team of DNV GL Energy in the Benelux, there is no need to worry about this. “The turbines are designed to withstand hurricanes with wind speeds of over 70 m/s (140 knots).”
The turbines do shut down when wind speeds reach a certain force, around 25 m/s (50 knots). But this should not be a problem for overall power supply, says Cleijne. “Storms in North West Europe tend to be quite concentrated.”
The turbines are also designed to withstand the normal turbulence at sea. “From the operational experience obtained so far, we are able to predict how long they will be able to operate.”
Weather is more of an economic than a security of supply risk, Cleijne notes. “Wind speed is a crucial factor for total output. For investors, this is a key uncertainty. The more certainty we can offer in this respect, the lower the financing costs.”
The industry nowadays uses highly advanced laser-based devices (‘Floating LiDAR’) to measure wind speeds at sea, says Cleijne. The data are collected to obtain a long-term view of wind speeds in specific locations. This kind of knowledge helps to reduce uncertainties about possible production and hence financial risks.
In the meantime, average load factors have reached up to 45%, Cleijne points out. “Some years ago this was only 35%. This is because designs have improved and down time has been reduced. Offshore wind has become a reliable source of electricity.”
And there are other ways the sector is addressing cable failures and other quality challenges. “Projects are being built with more redundancy”, says Cox. “If you have two cables, then if one fails, the impact is much less.” In addition, he notes that the advantage of wind farms is that failure in one place does not necessarily mean an entire park stops functioning. “In that sense the risk of offshore wind is lower than if you have a single big power station.”
Isn’t there a risk, however, that cost-cutting will lead to lower quality? Boehme does not think so. “Everyone realises that you need machines that produce kilowatt hours. Availability, which is based on reliability and maintenance, is key.”
According to Cox, the biggest risk is that companies may bid too low in tenders, and then find that they are unable to build the project at the cost they had tendered. “We have seen this in onshore wind and solar in the past.”
“We need policies with a long time horizon. Present policies carry us forward for another five years or so, but after that uncertainty looms”
Both experts warn that the industry can’t afford to get complacent. Boehme: “We are building more and more turbines, and they are becoming larger. Offshore, turbine capacities of 5 MW are now considered “small”, with new projects being planned with machines of at least 6 MW, but also with 7 to 9 MW turbines and beyond. The rate of moving from prototypes to full-scale projects is astonishing. Extensive up-front testing and verification are needed to assure and improve quality all the time.”
Cox notes that floating turbines will lead to new risks that need to be fully understood. “This is a new part of the industry. There are several demonstration floating projects in the water now, just single turbines. A first large array is currently being constructed in Scotland, Statoil’s Hywind project.”
The industry will also need to improve its response to emergencies, says Boehme. “In the telecoms sector, they have repair vessels that tackle cable failures anywhere in the world. Given sufficient critical mass, this may also be an option for the offshore wind sector to consider. It will increase availability and reduce energy costs.”
Cox believes that there could be more cooperation in the sector. “If everyone competes against each other, some things become more expensive. If we are going to achieve 50% electricity supply from wind, we may need more central long-term planning, led by the government. That would also reduce risks.”
The two experts praise the way in which the Dutch government organizes its tenders. It takes care of all the preparatory planning, so that developers need only design and build the wind farm. Dutch TSO Tennet builds the connections the wind farms need to take their power to the shore.
In fact, both Cox and Boehme agree that the biggest risks in the offshore wind sector are not technical. “We have a long history in offshore wind with the first projects built in the 1990s and operating for over 25 years”, says Cox. “We have developed offshore wind industry standards and carry out regular inspections. Teething problems are known and under control.”
Instead, the greatest risks are policy-related. “We need policies with a long time horizon”, says Boehme. “Present policies carry us forward for another five years or so, but after that uncertainty looms. Questions have been raised about the volumes that will need to be built. That is very harmful to the sector. If investors see only a few wind farms coming, they will not invest in the industrialisation the industry needs. That’s the real worry.”