Offshore wind now accounts for about 7% of European renewable energy generation. Most of this new capacity has been built since 2015. Although the rate of growth has been slower than many expected or hoped, it is still a significant shift in the way Europe generates electricity. The change has been biggest in the UK, where offshore wind now generates about 5% of all its UK electricity demand.
But it hasn’t been cheap. In 2012, new offshore wind farms at final investment decision (FID) had a levelised cost of energy of about €150/MWh. At the time, the ambition was to get to about €110 for projects reaching FID in 2020. Led by the rapid introduction of next generation of offshore wind turbines, recent analysis by BVGA suggests that the 2020 target is well within reach.
The truth is that even this impressive cost reduction is not enough if offshore wind is to become a sustainable industry. It may not need to be the cheapest form of new power generation for countries in the Baltic and North Sea regions, but it may need to be a strong second. The magic number for projects reaching FID in 2025 may need to be as low as €90/MWh.
Supply chain innovation
All parts of the supply chain will need to contribute if we are to be successful. Installation contractors have played their part already with the significant investment in bespoke new offshore wind installation vessels. An important area for progress now is reduce the sensitivity of installation to the weather. For turbine installation, the key constraint is wind speed with most projects unable to lift components in more than 11m/s at hub height.
Any increase in this maximum can lower the LCOE in five ways by reducing:
- Installation costs by reducing the time on site for vessels
- The cost of finance by enabling earlier generation
- Cost of capital by lowering the project risk
- Construction insurance by lowering weather-related project risk, and
- Yield losses from quicker blade replacements during operation.
Fortunately, innovators are developing new technology that will help realise these cost benefits. High Wind is one such company, and it has developed the Boom Lock tool. This allows an offshore crane to install wind turbine components at high wind speeds – up to 16m/s (certified to 20m/s) – by stabilising the hook during critical points in the lift.
BVG Associates undertook an analysis to quantify the effects of reduced vessel time and earlier generation. We used time-sequence data from Race Bank, scaled to achieve a 10m/s 10-minute average wind speed at 110m hub height. By considering also the correlation between wind speed and wave height, we modelled the duration of the turbine installation campaign.
We found that the difference between an 11m/s (a typical maximum today) and 16m/s maximum wind speed for lifts would be, on average, a one day reduction in turbine installation cycle time over the project. Clearly this reduces vessel and personnel time and is a significant cost saving (for either the installer of the developer), which might be about €200k/day. What is less clear is the benefit from bringing forward turbine generation.
When modelling the business case for a wind farm, a developer discounts the operational expenditure and the value of revenue. This means that the net present value of a day’s generation at the end of the wind farm’s life is significantly less than a day’s generation at the start of the wind farm’s life. If a developer brings forward generation by one day, then it is effectively replacing a day’s revenue at the end of life with one at the beginning. For a 500MW wind farm, this difference could be €400k/day, about twice the saving from vessels and personnel.
Reducing the impact of weather on installation potentially also has an effect on project risk, which could lead to a lower cost of capital and insurance. Boom Lock also has a potentially significant impact on operational weather downtime, particularly given the impact of blade leading edge erosion and pitch bearing deterioration on turbine availability.
The lessons from this analysis are clear:
- Installation contractors need to be able to understand and explain the value they add by reducing installation times, not only for turbines but also for cables, substations and foundations;
- There are potential benefits from tools to shorten installation times for both developer and contractor, so developers must ensure that its contractors are properly incentivised to shorten installation times through the investment in equipment.
The Boom Lock tool is one of a number of innovations that can make a significant impact on offshore wind LCOE.Like this post? Subscribe now and get notified about new content!