By Rikki Stancich in Paris

Earlier this month, energy conglomerate Siemens acquired a 49% stake in A2SEA, a supplier of installation vessels for offshore wind farms for €115 million.

The move marks an on-going vertical integration trend within the wind industry, following on from Dong Energy’s acquisition of A2SEA, for approximately DKK 700 million in June last year.

In December 2009, RWE Innogy announced its decision to invest in purpose-built vessels for installation of turbines and foundations in order to bypass bottlenecks in the supply chain. 

WindEnergyUpdate catches up with Siemens’ CFO Frank Zimmerman, to learn more about the strategy, new vessels in the pipeline and key markets in coming years.

WindEnergyUpdate:  There is a growing trend for companies to vertically integrate in the wind industry. What strategic advantage does Siemens latest move confer?

Frank Zimmermann: Our thinking is that there is a bottleneck in offshore solutions, particularly in installation technology. We have been looking at what we can do to help the industry and to avoid being exposed by this bottleneck.

With the support of a large company like Siemens behind us, we had a lot of options open to us. We took the best of these options by combining the three market leaders, Siemens as the turbine supplier; Dong Energy as the developer; and A2SEA as the installation specialist. There is a strong synergy between the three entities. Our common goal is to develop a better solution for the end customer, more affordable electricity from offshore wind farms.

WindEnergyUpdate: Where are the major gaps in the vessel market for offshore wind?

Frank Zimmerman: Where thousands of types of cranes can be used for onshore, for offshore development it is not the same. Capacity is the major gap. If you look at companies that deliver offshore turbines, we will soon be around 12 as opposed to 3 only a few years ago. All have the will and capacity to develop turbines.

However a challenge will emerge when these companies get their turbines to harbor, and the question will be: ‘How do we now install them?’

Counting the vessel days available with all existing fleets, this is a challenge already today in a much smaller offshore wind market as we will see arising. At least until 2015, probably even beyond, offshore installation capacity will be scarce. 

There are many ideas out there, but for the time being and as we have carefully analyzed, vessels similar shaped to the “MPI Resolution” hold the most promise towards our ultimate aim to accelerate the installation time required for offshore wind farms.

WindEnergyUpdate: To what extent will Siemens be involved at the design stage of new vessel builds?

Frank Zimmermann: We will co-own a market-leading installation company and so we can certainly influence what that company will do. We know which wind turbine products we want to develop and so we also want to develop best fit for purpose installation “tools” – “a tool”, this is what an installation vessel really is - and leverage our engineering expertise.

WindEnergyUpdate: To what extent will Siemens be investing in new vessel builds in
coming years?

Frank Zimmermann: In any case A2SEA would be doing the investing, not Siemens. Our role will be to proactively influence designs by bringing ideas and expertise to the table. The fact that our partnership can bring three perspectives of three market leaders will undoubtedly lead to good decisions being taken.

A2SEA just announced it decision to invest in a new installation vessel which will be able to carry eight to ten wind turbines at time which is significantly more than the capacity of the vessels which are currently on the market.  At the moment, A2SEA owns further four proven vessels - two of which are well maintained, but a respectable 18 years old.
 
WindEnergyUpdate: What level of demand is there likely to be for turbine installation vessels in the next ten years and where are the key markets likely to be?

Frank Zimmermann: To answer the first part, you can easily calculate the demand by counting the available vessels today and their available “installation days” per year. In 2010 about 1 GW of offshore wind is being installed and all vessels on earth will only just get the job done. They are all busy.

Assuming commonly predicted offshore wind market growth, it is required to add at least ten high performance offshore installers, e.g. capable of sailing out with 8-10 of our Siemens 3.6 MW offshore turbine and jacking up safely in waters up to 45 meters, until 2015. Such vessels will also be faster and more efficient in positioning, deck space, crane capacity, jacking speed etc.

We monitor closely, who wants to add what capacity and when. Based thereon, our market models predict that about five high-performance, “second-generation” offshore installation vessels are currently under construction and further five are to come timely thereafter. That will keep the market in equilibrium between scheduled projects and available installation capacity until 2015.

With the UK Round 3 starting up 2015 with installations as the world’s largest offshore wind program, clearly even more capacity is needed.  

Without any doubt the number one market at the moment is the UK, and the number two market is Germany, together offering a credible potential of more than 30 GW of installations until 2020.

We see potential in China to have up to 10 GW installed until 2020 and it may yet surprise us. 10GW is ambitious and with China I see two possible outcomes: either it happens or it doesn’t.

US and Canada are next. Combined they will probably generate around 5GW of offshore wind installations until 2020, which may not sound too ambitious for economically strong North America, but when you consider that the current total global installed capacity is around 2.5GW today since it’s beginnings in 1991, it gives some perspective.

In summary, we trust, what we are planning to do together with DONG Energy and A2SEA will be significant for the offshore world and if we are to stay the market leaders we are, we consequently also have to lead by example and contribute by building new vessels. But by the same token, we are not going to go crazy with the vessel build-out.

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Rikki Stancich: rstancich@gmail.com