Wind turbine makers halt race for size to focus on cost, delivery
After rapid increases in offshore wind turbine capacities, western suppliers are doubling down on existing models to drive supply chain efficiencies and reduce risks.
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Another stumble for offshore wind in New York has highlighted shifting sentiment in the offshore wind turbine market.
Last month, New York State Energy Research and Development Authority (NYSERDA) chose not to sign offtake agreements with three planned offshore wind projects after designated turbine supplier GE Vernova decided to switch to a smaller turbine.
The 1.4 GW Attentive Energy One (TotalEnergies and Corio Generation), 1.3 GW Community Offshore Wind (RWE and National Grid) and 1.3 GW Excelsior Wind (Vineyard Offshore) projects were all awarded provisional contracts in a competitive auction in October 2023.
GE Vernova decided to switch from its latest 18 MW turbines to a 15.5/16.5 MW platform and this caused "technical and commercial complexities" which meant the project could not proceed under the awarded contract terms, a NYSERDA spokesperson said. Most U.S. offshore wind projects set to be built over the next few years plan to install turbines in the 11 to 15 MW range.
The developers declined to comment on their plans for the projects but they have indicated their continued interest in the New York market, NYSERDA said. Last month, New York announced plans for two more offshore wind solicitations this summer and in 2025.
After years of rapid increases in turbine capacities, GE Vernova’s decision reflects a trend by western original equipment manufacturers (OEMs) of introducing fewer new turbines and focusing on existing models for longer.
GE Vernova did not give a reason for its turbine switch, but it follows a difficult few years in which volatile costs and delivery challenges have delayed projects and severely dented the revenues of turbine suppliers.
The hunger for larger turbines led to some developers bidding projects based on turbines in early development stages, which can lead to offtake awards that are at higher risk of abandonment by awardees, a spokesperson for Danish turbine supplier Vestas told Reuters Events.
Vestas plans to focus on its 15 MW offshore wind turbine. This size is “best positioned to enable greater certainty of on-time, successful project delivery,” the spokesperson said.
Standardisation
Over the past decade, offshore wind developers in Europe and U.S. sought larger turbines to lower the cost of energy per kilowatt hour and win state-backed power contracts in competitive auctions.
The maximum size of new offshore wind turbines has risen from around 8 MW to around 15 MW amid an “arms race” among leading OEMs, said Signe Sorensen, Senior Research Analyst for the Americas at Aegir Insights.
Global average offshore wind turbine capacities
(Click image to enlarge)
Source: U.S. Department of Energy's Offshore Wind Market Report, 2023 Edition (August 2023)
Intense competition squeezed the margins of turbine suppliers, while volatile global costs and logistics issues since the coronavirus pandemic have prompted offshore wind investors, developers and suppliers to reassess project risks.
On the U.S. East Coast, soaring costs and high interest rates prompted multiple cancellation of offshore wind contracts, delaying projects and curbing progress in building out new supply chain facilities.
Under financial pressure, western wind turbine suppliers are producing less turbine variants than Chinese rivals.
Since 2020, western suppliers have announced 29 new variants of onshore and offshore wind turbines, compared with over 426 from China, according to Endri Lico, principal analyst for Global Wind Technology and Supply Chain at Wood Mackenzie.
“The main reason is due to OEMs profitability pressure and their need to simplify their product portfolio,” Lico told Reuters Events.
Focusing on one model size could lead to reduced manufacturing costs thanks to standardization and industrialization, hence providing western OEMs and their component suppliers with the “clearest path to return to profitability,” Lico said.
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A focus on more mature existing technology would enable the supply chain to "reap the quality and cost benefit of consistent volume and an industrialized wind turbine technology over many years,” the Vestas spokesperson said.
“Designing technology with the current supply chain in mind will result in cost predictability, shorter execution times, and industry scalability,” the spokesperson said.
Timing risk
Developers look to optimise power generation and in some cases smaller turbines can be more cost-competitive because they can produce more power at slower wind speeds, feature more mature technology, or are more readily available.
Developer Ocean Winds, a 50/50 joint venture owned by EDP Renewables and ENGIE, selects the best turbine size for a given project while also "considering time to market,” a company spokesperson said.
Global offshore wind turbine market share for operating projects (end of 2022)
(Click image to enlarge)
Source: U.S. Department of Energy's Offshore Wind Market Report, 2023 Edition (August 2023)
The pioneering 800 MW Vineyard Wind project in Massachusetts (Copenhagen Infrastructure Partners and Avangrid) is currently installing an earlier turbine model by GE Vernova designed to operate at 14.7 MW. Meanwhile, the 2.6 GW Coastal Virginia Offshore Wind project will install 14.7 MW Siemens Gamesa turbines (SGRE) in the next few years while Orsted has chosen the 11 MW Siemens Gamesa models for the 924 MW Sunrise Wind project in New York.
Vestas has received firm orders for 15 MW turbines from projects in Poland, Germany and the Netherlands and has signed conditional agreements to supply the turbine to Equinor’s Empire 1 and 2 projects in New York, the company said. Empire Wind 1 is slated to start producing power in 2026 but Empire Wind 2 has yet to secure an offtake agreement.
The standardisation of turbines at existing capacities would reduce the need for new larger vessels or significant upgrades to existing vessels.
A lack of U.S. wind turbine installation vessels remains a significant risk for project developers, exposing companies to global vessel supply markets and workarounds using barges to transport into and out of East Coast ports.
“The cost savings from the larger turbines are partially lost to increased vessel costs,” Sorensen noted.
Bidding year
A raft of U.S. offshore wind auctions this year will indicate whether developers will be happy to focus on 15 MW turbines in their mid-term growth plans.
Developers including Orsted, Avangrid, Vineyard Offshore, EDP and Engie bid to secure up to 6 GW of new offshore wind capacity in the latest power auctions by three New England states. Together, the East Coast states of New York, New Jersey, Massachusetts, Connecticut, Rhode Island, and Maryland plan to tender for around 16 GW of offshore wind power in 2024.
Lico expects GE Vernova, Vestas and Siemens Gamesa to focus on the 14 to 15 MW range until 2029-2030, when they could start launching bigger models.
"They will continue to co-exist with the next-generation turbine for some years (beginning of ‘30s) until we fully transition to 20 MW [plus],” he said.
Developers will continue to be tempted by larger turbines and lower costs, and ongoing innovations by Chinese suppliers could spur western suppliers to refocus towards larger units.
Indeed, Siemens Gamesa has announced plans to develop “the world’s largest offshore turbine generator” and has received funding from the European Union for a prototype model.
“If the competitors keep going bigger, GE Vernova and Vestas may have to as well, no matter their preferences,” Sorensen said.
Reporting by Eduardo Garcia
Editing by Robin Sayles