Rising turbine capacities set to drive 60% of offshore opex savings

Larger, higher efficiency turbines and the “clustering” of project resources are driving down offshore wind maintenance costs as they become increasingly important in project valuations, Tom Harries, Wind Energy Analyst at Bloomberg New Energy Finance (BNEF), said.

Larger turbines significantly reduce the cost per MW of marine logistics, turbine spare parts and labor. (Image credit: FreddyTB)

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Technology advancements and growing installation experience have sliced offshore wind costs, producing record-low tender prices across Europe.

In September, the UK government awarded three new UK offshore wind contracts at prices as low as 57.50 pounds per MWh, half the price of contracts awarded in the last tender in February 2015. This followed record-low prices in Denmark, Netherlands and Germany over the last year.

Larger, higher efficiency turbines and improved installation practices have sliced capital expenditure costs, raising the importance of operational expenditure (opex) within project financing.

Technology gains are having a dramatic impact on offshore operations and maintenance (O&M) spending, as well as installation costs, Harries told the Offshore Wind Europe 2017 conference on November 14.

BNEF estimates growing turbine capacities directly impact as much as 60% of O&M costs, he said.

Higher capacity turbines require less maintenance resources per MW, reducing the outlay for spare parts, vessels and personnel during operations.

"Assuming turbines are getting more reliable, in reality you can really start shaving 60% of these maintenance costs," Harries said.

"We are not saying you are going to eradicate all that 60%, but you can really bring down that chunk by using more powerful turbines," he said.

     Europe offshore wind capacity forecast

                              (Click image to enlarge)

Source: BVG Associates for WindEurope (2017).

Tower power

The average rated capacity of installed offshore turbines rose around 62% between 2006 and 2016, according to WindEurope data. Average turbine capacities rose 15.4% in 2016 to 4.8 MW and earlier this year Orsted (previously named Dong Energy) was the first developer to install 8 MW turbines on its Burbo Bank Extension wind farm off the coast of Liverpool.

Higher turbine capacities significant impact the cost of marine logistics, turbine spare parts and turbine labor, which together represent over half of O&M costs, Harries told the conference.

Turbine gains also reduce O&M transmission and balance of plant costs, while the remaining 40% of opex costs is made up of fixed costs, he said.

            Offshore wind O&M costs by segment (%)

Data source: Bloomberg New Energy Finance (BNEF).

The commissioning dates for offshore wind projects are set several years in the future, allowing developers to factor in higher turbine capacities than currently available.

Orsted has predicted turbines of capacity 13 to 15 MW will be on the market by 2024. Innogy and Statkraft plan to install 9.5 MW MHI Vestas turbines for their 860 MW Triton Knoll UK offshore project, due to be commissioned from 2021.

In a 2016 report, analysts from BVG Associates and KIC InnoEnergy forecasted an increase in turbine rating from 4 MW to 10 MW between 2014 and 2030 could reduce the levelized cost of energy (LCOE) by almost 20%, before improvements in other areas such as blade aerodynamics and control.

Group savings

The clustering of project resources will also help owners drive down O&M costs, Harries said.

"Particularly on the marine logistics side, the facilities side and the management side-- you can really start to shave maintenance costs when you've got projects located nearby," he said.

An offshore wind farm owner with an existing UK project off the same coast could reduce O&M management and marine logistics costs by around 25%, achieving a total absolute saving on operational costs of 8.75%, according to BNEF estimates.

Adjacent projects achieve greater cost savings. The extension of an existing offshore project might achieve 50% savings in O&M management and marine logistics costs, representing a total absolute saving of 17.5%, BNEF data shows.

Indeed, Orsted predicts dramatic improvements in construction and operations efficiency for its planned Hornsea 2 project, compared with its adjacent Hornsea 1 project allocated in 2014 and currently under construction.

Orsted expects Hornsea 2 to benefit from a growing and competitive supply chain and the use of the company's O&M hub at Grimsby, England, which also serves other Orsted offshore wind farms on the UK east coast. The Hornsea 1 project, due online in 2020, has also provided learnings on specific site conditions and installation practices and enables Orsted to synergize supply chain logistics.

Other drivers

Several other industry trends will help owners cut costs. Advancements in data analytics and plant monitoring technologies are reducing opex by driving predictive and preventive maintenance. Experts also predict weather forecasting improvements and more efficient blade inspections through the use of new technology such as drones.

The growing involvement of oil and gas majors in offshore wind projects will also generate opex savings as they apply decades of expertise in offshore installation and logistics.

New vessels should also provide a boost for projects further offshore as suppliers respond to market demand, Barbara Zuiderwijk, offshore wind expert at Green Giraffe financial advisors, told New Energy Update in October.

“Given the more specialized vessels coming to the market, the O&M price difference between projects closer and further away from shore will become less significant,” Zuiderwijk said.

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