Although ‘clean energy’ covers a range of sustainable power sources, LR’s Senior Vice President, Clean Energy, Tristan Chapman, currently spends most of his time on offshore wind. He sees the sector poised to begin a new phase of exponential growth which will see sweeping changes to the fundamentals of the market as we know it today.
The UK holds number one slot, measured in installed power capacity from offshore wind. The country’s energy, generated offshore by wind, is forecast to rise from 10.5GW today, to 27.5GW by 2026, according to recent analysis undertaken by Oslo-based Rystad Energy. For the UK, wind generated offshore will exceed shore-based output, also overtaking solar power by a large margin.
In a wider context though, the backdrop will change, China will probably push the UK into second place during this next decade, with the US suddenly appearing from nowhere at number three. The Netherlands will slip to fourth, followed by Germany at five.
US potential
LR is well-placed to assist in the projected growth forecast in the US, spurred partly by the change of Administration, but mostly because the country is almost a newcomer to this sustainable energy source. LR is well-prepared to service the requirements of developers and has been actively assisting in early stage cost benefit analysis and infrastructure design for some time.
Jay Borkland, a senior engineer and offshore wind specialist recruited to join the classification society’s US Renewables Team in 2018, is now Chairman of the prominent Business Network for Offshore Wind. Although broad policy on the sector may be generated at a federal level, Chapman explained that many of the practical issues are decided by individual states, which have responsibility for managing energy at local level and where Borkland is well-connected. Energy from offshore wind farms feeds directly into electricity grids operated by the states themselves.
The slow start in the US is down to several factors. There is lots of space ashore, and wind power generated ashore is already a large energy contributor to the country’s electricity needs. In fact, in April 2019, Chapman revealed that onshore wind contributed more electricity to the grid network than coal.
But the main reason is that the US has plenty of cheap energy already. A few years ago, it was expecting to import large volumes of LNG; now it’s a prominent exporter. And supplies of cheap shale oil and gas should ensure that the country remains a net exporter for years to come.
This explains why only 30MW of power is generated by offshore wind today, at an offshore farm near Rhode Island. However, there are bold plans for large-scale investment off the country’s north east coast, where the sea is relatively shallow, and in the deep waters off its Pacific coast. Fixed and floating technologies are likely to be adopted, respectively.
Maturing markets
Chapman explained that underpinning the sector’s likely expansion more generally is the fact that the renewables business – and offshore wind in particular – is no longer seen as a slightly whacky technology that will never work without huge subsidies. Having reached maturity, the sector now offers an attractive and credible story to funding institutions. Offshore wind developers can talk confidently with investors whose funding plans commit to certain internal-rate-of-return targets, independent of subsidies.
“We needed the maturity, the regulations and the independence to satisfy the money markets that attractive returns are available,” Chapman commented. “Unsubsidised wind can now be delivered competitively and profitably.” He added that LR has been closely involved in the US since the early days “when the first innovative structures found their way into the water”.
LR has also undertaken risk assessments throughout the development of offshore wind power so far. These processes are likely to become much more important, Chapman believes, for two main reasons. The whole point of green energy is to reduce the potential harm to the planet that results from hydrocarbon extraction and related power generation.
Exactly the same argument applies to offshore wind infrastructure – the potential disruption of birds’ migratory habits, for example, and the impact of offshore construction on sea life. That is one of the reasons, Chapman added, why the front-runners in the offshore wind development sector all insist on the very latest climate-friendly features on their heavy-lift transport ships, wind turbine installation vessels, and service craft.
He also made the point that, until recently, it was a challenge to assess the likely impact of offshore developments, and to measure accurately their performance in operation. Digitalisation and smart technology now allow these measurements, both in real time and for predictive analysis.
These factors, together with revised energy policies at a federal level, are likely to kick-start new investment. “I think we’re going to see a lot of projects getting the green light in 2021,” Chapman predicted. “We’re excited by the growth potential.”
Offshore benefits
Although offshore wind power is still more expensive than other energy sources, the delta is narrowing. This process will continue, Chapman explained, for two main reasons: despite the environmental challenges, there are no local planning constraints and no ‘nimbyism’ in offshore locations. What’s more, wind speeds are much greater and, as the size of offshore plants increases, economies of scale will have a substantial impact.
However, Chapman noted that there is no ‘one size fits all’. Offshore plant has to be designed specifically with local conditions in mind. In the US, ports and offshore infrastructure in the Gulf of Mexico are well-developed. Off the coast of Massachusetts, for example, this is not yet the case.
The particular conditions prevailing in a location will also determine the choice of technology – fixed or floating. Here, Chapman pointed out, LR has a substantial book of experience in both, having been closely involved in the first floating production storage and offloading units in the late 1970s, as well as the first tension leg platforms a few years later.
Offshore wind generated from floaters is still about four times more expensive per megawatt hour than from fixed structures. But, he pointed out, the scalability that is now evident at fixed installations is not yet available in floating plant. This is only a matter of time, however. Furthermore, floating infrastructure lends itself to more conventional construction processes and could offer a completely new revenue stream for shipbuilders reeling from a serious downturn in new contracts.
Global sentiment
The delay of COP26, originally scheduled to be held in Glasgow in November but now postponed for a year, probably has a silver lining, Chapman believes. The one-year delay, greeted with disappointment at the time, could prove to have various benefits.
At a practical level, the impact of autonomous systems is transforming the design and operation of wind farms. Autonomous survey vehicles using digital technology can map the underwater terrain far more accurately while the unmanned operation of wind farms is also well-advanced.
In 2019, some facilities recorded just three visits per turbine over the whole year. Datacentric systems now feed lots of data back to central control rooms. These developments have a substantial impact on breakeven energy prices.
Meanwhile, at a macro level, the delay will provide the opportunity for more countries to understand the support the potential that sustainable offshore wind offers. And the fact that the US is likely to be sitting at the table in Glasgow will be hugely beneficial, Chapman declared.
The US offshore wind sector prepares for take-off
The United States has dramatic ambitions for offshore wind development. So far, the country has made little of the enormous potential that lies offshore, but things are about to change, says Rafael Riva, LR’s Commercial Manager in the US.
Following a change of Administration and renewed ambitions to harness the potential of renewables in the US energy mix, the country’s offshore wind sector is brimming with anticipation. According to estimates by BVG Associates, a UK-based renewable energy consultancy, offshore wind capacity in the US is estimated at just 30MW, compared to more than 22GW in Europe.
“There are a wider range of opportunities on both the Atlantic and Pacific seaboards,” said Rafael Riva, who is closely involved in LR’s offshore wind activities in the US. “With lots of focus on cheap energy from shale deposits, energy companies had left wind power until later. But now we get the sense that widescale development has already started.”
US offshore wind power today is generated at just one facility – the Block Island Wind Farm – developed by Deepwater Wind, now Ørsted US Offshore Wind. The five-turbine site is three miles off the coast of Block Island, just south of Rhode Island.
Huge opportunities …
However, although the strength of the wind hasn’t caught much US attention so far, Riva highlighted BVG estimates that today’s 30MW could soar to 33GW by 2030, an astonishing capacity increase by a factor of more than a thousand. Even two-thirds of that increase, if the figure turns out on the high side, would create huge opportunities for wind infrastructure participants, including turbine and fabrication technologists, and installation specialists, he said.
Meanwhile, in the longer term, the numbers are even more dramatic. With the proviso that stable policies remain in place, the US Department of Energy has forecast that offshore wind could generate as much as 86GW by the middle of the century – almost 2,900 times more than today.
To be fair, some clearly had realised the sector’s potential. When the US Bureau of Ocean Energy Management ran the last auction for Massachusetts offshore wind blocks in 2018, the event exceeded all expectations, raising more than $405m from just three offshore blocks.
Exceeding expectations
Each block sold for about $135m, over three times more than the average $42m for similar blocks raised two years earlier. Norway’s Equinor bought one, Mayflower Wind, a joint venture between Shell, EDP Renewables and Engie acquired a second, and a bid by Vineyard Wind LLC, a joint venture between Copenhagen Infrastructure partners and Spanish renewable energy company, Iberdrola, won the third. Riva explains that most of the country’s offshore wind potential so far lies in two regions – off the north east coast, Massachusetts in particular, mostly in shallow water, and off the west coast, where the continental shelf plunges rapidly into the deep waters of the Pacific. Therefore, he says, east coast wind development will focus mostly on fixed installations, while those on the west coast are more likely to require floating installations.
He points out that LR is well-placed to provide a range of services, including Certified Verification Agency (CVA), Investment Efficiency (IE) appraisal, and ITC Verification. “The Shells, BPs, and Equinors of this world know us well from our work with them in Europe. We’ve worked with a number of the wind power pioneers for many years and have a wealth of experience in the sector. And the verification functions in wind are similar to those in oil and gas.”
In addition to Riva’s hard work, Jay Borkland, an offshore wind specialist part of LR’s US Renewables Team, is leading the charge on developing advisory services in the US, focusing on ports, infrastructure and supply chain opportunities. Due to the scale and pace of development, LR has partnered with leading advisory firms such as, BVGA, Jacobs and Timmons Engineering. Much like developers who are forming Joint Ventures to manage risk and finance projects, such as EDPR & Engie forming Ocean Winds, Equinor & BP partnering in New York, and Macquarie & Iberdrola, for a professional services firm like LR, partnering is an innovative business model that is expected to grow significantly over the next five years.
Jones Act
constraints One new challenge to offshore wind is Jones Act compliance, or to give its formal title – The Merchant Marine Act of 1920 – will apply to certain aspects of offshore wind development. US-built ships, flagged in the US, and manned by US nationals will be required for the installation of wind power plant, and also for the supply and service of facilities.
It will apply to vessels that transport components “between points in the United States”. Under the 1953 Outer Continental Shelf Lands Act, any man-made structure fixed either temporarily or permanently to the seabed, is defined as a “point” on the outer continental shelf, which generally extends 200 miles from the coast.
Riva noted that, so far, there are no US-built wind turbine installation vessels and, if the sector takes off as expected, there will be a pressing requirement for such vessels. This could present opportunities for European companies seeking a foothold in the US offshore wind sector through the establishment of joint ventures, LR has already solidified a Joint Industry Project with a US Engineering firm for the development of a Jones Act compliant wind turbine installation vessel (WTIV) design, he said.
