Significant challenges are appearing across the industry related to cost and revenue. How we deal with them now will shape the long-term benefits of floating wind.
There are undoubtedly significant opportunities in the floating wind energy market globally, with the UK aspiring to replicate the success seen in bottom-fixed offshore wind and take a leading role in the sector. With project development really getting into gear on ScotWind and recently awarded INTOG projects accelerating to deliver quickly, there is now a need to make some big technical decisions that will impact all other aspects of project development and become increasingly difficult to reverse as time goes on. Meanwhile, the upcoming Celtic Sea leasing round provides the opportunity of another 4 GW of capacity, bringing the country closer to its floating wind targets. However, the allocation is likely to be highly competitive, with a greater focus on price than previous leasing rounds. Looking to the future, the large-scale roll-out of floating wind (as predicted by DNV’s Energy Transition Outlook report) is dependent on economies of scale and innovation making the technology dramatically cheaper. Therefore, across the board, one factor is coming into focus for floating wind like never before: costs.
Experience from the fixed offshore wind, oil & gas and shipbuilding industries, combined with knowledge from the first floating wind protypes and mini-arrays is invaluable in setting the first expectations for costs in commercial scale projects.
However, to ensure that Levelized Cost of Energy (LCOE) is calculated and analysed correctly, it is vital that physics-based numerical models are also used to capture complex dependencies between different parts of the project design and to faithfully represent new scenarios for which there is not yet reliable real-world data. Such an LCOE calculation needs to be comprehensive and consider the type of foundations, mooring systems, cables including their layout, wind turbine model and loading, substations, wind farm layout, transport & installation and operations & maintenance strategies, as well as their interactions with one another.
From DNV’s experience of guiding project developers through the process, these detailed numerical models enable assessment of many scenarios and can differentiate between concepts which give rise to different final project costs. This enables strategic decisions for the project to be made even from the earliest stages when relatively little information is available.
The other side of the financial picture to the costs comes from project revenue in the form of annual energy production (AEP). Project developers and financiers must have confidence in the returns expected for this technology to proceed. However, energy losses can be sensitive to a range of factors, such as platform tilt, yaw misalignment, site conditions and wake diversion. Luckily, several of these can be addressed using aero-hydro-elastic design tools to simulate the full floating system (including realistic controller), leading to minimized conservatism in P90 estimates. For projects to be economically attractive and bankable, the industry (including the finance sector) must be receptive to new methodologies built around such processes, replacing simplified assumptions in common use today.
A very practical challenge that needs to be considered alongside project financial aspects is that of supply chain bottlenecks. This issue is in fact, yet again, connected to the LCOE question since costs will ultimately drive technological trends which will in turn dictate the requirements for supply chain upgrades. Advice on how to cope with the technology of the future as well as anticipated uncertainties can be invaluable to project developers, floating platform manufacturers and fabrication, assembly and maintenance facility owners. To invest and develop capabilities in a timely manner, port authorities and government agencies need to have a clear view on how to future-proof infrastructure which is sensitive to floating technology sizing, maintenance requirements, storage needs and other constraints.
In the meantime, there is a huge rush from the turbine manufacturers to design and build ever larger machines that can drive down project cost of energy. However, more limited financial margins at play today for manufacturers mean that there is a risk that new larger models will enter the market prematurely and be prone to failures. Instead, an alternative route could be to target further standardization and industrialization (whilst avoiding limiting innovation), allowing supply chains to catch-up with the demand. Larger volumes of more standardized, mature products are likely to be more attractive to investors, as well as enabling more efficient processes for installation, transportation, and maintenance. Therefore, providing a second potential route to reducing overall project LCOE.
Finally, government policymakers need to seriously reconsider their approach in relation to offshore wind costs if the UK is to meet its Net Zero targets by 2050. In the recent annual Contracts for Difference (CfD) auction that allocates a set price for electricity, no offshore wind farms took part. The maximum price allowed was simply too low with respect to current sky-high supply chain inflation and borrowing costs. Similar factors have been implicated in other recent events, such as the Norfolk Boreas wind farm project ceasing development. These are worrying signs that should serve as a wake-up call for decision-makers.
Floating wind (along with bottom-fixed wind) has the potential to play a pivotal role in the UK’s transition to a zero-carbon energy generation portfolio and we have all the building elements to achieve that. What is needed now is coordinated action from stakeholders across the industry to drive down costs and increase certainty on revenue, based on a realistic view of today’s state of play, as well as an informed view of the trends of tomorrow.
Written by Aristeidis Chatzopoulos, Head of Turbine Engineering, Renewables UK & Ireland, DNV