Offshore Wind Energy
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BEN BLACKWELL
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FELICIA JACKSON
Editor at large of Cleantech magazine
and author of Conquering Carbon, she
specialises in issues surrounding the
transition to a low-carbon economy.
TIM PROBERT
Freelance energy journalist, he was
formerly deputy editor of Power
Engineering International and editor of
commodity reports, including World
Crude Report.
MIKE SCOTT
Specialist environment and business
writer, he contributes to the Financial
Times, Daily Telegraph, Bloomberg New
Energy Finance and Mindful Money.
FLEMMICH WEBB
Freelance journalist, contributing
to publications including The
Guardian and National Geographic, he
specialises in sustainable business and
environmental issues.
568
UK offshore wind
turbines operational
665
turbines under
construction
Offshore wind
is energy of future
325
turbines approved
for construction
From its position as a world leader in offshore wind power, the UK has the
potential to become a global centre of expertise, according to Maria McCaffery,
chief executive of RenewableUK
ȖȖ The UK stands at an energy
crossroads. It is clear that our old
energy choices are no longer adequate for an age which will see fossil fuels rise in cost, energy security
becoming an increasing concern
and, of course, the dangers of climate change even more apparent.
Alternative options are needed and
difficult decisions must be taken.
The rest of the world joins us
in this dilemma. Ambitious carbon reduction targets, coupled
with policies promoting energy
self-reliance, have prompted a
worldwide rethink of the energy
sector, spearheaded by some of the
world’s most prominent political
leaders and thinkers.
From our own Prime Minister
David Cameron to US President
Obama and Germany’s Chancellor Merkel, the message is clear:
renewable sources must play
a much greater role in modern
societies for the sake of economic
growth, energy security and protection of the environment.
Offshore wind fulfils all three of
these objectives. It is the epitome
of a truly global source of renewable energy, as the greatest resource
lies beyond coastal waters and
requires international co-operation to harness it effectively. The
UK is working with its North and
Irish Sea neighbours to develop
the cross-border grid infrastructure necessary to make the most
of our wind resource.
This resource is extensive. The
UK’s maritime exclusive economic
zone covers 773,676 square kilometres, of which only 30,000 km2
has been released for development
– less than 4 per cent – yet this
relatively small area of the sea will
provide around 40 per cent of our
annual electricity needs.
Progress so far has been rapid:
from 568 turbines already installed
and providing around 1.5 per cent
of the nation’s electricity today, the
sector is set to reach a contribution
of around 8 per cent in the next five
years. By the end of the decade,
the UK Government is calling
for 18,000 megawatts of installed
offshore wind capacity, contributing around 55 terawatt-hours of
electricity and creating more than
40,000 jobs.
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Foreword
This is one of the most
ambitious plans for the
development of offshore wind
resources in the world
Wind turbines are reaching
high capacity as UK
renewables gear up for a
green future
This is one of the most ambitious
plans for the development of offshore wind resources in the world,
and the rewards for achieving this
vision will be great, with tens of
thousands of jobs and billions of
pounds of investment in play. But
the rewards of ambition do not
stop at 2020.
Offshore wind projects are enormous, complex endeavours, and
successful delivery involves a
wide range of skills, from project
management, design, ecological
assessment, electrical engineering, maritime expertise and many
others, including financing. While
many of these skills will be sourced
close to where projects are built,
others can be provided at distances
of thousands of miles.
Development of the areas of the
sea that have been released up to
now has given the UK a head start
in developing these skills, and the
services and supply chain that rely
Source: RenewableUK
on them. We have already installed
more offshore wind facilities than
any other country in the world.
If we can harness this competitive advantage, we can ensure that,
wherever in the world an offshore
wind farm is to be built, people will
want to come to the UK first, to tap
into our hard-won expertise. Our
vision is for the UK to become, for
the global offshore wind market,
what the City is to financial markets: a global centre of expertise
that attracts business from all over
the world.
RenewableUK’s Global Offshore
Wind Conference and Exhibition,
at ExCeL London next month,
is the first of its kind and provides an international forum to
develop this vision. What better
opportunity could there be to
showcase our world leadership
position than in our capital city
in this Diamond Jubilee and
Olympic Year?
03
Offshore Wind Energy
Offshore wind turbines
installed in European waters
Wind Turbines Capacity
farms
installed (MW)
Norway
1
12.3
Finland
2
926.3
Sweden 5
75163.7
UK*
16
5681,858.2
Denmark
13
401857.3
Germany
6
52200.3
Ireland
1
725.2
Netherlands 4
128246.8
Belgium
2
61195
Portugal
1
12
Total
51
1,3033,577.1
Source: EWEA
*amended figures
.
Keeping the lights on, bills
down and energy green
Government reform of the electricity
market has been broadly welcomed, writes
Mike Scott, but there are fears that the
pace of change is too slow
ENERGY POLICY
ȖȖ The Government has published
its proposals for electricity market reform (EMR), with the aims
of “keeping the lights on, consumers energy bills down and creating
cleaner electricity to help tackle
climate change”, according to
Energy Secretary Ed Davey.
The reforms, which are crucial
to the future of the offshore wind
sector, “are designed to provide
investors with transparency, longevity and certainty in order to attract
£110 billion of investment to bring
forward new low-carbon power generation for the 21st century”, he says.
The Energy Bill proposes:
A new system of low-carbon
generation revenue support – a
feed-in tariff with contracts for
difference (CfDs). A “strike”
price will be set and, if electricity
prices fall below this, CfDs will
guarantee a minimum return for
investors, removing the exposure to electricity price volatility
and encouraging them to invest.
CfDs will also limit price rises by
clawing back support payments
if market prices are higher than
the strike price. The first strike
prices will be published within the
Delivery Plan in 2013;
A Capacity Market will be established to reduce the likelihood of
future blackouts by ensuring there
is sufficient reliable capacity to
meet demand;
An Emissions Performance
Standard (EPS) will prevent construction of new coal plants which
emit more than 450g/kWh (grams
of carbon dioxide per kilowatthour) - the most polluting form of
electricity generation;
A Carbon Price Floor that
provides a clear economic signal
to move away from high-carbon
technologies by increasing the
price paid for emitting carbon
dioxide. It places an initial value
on the price of carbon of around
£16/tCO2 (per tonne of carbon
dioxide in 2009 prices) in 2013,
which will rise to £30/tCO2 (in
2009 prices) by 2020.
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Electricity bills are estimated to
be, on average, 4 per cent lower
over the next two decades than
they would otherwise have been
“With or without reform, household electricity bills are likely
to increase over time, driven
primarily by rising fossil fuel
prices,” says Mr Davey. “However,
electricity market reforms will
help to reduce the amount that
bills will increase. As a result of
these reforms, electricity bills are
estimated to be, on average, 4 per
cent lower over the next two decades than they would otherwise
have been.”
While the details of EMR were
broadly welcomed, there was some
concern that investment will be
delayed until the Bill has worked
its way through Parliament and
until strike prices, which will be
administered by National Grid, are
published in late-2013.
“While it is reassuring to see
some progress on the Energy Bill,
it’s now important that Parliament not only gets it right, but
does so as a matter of urgency,”
says Dr Neil Bentley, CBI deputy
director-general.
“With over a fifth of the UK’s
generating capacity coming off
stream before 2020, we face a
real risk of electricity shortages
in the second half of the decade.
The clock is ticking to create the
market certainty that will unlock
billions of pounds of privatesector investment, generating
many new jobs across the UK
and securing an affordable supply of energy.”
Dr Gordon Edge, director of
policy at RenewableUK, adds:
“The timeline the Government
has laid out looks very challenging
to bring in wholesale change to the
electricity market.”
05
Offshore Wind Energy
Supergrid is
missing link
2030: EWEA offshore grid vision
Linking up projects can help
to deal with intermittency, as
Flemmich Webb reports
CONNECTIONS
ȖȖ One of the downsides to renewable energy generation is its intermittency: when the wind is not
blowing, the turbines do not turn and no electricity is generated.
At present, countries such as the UK have to
rely on non-renewable generation to fill the gaps
in supply and, when this is imported energy, it
exposes us to global fossil-fuel price fluctuations.
By connecting national transmission networks
to a supergrid, generators would be able to buy, sell
and supply renewable energy from and to regions
as and when they need it.
Because a supergrid would
connect wind farms from
Portugal to Norway, the chances
of no wind are much lower
This would make offshore wind a more reliable
energy-generation option and reduce the need
for power stations to be kept on standby in case of
capacity shortages.
A supergrid can be defined as a pan-European
transmission network facilitating the integration
of large-scale renewable energy, and the balancing
and transportation of electricity, with the aim of
improving the European market.
It would be more than the expansion of the existing and planned connections between European
Union states; rather it would be a linked series
of so-called “supernodes”, a cluster of interconnected wind farms in the North Sea, for example,
that are themselves linked to various national
grids. Because a supergrid would connect wind
farms from Portugal to Norway, the chances of no
wind being generated are much lower.
“Europe’s vast renewable energy reserves are
a continental resource to be traded in a single
electricity market,” says Dr Eddie O'Connor, chief
executive of Mainstream Renewable Power. “An
interconnected Europe will deliver affordable
and secure sources of low-carbon electricity to
consumers who are today penalised by barriers
to trade and exposure to volatile fossil fuel price.
“The supergrid will bring revolutionary change to
Europe in terms of the free trade of electricity, security of supply, clean sustainable energy and so on. It
will create a leading global position for Europe in
the transition to a low-carbon economy.”
06
Home-grown green
power reduces
reliance on imports
ENERGY SECURITY
With supplies of
traditional fuels
starting to run
out, offshore wind
can help improve
Europe’s energy
security, writes
Flemmich Webb
50%
of European
energy imported, 2012
70%
imported,
2030 forecast
40GW
of European offshore
wind energy by 2020
150GW
by 2030
Source: EWEA
ȖȖ Europe currently imports 50 per
cent of its energy and that figure is
forecast to rise to 70 per cent by
2030 as domestic sources, such as
North Sea oil and gas run out, and
countries like France and Germany
start to phase out their nuclearpower capacity.
Given the volatility of fossil fuel
prices and political regimes of
some of the countries that supply
Europe, security of energy supplies is an issue that increasingly
concerns policy makers.
Offshore wind is seen as part of
a portfolio of energy-generating
options that would make Europe less
reliant on imported energy and less
vulnerable to pricing fluctuations.
Wind energy is also renewable
so it has the added benefit of contributing to the European Union’s
2020 energy targets: reducing
greenhouse gas emissions by
20 per cent; improving energy
efficiency by 20 per cent; and
generating 20 per cent of energy
consumption from renewable
energy. So how large an impact can
offshore wind have on Europe’s
energy-generation mix?
According to the European Environment Agency, installed capacity for offshore wind will be 44.2
gigawatts (GW) by 2020. The
European Wind Energy Association comes to a similar conclusion,
estimating that by 2020, 40GW of
offshore wind power will produce
148 terawatt-hours (TWh) annually, equivalent to more than 4 per
cent of the EU’s total electricity
demand and avoiding 87 million
tonnes of CO2 emissions.
Between 2020 and 2030, a further 110GW of offshore wind
capacity will be added in European
waters. This would mean 150GW
of wind power would produce
562TWh annually, covering 14 per
cent of the EU’s 2030 electricity
demand and avoiding 315 million
tonnes of CO2 emissions.
This is at the optimistic end of
forecasts – 14 per cent is a substantial contribution to the renewablegeneration mix – and much must
happen to ensure this scenario
becomes reality.
“At a time when Europe is at a
major crossroads for its energy
future, offshore wind provides
a powerful domestic answer to
Europe’s energy supply and climate
dilemma,” says Gunther Oettinger,
European commissioner for energy.
“However, this development will
not happen without ambitious
national programmes and support
from the European Union, underpinning the market promise.”
One critical programme is the
development of an offshore grid.
There are 11 in existence with a
further 21 others planned for the
North and Baltic Seas. Linking
them would create a pan-European
electricity “super highway” that
would enhance security of supply,
both by allowing countries to buy,
sell and deliver wind power when
they had a surplus or shortage, and
by reducing the need for energy
imports from outside Europe.
Policy makers must also commit
to investing in the infrastructure
and industry to turn the potential
into reality. The pay-off for investment and regulatory support will
be jobs as well as giving the EU
“first-mover” advantage in the
offshore wind global market.
With offshore wind projected to
There is no getting away from the
fact that offshore wind is currently an
expensive way to generate electricity.
Figures from Bloomberg New
Energy Finance show that the sector
is more expensive than all technologies, except marine energy and solar
thermal generation.
Among the key areas that need
to be tackled are the cost of
finance, technological improvements and how the supply chain
can contribute.
The cost of finance will not
fall until the industry has been
derisked, which means reliability
must be established throughout
the supply chain.
And while technological innovation is needed, if the pace of
change is too fast, the supply chain
will not be able to keep up and the
risk will remain.
“There are two main things that
need to be worked on,” says John
Sturman, chairman of the Offshore
Renewables Group at the Institute
of Marine Engineering, Science &
Technology. “One is getting the cost
of turbines down and the second is to
reduce the cost of foundations.”
Initiatives such as the Crown
Estate’s Offshore Wind Cost
Reduction Task Force and the
Government’s Offshore Wind Component Technologies Development
and Demonstration Scheme aim to
cut the cost of offshore wind power
to £100/MWh (per megawatt-hour)
by 2020.
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grow the most rapidly of all renewable technologies, with installed
capacity multiplying 17 times
between 2020 and 2030, its impact
on reducing the eurozone’s reliance
on imported energy and improving
energy security will become an
increasingly important one.
“There is a major opportunity for Europe to harness its
huge offshore wind resource, to
ensure that we can generate the
maximum amount of clean energy
from a domestic source which
will never run out,” says RenewableUK’s director of offshore
renewables Nick Medic. “Wind
gives us energy security because
it reduces the need to rely on
expensive imports of fossil fuels.
The construction of new infrastructure, such as interconnectors
between European countries, will
help to maximise the benefits of
this power source.”
Wind gives us energy security
because it reduces the need to rely
on expensive imports of fossil fuels
PRICING
Industry battles to
cut energy costs
Offshore Wind Energy
Generating jobs and exports
Concerns about costs and fears of a potential skills shortage are combining to create uncertainty
around the impact of the offshore wind sector on the UK economy, writes Felicia Jackson
ECONOMY
ȖȖ Critics of offshore wind claim it
is vastly expensive and unproven,
but supporters say it has the longterm potential to stabilise UK electricity costs, create tens of thousands of jobs and boost exports.
Compared to the opportunity that
the offshore wind sector provides,
the scale of the challenge has been
overplayed, according to Nick Medic,
director of offshore wind at RenewableUK, and offshore wind could act
as a long-term hedge against future
volatility of fossil fuel prices.
As the UK imports half its gas
and three quarters of its coal,
diversifying the energy portfolio
to include a domestic fuel source
makes good sense.
Offshore
wind jobs
In addition, forecasts suggest
the offshore wind industry could
provide 70,000 jobs by 2020.
Martin Grant, chief executive
of energy at consultancy Atkins,
argues that, with the buoyancy of
the oil and gas market and demand
for maritime skills, these jobs will
not be replacements but new jobs
ranging along the east coast, from
Kent to Scotland.
To enable the industry to fulfil
this promise, private investors
must be persuaded to back what
are still high-risk projects. The
challenge lies in understanding the
industry’s potential to create jobs
and a new UK manufacturing base.
The potential for the export of
expertise is robust. Francois Hollande, the new French president,
has voiced support for increasing
2010
3,151
renewables; Germany’s retreat
from nuclear power is leading to an
increase in offshore wind deployment in German waters; and there
is growing interest from Asia.
The UK Government hopes that
the experience of creating a robust
domestic offshore wind sector will
translate into sales in other markets.
According to Arnaud Bouillé,
director of environmental finance
at Ernst & Young, the important
question is where value will be
created. Research by the Boston
Consulting Group says that, of
the approximately £3 million per
megawatt cost of offshore wind, 40
per cent comes from turbines (currently predominantly manufactured in Germany and Denmark),
30 per cent goes to foundations,
cabling and other infrastructure,
and the remaining 30 per cent to
support services.
Companies like Atkins Global
are retraining engineers from
other sectors to enable them to
move into offshore wind, while
RenewableUK has launched a
similar programme.
Mr Grant believes market intervention will be necessary to make
the offshore wind industry a success. He says: “The best thing you
can do is provide stability and
consistency for planning of the
long-term economic case.”
There are signs that the Government is having some success.
The first quarter of 2012 saw
Germany’s Siemens, Gamesa of
Spain and Danish group Vestas
announce manufacturing sites
in the UK.
Doosan of South Korea, however, pulled a £170-million investment in Glasgow, due to falling
confidence in the market. The
question whether the UK can
develop an industrial base to
drive development of the supply
chain is one of market volume,
timing and certainty – and that
means consistent support from
Whitehall if the UK is to achieve
its goals.
The challenge lies in
understanding the industry’s
potential to create jobs and a
new UK manufacturing base
70,000
2020
Source: RenewableUK
Best incentive
for adding employment
24%
Funding
23%
Certainty
Industry growth
23%
Planning
issues
13%
Training
10%
Tax
Misc
Source: Raconteur / RenewableUK, 2011
UK share of potential
European offshore wind power
33%
UK
Rest of Europe
67%
Source: RenewableUK
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07
Offshore Wind Energy
Wind of change blows
fair for sustainable future
Making offshore
Cost of energy
US$ per megawatt-hour
EXPERT OPINION
Policymakers and opinion formers in the energy sector agree the Europe
faces tough choices to meet the challenges of climate change, rising
prices at a time of austerity and geopolitical instability. Here five leading
supporters of offshore wind power assess prospects
Michael Liebrich, chief executive of
Bloomberg New Energy Finance,
founded the company in 2004
and is a member of the World
Economic Forum's Global Agenda
Council on Sustainable Energy
ȖȖ T h e
G ov e r n m e n t
has
announced it will be introducing
a new Energy Bill during this parliamentary session. Done right,
it could drive huge investment
in a mix of clean-energy technologies. Done wrong, the lights
could go out.
Any discussion about the UK’s
energy future has to start with
one fact: we are now a net energy
importer. Our gas production
has been declining by 6 per cent
a year since 2000. In 2011, for
the first time since 1967, the UK
imported more natural gas than
it exported.
This leaves us entirely at the
mercy of global markets. Over 200410, the average annual UK electricity bill rose by £290 because of rising natural gas prices. It is expected
to go up another £175 between now
and 2020. For all the fevered press
coverage about the cost of renew-
able energy, the main reason UK
energy bills have gone up is, and will
remain, the cost of natural gas.
In the US, the new technique of
fracking – fracturing rocks deep
underground to release gas previously thought unrecoverable
– has driven prices down to levels
unthinkable only a few years ago.
But, although the UK has shale gas
reserves, they are neither cheap
nor abundant enough to meet our
energy needs. “Frack, baby, frack!”
is not an energy policy.
Nuclear power has served the UK
well, but at a cost too expensive
to measure rather than too cheap
to meter. For all its attractions,
nuclear power will always need
subsidies. It should be part of the
answer, but not all of it.
Which brings us to wind. The
best-kept secret in the energy
industry is that modern wind
turbines can generate power as
cheaply as coal or gas plants. If
the UK maintains its leadership
position in offshore wind, it stands
to attract £30 billion of investment in coming years in areas of
high unemployment like Hull,
Tyneside, Merseyside, Belfast
and Scotland, and to benefit from
dynamic new export industries.
Ultimately, that is what the
debate is about. Should we
invest our best talent, our hardearned money and our geopolitical capital in propping up an
old energy paradigm – slavish
dependence on fossil fuels, an
ageing grid, energy waste worthy
of the Soviet Union? Or should
we invest in the new paradigm
– clean energy, deep energy efficiency, energy intelligence?
The Energy Bill is nothing less
than a showdown between the
ghost of energy past and the vision
of energy future.
ȖȖIf I had a pound for every time
I heard someone say “renewable
energy can’t be built without
huge subsidies” or “we’re not
seeing the cost reductions renewable energy promised”, I think I
could probably have built an offshore wind farm. Well maybe not
quite, but I certainly wouldn’t
be too worried about the global
financial crisis.
The reality is that renewable
energy has shown massive cost
reductions and technological
improvements. Indeed, if we saw
the same sorts of improvements
in another sector, there would be
huge levels of excitement. Actually,
we have, and we do. But for some
reason the message that renewable
energy isn’t and can’t be competitive often seems to linger.
And offshore wind is no different.
It suffers from criticism that it is
too expensive, too remote and too
difficult to connect to the electricity grid. Or we hear that, if the wind
stops, it will cause blackouts and all
sort of chaos.
But offshore wind power, like
other renewable energy technologies, has shown some impressive
developments. While relatively
new, compared with onshore
wind farms, offshore wind farms
have now been with us more than
two decades.
Since the Vindeby wind farm,
with 11 small 450-kilowatt (kW)
turbines, was built off the Danish
coast in 1991, we’ve seen offshore
turbine capacity grow markedly.
In March, a huge 6.15-megawatt
(MW) turbine, capable of delivering the demands of 6,000 people,
was installed 28 kilometres off the
Belgian port of Oostende. A 15MW
turbine, twice the capacity of the
largest onshore turbine currently
installed, is in development.
However, it is not just the size
of turbines that has advanced.
The first full-scale, deep-water
floating turbine of 2.3MW is oper-
ating in 220 metre-deep water
off the Norwegian coast. And in
2007, a wind farm of two 5MW
turbines was built in the North
Sea, 22 kilometres from the Scottish coast, to test the viability of
building commercial wind farms
in deep water and some distance
from the shore.
We very often can’t imagine what future technological
improvements will bring or the
speed at which they will come. So,
undoubtedly offshore turbines
will be more powerful and more
efficient, and deliver electricity at
lower cost than any of the current
forecasts suggest.
And this is vital. We mustn’t
forget that governments are
supporting the development of
clean energy technologies, like
offshore wind, because we must
swiftly wean ourselves off fossil
fuel-based energy that causes
climate change and embrace a
clean revolution.
Geothermal
flash plant
Wind onshore
Geothermal
binary plant
$64.25
$81.85
$95.51
Forecast offshore
wind capacity by 2020
Percentage of operators forecasting
capacity in gigawatts
21%
19%
24% 22%
13%
Other
10-13
GW
Under
13-15
GW
Over
15 GW
Source: Wind Marine Energy Business Survey2011
08
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100
80
Distance to shore (km)
Rupert Posner, who runs The
Climate Group’s global energy
programme, working to advance
the uptake of clean energy,
developed a world-first initiative to
track greenhouse gas emissions
from energy in Australian states
Water depths and distance
60
40
20
0
10
20
3
Water d
Operational
Under construction
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Consented
Offshore Wind Energy
e wind pay
Philip Lowe, born in Leeds and
educated at Oxford, has been the
European Commission’s directorgeneral for energy since February
2010, and is a former directorgeneral for both development and
competition
Wind offshore
Marine
tidal
Marine
wave
$232.20
$402.44
$445.41
Source: BNEF
EU power
capacity mix 2011
5% 6%
14%
Martin Lidegaard, Danish SocialLiberal MP, is Denmark’s minister
for climate, energy and buildings,
and was formerly chairman of the
influential Danish environmental
think-tank Concito
23%
10%
14%
ȖȖ Offshore wind energy has a key
role to play in improving Europe's
competiveness, sustainability and
security of supply.
We are only at the beginning of
offshore developments. European
Union member states' National
Action Plans indicate that installed
capacity is to increase ten-fold, from
an estimated 4 gigawatts (GW) in
2011 to around 40GW in 2020.
However, more than half of the
envisaged capacity in 2020 will be
installed in only two countries, the
UK and Germany.
Offshore wind energy brings
opportunities in terms of emissions cuts as well as growth
and employment. The industry
estimates that around 170,000
offshore-related jobs will be created by 2020, mostly for the benefit
of coastal regions.
The UK's ambitious Round 3
programme should ensure that the
industry can continue to scale up
activities and reduce costs.
For the European offshore industry to stay at the forefront of this
development it has to stay innovative
and continue to look for solutions
to new challenges such as installing
turbines in ever deeper waters.
New players are entering the
market, so technological as well
as logistical advances need to continue. At the same time the highest
quality and reliability standards
need to remain the trademarks
of EU offshore producers if they
are to remain at the forefront in a
highly competitive environment.
The EU is actively encouraging developments in this field,
financing R&D and a number of
flagship projects, for example
under the European Energy Programme for Recovery.
The European Commission is
also a keen supporter of the North
Sea Countries Offshore Grid Initiative, an integrated grid infrastructure connecting wind farms in
the North Sea and off the British,
French and Irish Atlantic coasts.
Through its scale, this grid could
not only help cut costs significantly, but also facilitate integration of large-scale offshore wind
resources into grids, while keeping
security of supply standards high.
In June, the European Commission will publish a new paper on
a strategy for renewables which
aims to take stock of progress in
the development of renewables
and identify policy choices for the
2012-2020 period. We hope this
will lead to a wide public debate.
ȖȖ In Denmark, we have a long
tradition of using wind energy
and the Danish wind industry is
a vital source of national growth
and prosperity.
This March, the Danish government secured broad political support
for an ambitious energy plan. The
agreement contains a wide range of
initiatives, bringing Denmark a good
step closer to the target of 100 per
cent renewable energy in the energy
and transport sectors by 2050.
The agreement moves us up a
gear, with large investments to
2020. By then approximately half
of electricity consumption will
come from wind power (today the
share is 25 per cent), and energy
consumption will decrease by more
than 12 per cent compared to 2006.
One of the ways to get there is
that we will construct two new
large-scale offshore wind farms at
Horns Reef (400 megawatts) and
Kriegers Flak (600 megawatts).
And, as Denmark will be making
huge investments, we will need
contributions from competent
companies all over Europe.
We will welcome new bidders
for the Danish projects. And we
will design the tender process in
an open dialogue, so that we can
ensure strong competition and the
best possible end result. Look at this
as a very open invitation. We expect
the tender to be published next year.
So keep an eye out for Denmark.
Green investments are investments in both the present and the
future. More than 20 million Euro-
pean jobs are linked to energy and
the green economy in one way or
another. The European Commission
estimates that their proposal for a
new energy efficiency directive will
deliver about two million new jobs.
This clearly illustrates the potential
of pursuing the green agenda.
But we are still in times of financial crisis in Europe and political
priorities tend to shift. There is a
danger that long-term objectives
give way to short–term goals and
that green ambitions are lowered. I
know this is a concern throughout
the green industry.
We must remember that the
green agenda is both about job
creation in the short run, and
about our climate and price stability in the long run.
ȖȖ The UK Government pins much
of its hopes for increasing exploitation of renewable energy on wind.
Offshore installations have been
encouraged due to their reduced
impact on communities and the
generally higher capacity factors
which approach 40 per cent rather
than the 25 per cent typical of
onshore systems.
Under its commitments to European Union targets, the UK must
meet 15 per cent of its energy
needs from renewables by 2020,
which implies around 40 per cent
of electricity.
If all this was to be met by wind,
around 33 gigawatts (GW) of
capacity would be needed. Today,
operational or in construction,
there is 5.9GW onshore and 4.3GW
offshore, with planning consent
for a further 3.9GW onshore and
1.1GW offshore, a total of a little
more than 14GW.
Initial studies and projects are
underway on a further 4GW of
offshore wind farms (compared
to almost 8GW for onshore)
which, as well as highlighting
that we still have more capacity
to find, suggests that offshore
wind is not yet the most attractive option for developers and
electricity generators.
Yet, potentially, offshore wind is a
vast resource: estimates are that an
average of 100GW of power could
be generated from less than one
third of UK waters shallower than
50 metres. That is more than twice
the UK’s current typical electricity
demand – so we can do it, but what
impedes us from cracking on?
Firstly, today’s cost of offshore
wind turbines is proving higher
than expected, approaching
£3,000 per kilowatt of capacity
which means each unit of electricity produced costs about twice
that from a conventional power
station. Engineering rotating
machines for the hostile marine
environment is difficult and,
although it will be done, our latest
analysis suggested costs are likely
to reduce by only 20 per cent over
the next decade.
Secondly, there are still challenges to overcome with the
variability of wind power which
requires back-up or other power
balancing systems.
And finally, offshore wind is not
in the same places as our old coalfired power stations, so we need a
substantial reinforcement of the
national grid to move the power to
where it’s needed.
26%
Fuel oil
Coal
Photovoltaic
Gas
Wind
Other
Nuclear
Large hydro
Source: EWEA
to shore
30
John Loughhead, executive director
of the UK Energy Research Centre,
is a past-president of the Institution
of Engineering and Technology,
and was a corporate vice-president
with the Alstom Group
40
50
The best-kept secret in the energy
industry is that modern wind
turbines can generate power as
cheaply as coal or gas plants
60
depth (m)
Source: EWEA
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09
Offshore Wind Energy
Biggest UK
offshore
wind farms
Walney I and II
UK ‘leading the
world’ in offshore
wind power
Energy Minister Charles Hendry talks to
Ben Backwell about the challenges and
opportunities being created by the UK’s offshore
wind sector, and what the Government is doing
to help its growth
Q&A
102
367.2MW
Turbines
Energy
Thanet
100
300MW
Turbines
Energy
Robin Rigg
60
Turbines
180MW
Energy
Lynn and
Inner Dowsing
54
Turbines
194.4MW
Energy
Source: RenewableUK
ȖȖQuestion: What do you
think has been achieved for
the UK’s offshore wind sector
since the Coalition Government took power?
Charles Hendry: We have
achieved a great deal in two years.
The UK is now the world leader in
offshore wind with more capacity
built than any other country and
rated the best place to invest in
offshore wind in a recent Ernst &
Young report.
During the 2011/12 financial year,
we have seen announcements of
planned and confirmed investments to the tune of almost £2
billion, which could support over
8,000 jobs. We have seen major
international energy companies
making it clear they want to do business in the UK, including Siemens
and Gamesa. We’ve also opened the
world’s largest offshore wind farm
at Walney and seen 817 megawatts
deployed since May 2010.
Q What are some of the key
Government initiatives
currently under way?
The Offshore Wind CompoA
nent Scheme supports the
development and demonstration
of key component technologies
that will reduce offshore wind
costs. The first call for proposals
closed in December 2011 and
resulted in £4 million of grant
awards to five companies, including David Brown Gear Systems,
NGenTec, OSBIT Power and OGN
North Sea. The second round was
launched on May 10 with a budget
of up to £5 million. We also
recently made an agreement with
the United States to work together
on the development and demonstration of floating offshore wind
turbine technology. We made £60
million available to support the
development of new offshore wind
manufacturing projects on the
English coast, in parallel with
similar support by the Scottish
Government.
Q What about the Offshore
Wind Cost Reduction Task
Force – how confident are you
that the aims of the task force
can be met?
A The industry-led task force
looks at how we can reduce
We’ve opened the world’s largest
offshore wind farm at Walney
and seen 817 megawatts deployed
since May 2010
Q How confident are you in
the cost of offshore wind to £100
per megawatt-hour by 2020. This
is challenging but I am optimistic
it can be achieved. We shouldn’t
forget that, as we are seeing with
onshore wind, there is every expectation that costs will reduce as
technology improves and massdeployment takes place. The task
force considered how we can
best deliver cost reductions more
quickly by focussing on a number
of key areas with the greatest
potential. I very much welcome the
comprehensive task force report
and we will be looking to work with
industry to ensure we can all act on
its recommendations.
Q What is the Government’s
main focus in terms of
ensuring that the UK supply
chain is ready for Round 3?
We want to see a substantial
A
increase in UK content in
offshore wind farms. The sector
recently confirmed the vision that
UK firms should provide more
than 50 per cent of the content of
future wind farms. This sends a
strong signal of the confidence
developers have in the UK supply
chain and reflects recent progress.
Having started from a low base, UK
content in offshore wind is growing; for example, Robin Rigg wind
farm reached a level of 32 per cent,
but we want to improve on that
further. I was pleased to see the
NORSTEC network that was
recently established, with the aim
of creating a major new renewable
energy centre in the North Sea.
the current planning system’s ability to process large
amounts of consent applications for offshore wind projects
in a timely fashion?
The Government is commitA
ted to giving a greater say to
people, communities and councils
through a faster and more democratically accountable planning
system. This is why we have abolished the Infrastructure Planning
Commission and replaced it with
a new National Infrastructure
Planning Directorate within the
Planning Inspectorate. Round 3
will lead to a significant increase in
applications and government will
keep the issue of resourcing under
review. I am confident that the
reforms will streamline and speed
up the planning system.
Q Finally, do you think the
Government is doing enough
to tell the “good-news” story
around offshore wind in terms of
job creation and manufacturing?
I am certainly using every
A
opportunity I have to tell
investors about what a great place
the UK is to invest. This month, I
will speak to delegates at the Global
Offshore Wind Conference to set
out that story. Recently, we hosted
energy ministers from the world’s
23 leading economies at the Clean
Energy Ministerial in London,
where we had the opportunity to
take delegates out to see UK wind
farms and to talk to them about the
work we are doing.
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Steel: the foundation
of a SuStainable
energy future
Scan to link to our new interactive products and
services guide and discover how we can provide
the steel solution for your offshore wind project.
www.tatasteelenergy.com
10
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93x100_designing.indd 2
21/05/2012 14:51:04
Offshore Wind Energy
Offshore wind plans:
bigger, better, stronger
Floating wind turbines
Spar-buoy with twotier catenary mooring
drag embedment
anchors
Tension-leg
platform (TLP)
with suction pile
anchors
Concrete (TLP)
with grativy base
anchor
As the industry scales up, turbines will get bigger, more efficient
and further out to sea in deeper water, writes Tim Probert
TECHNOLOGY
ȖȖ The offshore wind sector is not
just driving the revitalisation of the
manufacturing sector in the UK,
it is also deploying some cuttingedge technology.
The latest offshore wind farms
employ turbines with a typical
power capacity of 3 to 3.6 megawatts
(MW) but, targeting the Crown
Estate’s 33-gigawatt (GW) Round
3 programme where construction
is set to start in the middle of the
decade, the world’s leading turbine
makers are bringing to market
machines with double the capacity.
These turbines will be taller than
The Gherkin building in London
and have turbine-rotor diameters
larger than the London Eye. They
will stand in waters up to 60 metres
deep and, in some cases, more than
200 kilometres from shore.
French power generation equipment manufacturer Alstom has
designed its first offshore wind
turbine – the 6MW Haliade 150 –
with Round 3 in mind. Once serial
production commences in 2014,
Alstom plans to install 200 of the
turbines, which are designed to
operate at a depth of around 35
metres and a wind speed of 9.5
metres/second, every year in the
UK and France, equivalent to
1.2GW of new capacity per annum.
Frederic Hendrick, Alstom’s
vice-president of offshore wind,
believes 6MW is the optimum
size of turbines for Round 3. “We
looked at various power ratings up
to 10MW and what is required in
terms of blade length, the weight
of the nacelle and the implications for the turbine substructure,
which can account for 30 to 40 per
cent of the total cost. We found
6MW to offer the best value in
terms of total cost of electricity.”
Siemens is also launching a 6MW
turbine, the SWT-6.0. The German
company has started building two
test machines at Danish utility
Dong Energy’s Gunfleet Sands
array off the Essex coast. When
they come on line in November,
these will be the biggest turbines
deployed in the UK.
Both manufacturers have opted for
direct drive permanent magnet generators rather than gearboxes, which
are prone to malfunction in the
harsh, turbulent environment of an
offshore wind farm. Henrik Stiesdal,
chief technology officer of Siemens
Wind, says direct drive generators
also make the nacelle lighter, thus
reducing stress on the substructure.
“So far, large wind turbines have
always been heavier per megawatt
than small ones,” he says. “The SWT6.0 breaks this rule and has a weight
per megawatt similar to many
machines in the 2-3MW range.”
It is not clear that ever-larger
turbines will be cost-effective,
says Alstom’s Mr Hendrick. “It
would be easy to make a 10MW
turbine, but it would have a poor
capacity factor. Our customers
need simple, robust, reliable and
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efficient machines to minimise
maintenance costs, which are a
killer for offshore wind.” Alstom
hopes the Haliade 150 will need
to be maintained only once a year.
Larger turbines need larger
foundations and at depths of
30 metres or more, low-tech,
relatively low-cost steel monopiles
hammered into the seabed start to
become impractical. Steel jacket
foundations, which resemble miniature oil rigs, will play a significant
role in Round 3.
To exploit the deeper waters off
the north-west coasts of Scotland
and Cornwall, however, something more radical will be needed:
floating turbines. The Energy
Technologies Institute is looking
at proposals to build a £25-million
floating wind turbine demonstration project, which will see the
installation of a 5-7MW prototype
in waters 60 to 100 metres deep
by early-2016.
Current floating designs envisage
using horizontal-axis turbines that
look similar to current models, but
floating vertical-axis wind turbines
are under active exploration, says
Dr Simon Harrison, Mott MacDonald’s director of energy. “If
they show promise, they are going
to be the way forward for deepwater offshore wind farms.”
Turbines will be taller than The
Gherkin and have rotor diameters
larger than the London Eye
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11
Offshore Wind Energy
Surfing the new wave can
make offshore wind pay
Turbines must
have support
to turn wind
into energy
Companies involved in the complex supply chain
needed to successfully develop offshore wind power
are rising to the challenge, as Tom Idle discovers
INFRASTRUCTURE
SUPPLY CHAIN
ȖȖ In the next decade, offshore
wind power capacity in Europe
will grow tenfold. But this huge
growth will only be realised with
the support of a strong network
of suppliers.
From subsea cable manufacturers, network transmission box
developers and skilled installers, to project developers and
consultants, electrical engineers
and maintenance personnel, the
supply chain for offshore wind is a
complex one.
Turbines need towers, blades
and drive train components, and
substructures to support them in
turbulent seas. And sea vessels are
needed to support repair, maintenance and installation functions.
Evidence suggests that the supply chain is responding well to the
challenge. Much of the focus so far
has centred on wind turbine manufacturers, but they are only part
of the picture. More than half of
the capital expenditure on offshore
wind is typically spent on things
We need to double our capacity
for critical components, like
electricity cables, substations
or cabling vessels
To build
23GW
Source: Douglas-Westwood
like foundations and cabling, and
as much as a third is reserved for
operations and maintenance.
By 2020, €10.4 billion (£8.4 billion) will be spent on offshore
wind energy every year, according
to the European Wind Energy
Association (EWEA). And between
now and then, almost €66 billion
(£53 billion) will be invested in the
entire supply chain.
“It’s a good business to be in,”
says Jan Declecq, head of business development at CG Holdings, one of the leading transmission and distribution companies,
which has won a number of
contracts to design, engineer and
install onshore and offshore substations. “The offshore market
offers good opportunities for
good technology – that’s why
we’re positive.”
It is a market that has seen a raft
of new players emerge. But it has
also provided big opportunities
for well-established businesses
to diversify. “Take HVDC [highvoltage direct current] converters,
for example. There are a myriad of
companies that could supply into
that space,” says Adrian Fox, supply chain manager at the Crown
Estate, which owns the UK’s seas.
“Companies that might currently
supply to the automotive sector
could make slight changes to their
business and become suppliers to
the offshore wind industry.
“Last year, Goliath Cranes signed
a £500,000 deal with RWE to supply small cranes for the back of its
access platforms. It wasn’t something they had looked at before.”
The latest of the Crown Estate’s
UK supply chain events convenes
tomorrow, in association with
Offshore Wind England, at the
National Exhibition Centre in Birmingham, where major developers
and suppliers will discuss the sector’s prospects.
of capacity by 2020, the UK needs...
5
more
foundation
factories
13
cable
manufacturers
20
installation
vessels
Cables
Power to the UK
The success of offshore wind
projects pivots on getting the
energy generated out at sea back
to the shore and into the grid. For
this, developers need the offshore
cables sector, a highly specialised
and lucrative industry dominated by
just a handful of companies.
The £2.3-billion sector is in a
healthy state, with demand for
cables currently at around 800
kilometres a year, stretching to
around 1,000 by 2014, according to
Bloomberg New Energy Finance.
Three established players –
infrastructure giant ABB, French
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group Nexans and Prysmian of Italy
– make up more than 70 per cent of
the market, with newcomers NKT
and General Cable providing the rest.
Up to now, most of the cables linking wind turbines to shore have been
high-voltage AC. But in the future,
wind farms will increasingly call on
high-voltage DC (HVDC) subsea
cables that are capable of transmitting energy over long distances
more economically.
But with a limited number of suppliers, there are fears the HVDC cable
supply chain could bottleneck, particularly in the second half of this decade.
The European Wind Energy
Association’s recent study into the
state of the market highlighted a
need for “substantial” additional cable
manufacturing capacity to meet
future demand, especially with lead
times for bringing new HV subsea
cable capacity online currently set at
around two to three years.
ABB points out the need to
upgrade the onshore cabling
network to cope with increasing
offshore power supplies.
“One of the key focus areas is
the need to reinforce the onshore
grid to enable integration of the
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power injected from offshore wind
farms and transport it efficiently to
consumers,” the company says. “This
requires the existing grid to become
stronger, smarter and more flexible.
“In terms of the electrical transmission system, it is suggested that
over £14 billion of investment will
be needed to deliver the offshore
network connections. This means
the need for not only offshore
infrastructure, but also significant
onshore connection works and
upgrades to the existing transmission infrastructure to accommodate
the new offshore generation.”
Projects will not proceed unless all
necessary elements are in place to
tackle the significant manufacturing
and engineering challenge ahead, as
Tom Idle reports
ȖȖ Europe’s offshore wind market is dependent on
infrastructure renewal projects coming to fruition in the next few years. From electrical cabling,
maintenance and repowering operations, to substation construction, electricity grid upgrades and
port expansions, it is critical that the appropriate
infrastructure is in place to ensure offshore wind
becomes a viable future energy source.
Of course, manufacturing plants are needed for
the turbines themselves. But other infrastructure
needs attention too. According to a recent study by
energy analysts Douglas-Westwood, the UK alone
needs five foundations factories, 13 cables factories
and 20 installation vessels to supply the necessary
kit that will create 23 gigawatts of capacity by 2020.
The key challenge is to efficiently deliver the
power harvested at sea to the onshore transmissions
system. As Stefan Jonsson, head of offshore wind
connection at the power technologies business ABB,
says: “Transporting electricity to the shore and then
integrating it into the grid for supplying consumers
is a key element in the success of this sector.”
As wind farms have got bigger and moved further
away from the shoreline in recent years, highvoltage direct current (HVDC) cables have been
increasingly sourced for their underwater capabilities and strong performance in transmitting power
over long distances. But “substantial additional
cable manufacturing capacity” is required, according to the European Wind Energy Association.
“The industry faces a number of challenges,”
says Mr Jonsson. “There is an ongoing need for
technologies that cater to offshore requirements,
like specific auxiliary services such as cable-laying
and crane vessels.”
Rhys Thomas, director of renewables delivery at
RenewableUK, argues that cabling and electrical
infrastructure does not receive the same amount
of attention as things like turbines. “Perhaps it’s
because they are out of sight, but their importance
cannot be underestimated,” he says.
Ports are crucial to servicing a number of supply chain elements. Over the next ten years, more
manufacturers and suppliers will be located at
port facilities, and the ports need to be suitable.
To save on transport costs, turbines, blades, drives
and other large, awkward and heavy components
need to be built close to the shoreline, ready to be
shipped out to sea. The ports will also have to cater
for the increasing number of different vessels
coming on stream to install, repair and maintain
wind farm components.
Cabling and electrical infrastructure
does not receive the same amount
of attention as turbines
13
Offshore Wind Energy
CASE STUDY
High seas
high risk
Green Investment Bank
could be white knight
Offshore wind turbines
are a big investment in a
sustainable future
The core of any business model is a predictable return on
investment, but uncertainty surrounds the cost of next-generation
wind turbines, writes Tim Probert
ȖȖ As the UK prepares to build its
32-gigawatt Round 3 offshore wind
programme, uncertainty over construction costs has raised concerns
among investors that the £100-billion capital that is required may
not be forthcoming.
Round 3 may seem a small step
from Round 2 but, in terms of the
amount of money needed, it is a
giant leap and utilities will not be
able to finance many projects at
this scale from their balance sheets
without credit-rating agencies taking a very dim view.
To realise the North Sea’s full
potential, Round-3 projects will be
located further out to sea – potentially 200 kilometres from shore
at depths of 50 metres or more
– which requires larger arrays, bigger turbines, deeper foundations
and longer construction times.
As no other nation has attempted
to build offshore wind at these
depths and distances, nobody can
be exactly sure how much these pioneering projects will cost to build.
Potential early-stage investors
fear these complex projects pose
a significant risk of returns being
heavily diluted by construction
over-runs. The message from a
project finance community, battered by recent economic headwinds, is clear: they will not invest
until there is greater certainty.
However, there may be a white
knight on the horizon in the form
of the Green Investment Bank
(GIB). Investors view the GIB
as having a crucial role to play in
plugging gaps where the private
sector is unable to bear the full
construction risks of Round 3.
Anthony Marsh, head of transactions at UK Green Investments,
set up by the Department of
Business, Innovation and Skills
last year to oversee the creation
of the nascent GIB, says the bank
could directly invest in Round-3
projects in partnership with the
private sector.
“The plan is to prove it works so
that private capital piles in and
then we move on to another technology,” he says. “The Holy Grail
is to get institutional, long-term
funds into the offshore wind sector – they are not investing because
they think the risk-reward profile
is not appropriate. They need longterm certainty and we will encourage them to have it.”
As the GIB sits on the Government’s delicate balance sheet, the
Treasury has capitalised the bank
with just £3 billion. But, after
2015 when the GIB assumes full
borrowing powers, liabilities are
expected to increase substantially.
Andy Cox, head of power and
utilities at KPMG, believes the GIB
is the key to unlock the £100 billion required for Round 3, but not
necessarily as a front-line investor.
“At this stage, the GIB needs to be a
pioneer focused on financing first-ofa-kind-type projects by underwriting
construction risks via guarantees
rather than capital,” says Mr Cox.
“The GIB could stand behind primary project contractors, which
would assume a certain level of overrun risks, with a second tranche of
construction support. By assuming
some of the construction risks, more
private capital will be forthcoming.”
Calculating some of the more
exotic construction risks of
Round-3 projects, like weather
windows and non-availability of
vessels, is proving such a headache
that insurers are unable to step
into the breach, according to Jerry
Biggs, chief executive of UK renewable energy finance and insurance
company Narec Capital.
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FINANCE
“There are gaping gaps in insuring offshore wind farms and some
projects have been uninsured,” he
says. “This is particularly unpalatable for debt finance.”
Mr Biggs believes GIB should
work with insurance companies
and research institutions to
develop models to underwrite
challenging debt structures, and
in turn lower the cost of premiums, which on average account
for 26 per cent of operational
expenditure. “Once they have
that knowledge base, insurers
will then undercut each other and
bring down premiums rapidly,”
he says.
Nobody can be exactly
sure how much these
pioneering projects will
cost to build
The 504-megawatt (MW) Greater
Gabbard offshore wind farm, a joint
venture between RWE Innogy and
Scottish & Southern Energy (SSE),
has been beset by a lengthy construction over-run.
The project, which involves the
installation of 140 wind turbines
located 25 kilometres off the Suffolk coast, was initially scheduled
to be commissioned in 2009, but is
now due to be completed by the
end of 2012.
The delay is allegedly due to
apparent welding defects in 52 of
the array’s transition pieces, which
form a base upon which the wind
turbine stands.
The principal contractor for Greater
Gabbard is US firm Fluor, which is
responsible for installation of the wind
turbines as part of a $1.8-billion turnkey contract. Last year, Fluor sued
Greater Gabbard Offshore Winds
Limited (GGOWL), jointly owned by
RWE and SSE, for a £300-million claim,
alleging the latter had carried out
unnecessary testing and repairs to
the transition pieces.
GGOWL is preparing to countersue Fluor over the quality of the
transition pieces and steel monopoles, which were fabricated by
Chinese firm Shanghai Zhenhua
Heavy Industries and then shipped
to the Netherlands.
The project has also faced construction delays following the bankruptcy of
sub-contractor Subocean, the death
of a worker and even the controlled
explosion of a 680kg Second World
War German mine.
There have been other setbacks
to befall offshore wind farms.
Slower-than-planned repairs at a
faulty export cable, linking to the
300MW Thanet wind farm off
the Kent coast has cost operator
Vattenfall an estimated 60 gigawatt
hours (GWh) of lost power generation, while at the Swedish utility’s
Kentish Flats array, some turbines
are on their fourth gearbox. Meanwhile, Danish utility Dong found
that grouting in the foundations of
164 turbines at its Horns Rev 1 and
2, and Burbo Bank offshore wind
farms had failed, necessitating
costly repairs.
However, most industry analysts
view these teething troubles as an
inevitable part of the UK’s pioneering offshore wind programme
and consider they need not deter
investment.
15