CUTTING OCEAN WIND COSTS

Keeping the lid on offshore installation costs
Andrew Williams, 28 March 2011 (Wind Energy Update)

"Several sector-wide factors have raised the underlying costs for offshore wind over the last few years, including rising commodity prices, currency fluctuations and bottlenecks in the supply chain. At the project level, a sluggish planning and consenting process has also eaten into budgets…

"At the installation stage, day rates for hiring installation vessels are also very high, so it is essential that developers maximise utilisation rates [by avoiding fabrication and weather delays to ensure vessels aren't sitting idle]…[O]ver-optimistic planning schedules for installation, that don’t consider the compounding impact of delays on other elements of the project, and delays on milestone payments and income from generation, are another cause of cost overruns…"

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"Planning for weather effects is complex. The impact of a delay in good weather can deliver a one-two punch to project schedules - one at the time, and another later when the installation schedule slips in to periods where the likelihood of weather down time is higher…

"In an effort to minimise costs and reduce risks…wind energy companies should ensure they devote sufficient time and resources to making the best technology choices and…[do] ‘front end’ engineering design…[along with] more effective project teams and detailed project development process schedules, including integrated contracting strategies and project control mechanisms…"

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"Another effective strategy is to engage early with experienced installation companies on the wind farm layout and installation infrastructure. This would allow cable manufacturers, foundation manufacturers and installers to collaborate…for optimal installation…[L]ogistics providers…should bring more value to projects…by proposing commercial models that would spread the risk and minimise installation times…[such as] building interesting partnerships with the supply chain, including turbine manufacturers, fabricators and installers - essentially taking lessons from oil and gas to align incentives to minimise system costs…

"…[A] more rigorous, detailed and integrated approach to the planning, management and execution of key project stages could well pay dividends for forward thinking companies."