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DNV GL’s Colin Morgan on predicting in the future: Get real

Colin Morgan-smallOffshore wind may fall short of unrealistic forecasts, but it can still deliver the goods.

In 2003, we predicted that the burgeoning European offshore wind business was an all-or-nothing affair. We thought it would either fizzle out or skyrocket. We were wrong. For the last ten years offshore wind has made modest progress; installed capacity has grown steadily but fallen consistently short of predictions.

The reasons for this so-so performance against targets have as much to do with forecasts as the reality of building wind farms. In the UK, for example, stewards of the seabed The Crown Estate opened up enough of the waters around the country during 2010 for a huge 32GW of capacity in addition to the projects already under development. At the time the stated objective was to see the bulk of the entire programme up and generating by 2020.

Experience has shown this expectation as not merely optimistic; it was wholly unrealistic. Successive updated projections from the government have downgraded the ambition, first to 18GW total capacity in 2020 and, more recently, a range of 8 to 13GW. In fact, our own most recent analysis of the funding offered by the UK Treasury indicates that the upper end of this range is a stretch target.

Overinflated or unrealistic expectations for offshore wind are damaging for governments, developers and the supply chain. A failure to deliver the anticipated capacity may jeopardise governments’ environmental and industrial goals and hurt supply chain players—especially those who boldly invest in the sector to gain ‘first mover’ advantage. Independent developers, whose business model is built on a steady flow of new projects, are hurt more than the utilities which have more diverse interests.

The overall effect is a gradual erosion of confidence—especially among the parts of the industry most vital to its success. The early optimism is understandable: the vast emptiness of the sea, the superb wind resource and the seemingly unlimited capacity for clean energy generation has inspired spirited enthusiasm for offshore wind in maritime countries around the globe.

For utilities, the prospect of fulfilling obligations to source renewable energy in gigawatt chunks rather than piecemeal onshore wind or solar development is hugely attractive. To the pioneering, independent developers, taking the experience of decades of onshore wind development offshore seemed to be little more than a case of chartering a few boats. To contractors used to the scale and challenges of getting oil out of the seabed, putting up windmills looked like child’s play.

Reality bites
But, as ever, when something appears too good to be true, it probably is. In market after market we have witnessed a dawning realisation that the sea is not the unclaimed wasteland it at first appeared to be. There are numerous economic claims on the sea and the seabed. The environmental permitting of unknown technology in sensitive environments turns out to be devilishly complex, rife with confusion about which department of the government should do what and even which laws should apply.

Even once underway, the construction process begins to illuminate just how radically different constructing wind farms at sea is from the familiar onshore context. We’ve seen seasoned onshore wind specialists lose heart and the oil and gas contractors realise that the margins available from supplying renewable power simply can’t compete with those that can be earned from supplying hydrocarbons, especially when the oil price is over $100 a barrel.

Overcoming delays and ballooning construction costs is often a ticket to even more misery. Operational issues and serial defects in turbine products untested in the marine environment often leads to lower than expected production. The net result is contractors that are sore, if not insolvent.

To add insult to injury, in the mid to late ‘00s, learning from bad experiences led remaining contractors to price more cautiously and seek more conservative contracts. And, as the regulatory frameworks were tested, the stakeholders took up their positions and began to assert themselves. In response, to the dismay of governments, offshore wind costs rose.

Bloodied but unbowed
It’s been a bumpy ride, but after a tumultuous decade and a lot of learning, all of the factors needed for sustainable offshore wind business are in place in Europe. A supply chain now exists, despite ongoing policy uncertainty in the UK. Regulators and the permitting processes Offshore wind may fall short of unrealistic forecasts, but it can still deliver the goods all of the factors needed for a sustainable offshore wind business are in place they oversee are working. There is a clear trajectory to lower the cost of offshore wind energy. Installation techniques and project management have improved to such an extent that the Thanet offshore wind farm in South East England saw 100 3MW turbines installed at a rate of more than one a day. Nobody should be in any doubt that offshore wind is difficult. The rapidly evolving engineering is relatively new and the regulatory processes in some jurisdictions have had to be written from scratch. The lesson for those who want to be involved in this industry is “treat official forecasts with skepticism.” But they should also remember that while offshore wind has fallen short of the unrealistic expectations, the progress has still been remarkable. From a standing start ten years ago there are now 2,000 turbines currently generating clean power—the fruit of an industry which employs thousands of people. An impressive record by anyone’s measure.

This article first appeared in Offshore Wind: 10 years, 10 lessons. The complete document can be downloaded from here.

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