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How can the offshore wind industry unlock its cost saving potential?

Within the last decade a multi-billion Euro industry has been stemmed out of the European and UK waters to find itself confronted with the challenge today that it has to cut its cost down to nearly half to survive without subsidies in future. “Offshore wind is too expensive;” “Rueing the waves;” “Offshore Wind costs twice as much as coal and gas generated electricity”—are just a few headlines recently seen in western newspapers.

In Asia’s biggest Offshore Wind Market China with a (recently revised) targeted installed capacity of 10 GW Offshore Wind by 2020 the exact same discussion is held latest since the new feed in tariff of 850 CNY/MWh was introduced in June 2014. Much applauded for the fact that there eventually is a number, but with covering only roughly half of the LCoE of Offshore Wind in Europe, being accused by the industry of being far too low (Offshore Wind Tariffs/MWh expressed in US$ for comparison: UK 261 USD, GER 205 USD, CN 138 USD). No wonder that Offshore Wind is delayed everywhere; putting tremendous investments, jobs, and finally companies at substantial risk.

The industry needs to find a way to move close together fast and unlock its cost saving potential. Looking at the amount of savings required and the little time we have to realize those I believe that these cost savings need to be achieved on an international scale. Although not directly comparable, I cannot help to remember what people said about Solar when I was a student. Solar PV might be a dead industry today would China have not dramatically driven down the cost for Solar PV panels. The technology which one felt pity for in a friendly way when wind was getting cool and en vogue has bigger growth rates today and is expected to overtake wind on annually installed capacity per year soon. Can this game change happen in (Offshore) Wind too? It is believed that there is room for 15% cost savings in the Offshore Wind supply chain by effect of scale, standardization and competition. The timing at least gives us a chance to achieve this faster than in Solar since Europe and the UK face the problem at the same time as the world’s largest manufacturing nation China which strives to soon become one of the world’s biggest Offshore Wind nations too. Might we even achieve more savings this way?

Making the production more efficient, though, is not the only answer to achieve 40 to 50 percent cost savings obviously. It’s also about doing things right, doing things better, and doing things differently. DNV GL has therefore recently launched its Offshore Wind Manifesto with the intention to help the industry getting the jigsaw puzzle of already existing promising approaches and initiatives by the many experienced stakeholders together to one big picture, and adding the pieces which were missing. Many of these initiatives call for Joint Industry Projects to unlock efficiencies by advanced technologies and design integration, as well as by the optimization of installation and operation processes and procedures, and it is very promising to see how companies open up to transparently share experience, data, success stories and failures. Currently that happens in regional silos though and my vision would be that in addition to international consultants offering their advisory services to the Asian Offshore Wind Industry, Asian industry players join the joint industry projects in Europe and UK, or even better that we make them global joint industry projects. This would not only have the potential of taking a broader view on how the Offshore Wind Industry needs to look like tomorrow, but also gives us a chance to develop a global approach for Health, Safety, and Environment related matters for which—no matter which cost pressure we are under—we cannot afford compromises.

1 Comments Add your comment
Avatar Yang Hu says:

Great article on cost reduction. One thing I’d like to say is that manufacturing cost reductions can be achieved on an international scale, but permitting cost/time savings need to be addressed locally.

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