“Offshore wind offers great promise but the industry is at a very delicate stage now. We can’t afford to make mistakes in construction that lead to cost overruns,” warns Joe Phillips, Head of Strategy & Policy for Renewables at DNV GL, one of the largest technical energy consultancies in the world. DNV GL has recently issued an “offshore wind cost reduction manifesto” that commits the company to help reduce costs in the sector by 25% and additionally offers a “feasible” cost reduction scenario of 40%. “If you can’t become competitive in the next decade, you have to question whether you are sustainable,” says Phillips.
For Joe Phillips it’s almost a personal mission. He does not mince his words when it comes to the urgency for the offshore wind sector to bring down costs. “It is crucial to make progress. If we don’t, then the political bargain will collapse,” he says. “We can’t expect to continue to be massively supported into the next decade.”
Phillips, who has a degree in mechanical engineering, has worked in offshore wind for 10 years, as Principal Engineer and Head of Strategy and Policy at GL Garrad Hassan, now DNV GL. “Offshore wind is where I come from,” he says.
For Phillips’ company DNV GL, established in September last year as the result of a merger of prominent European engineering and certification companies, including Det Norske Veritas (Norway), Germanischer Lloyd (Germany) and Kema (The Netherlands), offshore wind is not some minor concern. “Offshore wind is the point where all the core businesses of DNV GL meet – maritime, offshore engineering, renewable energy, power transmission and marine operations. We have the ability to understand the whole value chain, take the broader view and chart a course,” is how Johan Sandberg, Service Line Leader Offshore Renewables at DNV GL, puts it in the foreword to the company’s offshore wind cost reduction manifesto published on 25 September 2013.
For this reason, DNV GL has decided to take a leading role in the global drive to make offshore wind cost-competitive. Because no matter how attractive and clean offshore wind may be to its proponents, “even the greatest advocate for the industry would agrees that costs have to come down”, says Phillips.
No debate
Indeed, despite the great promise it offers as a source of domestic, CO2-free, non-polluting energy with minimal visual pollution, offshore wind is still one of the most controversial forms of renewable energy. Critics point to the sector’s large infrastructural requirements, question its long-term reliability and note that unlike solar and onshore wind, it relies on centralised control. But the greatest criticism concerns its high cost – currently around €140-€160 per MWh – 20-25% more than, for example, the UK government will be paying EDF for the power to be produced by the planned nuclear power station at Hinkley Point C, which itself has been criticised heavily for being too expensive.
No matter how attractive and clean offshore wind may be to its proponents, even the greatest advocate for the industry would agree that costs have to come down.
The high cost of offshore wind has already led countries like the UK, Germany and the Netherlands to scale back their earlier ambitions for offshore wind. “In Germany five years ago the target was 25 gigawatts (GW) by 2025,” says Phillips. “Now the most recent commitment in terms of funding takes the country to 5 GW by 2020. In the UK the initial aspiration was 32 GW by 2030. In theory that’s still possible, but the industry has stalled. Only one project has reached financial close in the past 12 months. Regulatory changes mean that government funding to support offshore wind is significantly reduced. Realistically, we are looking at one project a year coming through in the UK till 2020, each of about 500 MW.”
Credit: DNV GL
Yet, despite these criticism and setbacks, Phillips’ faith in the potential of offshore wind remains unshaken. “If we did not believe this was feasible, then you’d have to ask yourself why we are putting so much money and resources into it. We do believe it. The whole industry does.” Indeed, he adds: “There is no debate any more about whether it’s possible to make offshore wind competitive. The debate is not about if, but about how to achieve this.”
In this respect, Phillips is not unhappy with the scaling back of earlier plans. “You can say the new plans present a depressing picture, but I think it’s a more realistic one. And the volume is still high enough to support a supply chain, to continue attracting investment. Everyone assumes that the only way offshore wind can succeed is to make it really big, because of the economies of scale you get. But at this more modest size you can also have a viable industry.”
Joint industry projects
Still, the “how” in the equation is no simple matter, Phillips agrees. In its search for cost reductions, DNV GL has found that there are no silver bullets. There are no clear scale pathways towards cost reduction, as there are in the solar industry for example, or in electricity storage. There are only many different, incremental steps that need to be taken that together will lead to the desired result, says Phillips.
DNV GL’s manifesto contains 14 specific cost reduction pledges across a wide range of activities, from data sharing operations to improvements in turbine design. These 14 pledges are broken down into three categories: doing things right, doing things better, doing things differently. Only the last category refers to real technological innovation, the first two are mainly about improving existing practices. “And none of this is optional,” says Phillips. “Even shaving an hour off construction activity can have an impact.” There is a danger, he says, that “all attention is placed on big, sexy things like bigger turbines. But we can’t lose sight of the more boring, incremental improvements.We can’t afford to make mistakes in construction that lead to cost overruns.”
One crucial way for the offshore wind industry to cut costs is to collaborate – rather than compete – on developing best practices. This is what the oil and gas sector does.
One crucial way to cut costs that DNV GL has identified is for the industry to collaborate – rather than compete – on developing best practices. According to Phillips, the offshore wind sector needs to take a cue from the oil and gas sector and focus relentlessly on bringing costs down by solving problems together. “At DNV GL we are active in offshore oil and gas, so we know first-hand how this sector operates.”
The offshore oil and gas industry often works with so-called joint industry projects (JIP’s). What happens is that competitive rivalries get parked and companies collaborate to solve a problem, which will subsequently come to serve as an industry standard. “What it means is that you need to get rivals to speak the same language. Get your boffins in a room and let them crack the problem. If you allow commercial people to dominate the conversation, you will get nowhere.” The first JIP’s have already been initiated now in the offshore wind industry, Phillips says.
Collaboration is important for another reason as well, Phillips notes. Currently, the supply chain in the sector is fragmented, as a result of which cost reductions in one part of the chain are not taken up because they benefit a different part. “For example, right now you have companies making turbines and companies making foundations. We found that by adopting an integrated approach to turbine-foundation design, we could save at least 10% on levelised costs.” Phillips illustrates the advantages integrated design can offer with a simple example: that of pitch control. “Increasing the frequency of pitching the blades, adjusting them to the force of the wind, reduces the force on the structure, so you need less steel in the foundation. But you are asking the turbine companies to take a risk which will primarily benefit the foundation design.”
Right pathway
Currently, offshore wind costs about €140-160 per MWh, including grid connection costs, says Phillips. In its manifesto, DNV GL pledges to help bring this down by 25%, by following its 14 different initiatives. In combination with other trends, says the manifesto, the “broadly endorsed industry cost reduction target of 40% is feasible”. In other words, offshore wind projects starting around 2020 should cost about €100 per MWh. “That’s in line with targets set by the government both in Germany and the UK.”
So far, responses to the manifesto have been mostly positive, Phillips notes. “We are going over a list of 300 companies who have responded. With many of them we are following up on an individual basis.”
In any case, given its cost reduction potential, offshore wind offers a brighter perspective than the Hinkley Point C nuclear power project, which gets £92.50 (€117.00) per MWh for a period of 35 years from the UK government – guaranteed, inflation-adjusted, and with no need to bring down costs.
Not so for offshore wind: Phillips makes it clear that €100 per MWh is certainly not the end of the story. After 2020, cost has to be reduced further, he says. “If we can deliver €100 per MWh by 2020, we are on the right pathway to become competitive in the 2020s. If we can’t deliver that, you have to question whether there is a pathway at all.”
source: http://www.energypost.eu/interview-joe-phillips-dnv-gl-offshore-wind-one-way-forward-together/
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