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Photoblog: Another offshore wind farm under construction

by Jerome a Paris Sun Jul 11th, 2010 at 05:03:09 AM EST

I had the pleasure of accompanying my most famous client to visit another offshore wind farm under construction with the same turbines. We took the train to lovely Harwich an hour and a half away from London, and set out to visit the soon-to-be largest offshore wind farm.

It will be the first of several massive wind farms which are larger than 500MW each (meaning they can produce close to 2 TWh of electricity per year), and a price tag in the EUR 1.5-2 billion range. That price can be split roughly in 3 similar-sized bits, being (i) the turbines, (ii) the marine construction work, including the foundations, and (iii) the rest, including development costs, electrical equipment (high voltage transformer station and cables) and, if relevant, financing costs. The size of the different fractions can vary depending on the distance to shore, water depth, site conditions and regulatory framework (in Germany, for instance, you don't need to build the high voltage export cable as this has to be taken care of by the grid operator).

This is part of my wind series. As noted before, I advise wind farm developers on their financing needs, including, as noted in the first link above, US developers.


Construction typically starts with installation of the foundations, laying of the intra-array cables, and installation of the foundations. The offshore transformer station and main export cable are independent tasks which are typically done as early as possible as their absence prevents the operation of the wind farm - but these are "long lead items" - ie it takes time to order them and build them.

:: ::

Offshore transformer station

In this case, the project is so vast that it has 2 transformer platforms and 3 export cables. Here's one of the platforms. It is roughly 30 meters by 30 meters by 30 meters:

:: ::

Foundations

Today, almost all of the foundations - the parts of the structure that are hammered, or anchored on the sea floor and carry the turbines - have been installed, as have most of the "transition pieces" - the intermediate part of the structure which sits between the foundation and the turbine, ensuring that the bit where the turbines are built is perfectly horizontal, and including the boat landing, cable tubes and sometimes some of the electrical equipment.

Here are some of the foundations with nothing on top:

(In the back, you can see the foundation laying vessel, a huge boat, but we were not allowed to approach, as it was engaged in manoeuvring with its anchors and the security distance was quite large)

Here's a transition piece:

:: ::

The turbines

And the same with the turbines on top:

Most of the turbines were still in the storage area at the port:

You can see the bottom part of the towers on the right, and nacelles on the left. Blades are also on site, but not visible on that picture

:: ::

As the first picture above suggests, a few of the turbines have been erected already, which means that there was activity across the different tasks on the wind farm, allowing it to see various bits of the construction. What is striking is the number of vessels engaged in work on such a wind farm; beyond a number of smaller crew vessels and various tug boats (not shown here), here's a sample.

Hotel boat

A hotel vessel for the construction crews, located on the edge of the wind farm. Workers typically spend 2 or 3 weeks in a row over there. With the site 20 miles from shore, you can save 3 hours of transfer per day for workers - plus they are not woozy or seasick when they get to their tasks...

It's like a cruise ship, except that there is no alcohol on board...

Transport vessel

This is a simple transport vessel, bringing the turbines from Denmark to the staging port. You can see the two tower sections (the bottom one is vertical, the second one is horizontal) and blades. I would guess the nacelles are transported by a separate boat.

Cable laying vessel

And here is a cable laying vessel. Notice the platform on the front of the boat, which can carry several kilometers of rolled up cable (in that case, the boat was not doing any installation):

With turbines typically situated 500-800 meters from each other (with larger distances in the prevailing wind directions, to limit wake effects), you typically need more internal cabling than export cable, and you need to know exactly where you put these cables, to avoid any damage (in a famous incident in an earlier wind farm, one of the vessels installing turbines jacked up through one of the cables, damaging it...)

:: ::

Installation vessels

The project was using at least 3 jack-ups at that point. Jackups are boats which are able to "stand" on the seafloor thanks to retractable legs which can be lowered to the seabed and carry the boat. Their usefulness is constrained, naturally, by the size of their legs (which limits the water depths they can be used in) and their carrying capacity, both in terms of useful loading area on board and of the capacity of their crane(s). The jackups used by the project were quite different:

The first one was a simple barge with no means of propulsion: it needs to be tugged to site. It was on its way to the construction site. We overtook it when we went there ourselves, and it still hadn't arrived when we left: the trip requires roughly 6 hours for such a barge. It can carry 3 full turbines:

As you can note, the tower sections have been pre-assembled onshore. Any work which can be done onshore is a huge time and cost saver as things are always more complicated offshore. In this case, blades must be installed individually.

The second jackup is a self-propelled vessel (ie it can move with its own engines); it can carry 2 turbine sets. It has strong lifting capacity, but the positioning of the crane between the legs makes it more difficult to load the blades onto the vessel in the harbor.

A third jackup vessel was available; note how the cranes are located on the "legs," giving them a lot more freedom to move. However that boat is also relatively small.

:: ::

There have been two philosophies to build offshore wind farms: consider that it is a wind farm project that happens to be offshore, or consider that it is marine construction work which happens to include wind turbines. In either case, construction has been complicated until recently by the lack of adequate vessels and the need to make do with equipment which had not been specifically designed for the tasks involved in the offshore installation of wind turbines. A lot of oil&gas people scoff at the wind industry people when they explain how difficult it has been to build the turbines: after all, the few hundred tons which need to be lifted when the various large bits of a turbine are being installed are rather puny compared to the massive structures built for offshore oil&gas platforms; but oil&gas people tend to underestimate (i) the logistics involved in transporting and building dozens, and now hundreds, of identical structures at sea, and (ii) the specific requirements of below-centimeter tolerances to position multi-hundred ton items 80 meters above the sea...

The land requirements in harbors for storage (but with reinforced quays to bear the loads), the carrying capacity of the vessels (to transport the parts 20km - and in forthcoming projects 100km out at sea), the transfer times, the crane specifics (to install towers, nacelles and blades, which are very different animals) make this industry a very unique one, and it is now just beginning to work out the best way to do things - and of course, all sites have different characteristics (depth, distance to shore, nature of the subsea soil, size of the turbines selected) which make standardised, universal equipment a pipe dream...

But it's happening - and it's keeping an increasing number of people busy.

There are worries about how quickly the supply chain will ramp up to accommodate the massive investment plans being contemplated; ironically, I still think that the technical side will be easier to take care of than building up the commercial teams of the various key players (turbine manufacturers, project developers, financing institutions) which must put in place the highly complex contractual framework for these massive, and still risky, projects. Right now, it seems it's the same people on almost every other project...

Display:
sometimes generates some strange results...



Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 05:05:22 AM EST
by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 05:05:55 AM EST
[ Parent ]
to learn something about our future.  Thank you, Jerome.

And I'm glad you don't look Serious.

Our knowledge has surpassed our wisdom. -Charu Saxena.

by metavision on Sun Jul 11th, 2010 at 06:06:28 PM EST
[ Parent ]
What was your camera smoking?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Migeru (migeru at eurotrib dot com) on Sun Jul 11th, 2010 at 06:47:52 AM EST
[ Parent ]
I thought you said there was no alcohol on board...?!?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jul 11th, 2010 at 11:05:32 AM EST
[ Parent ]
Any reason you didn't mention what turbines are being installed on the project? Here's a schema of the Siemens SWT 3.6/107.

Tech specs HERE.

There are currently some 98 of these babies in operation, almost all offshore.  Siemens has hundreds of smaller turbines (2.3MW) operating offshore, some for years.

Here's their Offshore PDF.

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Sun Jul 11th, 2010 at 05:40:33 AM EST
How would this be done without petroleum-based ships? Sail tug boats towing the platforms? Or would it be simpler and easier to put little nukes in most of the construction vessels?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 11th, 2010 at 05:44:57 AM EST
H2 from desalinated seawater using offshore wind electricity?

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin
by Crazy Horse on Sun Jul 11th, 2010 at 05:52:46 AM EST
[ Parent ]
using some/all of the extracted salt for peak extra energy storage?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Sun Jul 11th, 2010 at 06:19:57 AM EST
[ Parent ]
the boats are petroleum-powered. But the energy input is minimal compared to the overall energy input of the wind farm. The EROEI is generally estimated to be in the low 20s, meaning that it takes 6 months to "recoup" the initial energy costs.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 06:58:52 AM EST
[ Parent ]
Why would you want that?

A 'centrist' is someone who's neither on the left, nor on the left.
by nicta (nico@altiva․fr) on Sun Jul 11th, 2010 at 07:13:45 AM EST
[ Parent ]
Oh, just thinking a bit ahead to when we won't have cheap bunkering oil for ships...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 11th, 2010 at 08:22:26 AM EST
[ Parent ]
Right now, it seems it's the same people on almost every other project...

how frustratingly lucrative ;-))

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Sun Jul 11th, 2010 at 06:37:59 AM EST
there is that, yes. But I do need to find a way to free up some time for the rest of my life...

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 06:59:47 AM EST
[ Parent ]
But I do need to find a way to free up some time for the rest of my life...

that's ET, right, stranger?

;)


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Jul 11th, 2010 at 11:20:04 AM EST
[ Parent ]
European Tribune - Photoblog: Another offshore wind farm under construction
ironically, I still think that the technical side will be easier to take care of than building up the commercial teams of the various key players (turbine manufacturers, project developers, financing institutions) which must put in place the highly complex contractual framework for these massive, and still risky, projects.

...use a partnership enterprise model. :-)

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Jul 11th, 2010 at 11:48:24 AM EST
[ Parent ]
do you really think complexity goes away because you decide to ignore it?

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 12:35:42 PM EST
[ Parent ]
If interests are aligned and conflicts minimised, less prescriptive - and complex - agreements are necessary.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sun Jul 11th, 2010 at 01:37:05 PM EST
[ Parent ]
by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 02:02:32 PM EST
[ Parent ]
...for the users of financial and professional services, but not necessarily for the providers.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sun Jul 11th, 2010 at 02:21:32 PM EST
[ Parent ]
I've said repeatedly that offshore wind should be done by State owned companies under a long range coherent plan with the corresponding industrial policy.

That will not eliminate the technical complexity of the industry and the need to understand and allocate the underlying risks properly.

Project finance bankers and associated parasites have brought discipline to projects on that front, but whatever. Enjoy your utopia.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 02:28:43 PM EST
[ Parent ]
But surely Utopia is something we use to aim for,  not as an excuse for supporting the status quo. We'd all like a General Theory of Economic Dynamism, but we are a long way off still. Meanwhile, in such a circumstance, do scientists stop stumbling through possible steps to the General Theory? No, they continue to make asses of themselves.

But Utopia is in the back of their minds. What other motivations are there?

Your defence of what you do is at least as powerful as my own defence of what I do: but we are going to be superceded. And I suspect that will now happen quite some time before Keynes' mortality dictum applies.

You can't be me, I'm taken

by Sven Triloqvist on Sun Jul 11th, 2010 at 03:00:44 PM EST
[ Parent ]
Since you think I defend what I'm doing, maybe you could explain it to me, so that I understand what you think I'm defending, and then explain how it can be improved.

Otherwise these conversations are a bit surreal or silly or both.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 03:15:12 PM EST
[ Parent ]
Jerome a Paris:
I've said repeatedly that offshore wind should be done by State owned companies under a long range coherent plan with the corresponding industrial policy.

'State-owned company' might IMHO better be a partnership with State participation, but the rest is self evident, and none of it anything to do with my point.

Jerome a Paris:

That will not eliminate the technical complexity of the industry and the need to understand and allocate the underlying risks properly.

Agreed. But that was not my point. My point is that a partnership framework is probably an optimal way of allocating risks, which is why they are emerging in use. Upon the subject of risk, having been a director of a global exchange and for many years closely involved with the complexities of cross-border international clearing and settlement, I think I have some understanding.

Jerome a Paris:

Project finance bankers and associated parasites have brought discipline to projects on that front, but whatever

When have I ever said otherwise? I have never objected to bankers or professionals who add value and I certainly would not criticise rewards commensurate with skills and experience.

The more complex and difficult it is to bring these transactions together, the fewer the people capable of them; the more valuable their skills; and the more in demand they will be.

Would a simpler contractual framework be in their interests? Good question, and I suspect the answer is a trade off between financial reward and quality of life.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Jul 11th, 2010 at 03:11:36 PM EST
[ Parent ]
the more complex contracts are those between the project company and the industrial contractors. The financial contracts are much simpler.

The complexity is not created by the financiers. And they don't cost much either.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 03:20:47 PM EST
[ Parent ]
Jerome a Paris:
the more complex contracts are those between the project company and the industrial contractors. The financial contracts are much simpler.

The complexity is not created by the financiers. And they don't cost much either.

Very good point, and the disastrous state of the Edinburgh Tram project could be an object lesson.

Trams scheme `took wrong route' - Herald Scotland | Business | Corporate & SME

A project originally expected to cost £250m is now expected to come in at £650m. The massive disruption that the work has entailed for businesses and consumers may continue until 2014.

But my fundamental point remains.

Partnership-based agreements are not by any stretch of the imagination 'utopian' but an increasingly important tool in the development toolbox, particularly now that conventional financing is increasingly difficult.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Jul 11th, 2010 at 03:31:25 PM EST
[ Parent ]
I've said repeatedly that offshore wind should be done by State owned companies

Why?

Not that I particularly object to the sovereign taking an active hand in industrial development, but I was under the impression that wind actually was a sector where simply ensuring the correct market structure via preferential dispatch and fixed prices would be sufficient to permit private planning units to perform the actual industrial development. This not so?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 11th, 2010 at 03:12:10 PM EST
[ Parent ]
is two things:

  1. investing at a cost of funding which is that of the State rather than that of the private sector;

  2. having a long term investment framework which provides a stable environment for the manufacturers to build up the industrial capacity.

There are various ways to achieve this.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 03:18:48 PM EST
[ Parent ]
Jerome a Paris:
investing at a cost of funding which is that of the State rather than that of the private sector;

As QE demonstrates, the cost of State development credit is zero. Once productive assets are complete, then development credit may be retired and recycled by refinancing.

Securitisation would be a conventional way of refinancing: I advocate direct investment in energy production by 'unitisation' - ie monetisation of energy.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Jul 11th, 2010 at 03:39:17 PM EST
[ Parent ]

As QE demonstrates, the cost of State development credit is zero.

short term funding is at zero, for now, but not long term funding. it's relatively cheap right now, but that may not last (cf "bond vigilantes).

But in any case, unitisation will cost more than the sovereign cost of funding, otherwise why would investors do it?

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun Jul 11th, 2010 at 04:12:31 PM EST
[ Parent ]
Jerome a Paris:
short term funding is at zero, for now, but not long term funding. it's relatively cheap right now, but that may not last (cf "bond vigilantes).

I am not talking about State Debt, which is public borrowing: I am talking about State Credit.

That is what QE actually is: it is not debt, although that is the fundamental misconception of Keynesian and Monetary economists alike. It is akin to a non interest-bearing redeemable share.

State Treasuries may simply spend (under professional management like your good self of course) the necessary development credit either by writing cheques drawn on a central bank or by issuing Treasury notes (eg the US 'greenbacks').

Private banks already do precisely the same thing when they pay staff; other costs; dividends to investors; or when they buy (say) government debt. In other words they both lend and spend credit into existence, creating demand deposits as they do so.

That is how our deficit-based system works.

Jerome a Paris:

But in any case, unitisation will cost more than the sovereign cost of funding, otherwise why would investors do it?

Unitisation of energy is the issue of Units redeemable in payment for energy. (NB to avoid misunderstandings, Units do not secure supply).

There are many billions of dollars already invested in energy, typically through oil and gas Exchange Traded Funds which are generally served (and too often pillaged) by investment banks using structured finance and/or the futures markets.

These ETFs - like any other funds invested in commodities - are 'hedging inflation', and you will understand that like gold, energy offers no return on investment.

Unitisation creates an investment denominated in energy rather than in fiat currency. So it does not necessarily cost more: in fact, the beauty of funding renewable energy in this way is that the Units which are used to fund renewable energy projects or even energy saving projects cost nothing to redeem.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Jul 11th, 2010 at 05:44:26 PM EST
[ Parent ]
True, but on the other hand we have existing industrial and institutional capacity in the private sector that has demonstrated its ability to actually build working wind farms. And there are a lot of projects where such capacity does not exist, has not been proven to be possible or has been proven to be impossible (railways being a very good example). Now, I'm not a big fan of the idea of "crowding out" or the idea that government has some fixed maximum size that makes government spending compete against itself, so to speak. But recreating under public supervision what already works reasonably well in the private sector strikes me as vaguely silly, in the same way as privatising well-running public services.

The first of the issues you raise can be taken care of by a public industrial development bank, no? That is a good idea in any case, and would have wider impact than "just" wind power. The second issue is one of liaisons with the grid operator, and there is a good case to be made that the grid operator needs to be heavily regulated and/or under direct sovereign control. Of course, there is a case for subordinating the generation of power to the grid operator rather than separating those functions, which I suppose would put the wind farm development indirectly under sovereign management...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jul 11th, 2010 at 06:27:28 PM EST
[ Parent ]
and it is THE future, so now is the time to train your understudies and delegate!  (Select people well.)  Train and mentor before you burn out and miss your private life.  Share the work, share the wealth.  

P.S.  No.  The kids are too young to work and they have a right to choose their own field.  (;

Our knowledge has surpassed our wisdom. -Charu Saxena.

by metavision on Sun Jul 11th, 2010 at 05:56:35 PM EST
[ Parent ]

It will be the first of several massive wind farms which are larger than 500MW each (meaning they can produce close to 2 TWh of electricity per year), and a price tag in the EUR 1.5-2 billion range. That price can be split roughly in 3 similar-sized bits, being (i) the turbines, (ii) the marine construction work, including the foundations, and (iii) the rest, including development costs, electrical equipment (high voltage transformer station and cables) and, if relevant, financing costs.

No one is yet sure how important each of the basic three project components will be in terms of life cycle costing.  I've given this a couple days thought, and I must note that what's really important is the value of the production of electricity, and that's the function of the turbines. The failure of either of the other two sectors (barring catastrophic failure) is not as important as the turbines.

The reasons the foundations, grid interconnections, and even development and financing costs are incurred is because we go to sea to more efficiently harness the wind.  It's the turbines which do that.

The turbines' task is to harness the wind and produce TWh, over the life of the financing costs and then some. The revenue stream to pay for all three sectors comes from the power train. Thus, though capital costs can be divided into the three sections, isn't the lifetime success of the project due to the turbines' performance?

Foundations are either stable or not, last or not. When not, it's a catastrophic failure of the project design phase. Development costs can't really fail, though they can be excessive. Grid costs are completely standard, though of course with higher cabling costs, with the addition of a standard substation on sea legs (with added compliance to the harsh marine environment).

But the revenue stream which pays for it all is dependent upon the performance of the turbines (and the development cost of estimating the wind resource.)  After all, these may be huge capital projects in comparison with mature onshore wind projects... but they're still wind projects.

So it would seem that in allocating risk, one third of project costs bears a much higher burden than the other two thirds.

My question is, do current contracts reflect such risk allocation?

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Tue Jul 13th, 2010 at 07:18:48 PM EST
you can argue that more of the construction risk comes from the offshore work phase, which is definitely not in the hands of the turbine manufacturer. The risks are that of delay, cost overrun and, if problems appear later (like grouting) further costs.

The cables and electrical equipement can be single points of failure with a massive impact on the project.

So altogether, we do try to finetune the turbine contracts (supply & installation on one side, and long term operations on the other), but we can't ignore the rest at all.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Wed Jul 14th, 2010 at 05:28:40 AM EST
[ Parent ]


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