Tuesday, April 10, 2012

(BN) Wind Power Seen Surging as Custom Barges Cut Set-up Cost: Energy

Bloomberg News, sent from my iPhone.

Wind Power Seen Surging as Custom Barges Cut Set-up Costs

April 10 (Bloomberg) -- Offshore wind-power producers from Dong Energy A/S to RWE AG are building custom ships at record rates to reduce the cost of the technology that's three times as pricey as electricity from coal plants.

As many as 20 vessels, some with movable legs that reach the seafloor, will come onto the market in the next few years, reducing chartering costs of as much as 200,000 euros ($261,000) a day, said Marc Seidel, an offshore engineer at Suzlon Energy Ltd., which supplies wind turbines to Germany's RWE.

A lack of specialized installation ships has forced companies to hire barges designed for oil exploration, holding up work at projects such as EON AG's Robin Rigg wind farm off Scotland's western coast. The British government estimates that offshore wind may contribute more than 35 billion pounds ($55 billion) to the economy by 2050 if costs are cut quickly enough.

"Having these vessels is the difference between being able to build the projects that we're all looking at today and not," Paul Coffey, chief operating officer of RWE's Innogy unit, said by telephone from Swindon, England. "They allow you to operate in higher water depths, in more inclement water conditions. They allow you to get the job done faster and more safely."

In the early 2000s, developers had to "beg, steal and borrow" vessels from other industries to get projects completed, Coffey said. Essen-based RWE won rights with SSE Plc, Norway's Statoil ASA and Statkraft AS to develop the Dogger Bank wind park 100 kilometers (62 miles) off eastern England in the U.K.'s third licensing round. Dong had a similar struggle.

Adapting Equipment

"We applied equipment across all elements of the supply chain that were developed for something else," Dong's head of renewables construction, Christina Grumstrup Soerensen, said by phone. "We put land turbines out at sea, and we used vessels developed for the exploration and production industry, or bridge-building equipment."

The new ships allow developers to install turbines in deeper waters, lift heavier weights, cope with bigger swells and carry more machines out to wind-farm sites, speeding up project completion.

A utility can earn 10,000 euros operating a 6-megawatt turbine on a "good wind day," said Thomas Karst, an industry adviser with Make Consulting LLC in Aarhus, Denmark. "If you can have 10 turbines up a month earlier on a project, that's 3 million euros in your pocket from early generation."

While sea-based wind power is among the most expensive forms of renewable energy, countries including the U.K. have promoted large-scale projects to add jobs, harness the stronger winds offshore and lessen the noise and visual impact of turbines on nearby communities.

Cost Comparisons

Offshore wind costs about $232 a megawatt-hour of power generated, according to data from Bloomberg New Energy Finance. That compares with about $80 for onshore wind, $62 for gas-fired plants and $77 for coal. The government supports the industry with incentives for power produced by renewable energy sources.

"If we gave away our turbine for free, we would not even be close to the price of coal," said Jesper Moeller, head of offshore engineering for the wind division of turbine manufacturer Siemens AG. The Munich-based company supplied the majority of machines installed at sea in Europe last year.

RWE spent 200 million euros on two custom-made craft that can operate in waters 45 meters (148 feet) deep and are due to begin work in June and July. The vessels, known as jackup barges, have platforms supported by legs that can be adjusted to fit different water depths and heights for the towers that support wind turbines.

Specialized Vessels

A2Sea, a Siemens-Dong venture which is installing turbines at the 1-gigawatt London Array, the world's largest approved offshore wind park, initially operated two old container ships adapted with cranes and legs, according to Chief Executive Officer Jens Frederik Hansen. The venture now has two larger vessels with another due this year, and on March 23 announced a $155 million deal to have a fourth built by 2014.

"The larger vessels will be fully booked at least until 2020," Hansen said. "The smaller vessels will go into the service area probably for maintenance."

MPI Offshore Ltd., owner of the industry's first purpose- built vessel, the Resolution, turns away "lots of enquiries" from developers, said Managing Director Peter Robinson. The U.K.'s Centrica Plc has the option to use the Resolution until 2016, and a further MPI vessel has been chartered by Germany's EON for six years when it completes its current task.

Goals for Wind

Europe will install about 10.4 gigawatts of offshore wind turbines from this year through 2015, more than 70 percent of the global total, according to New Energy Finance. From around 2015, U.K. developers will start building the country's third round of offshore wind farms, which are typically further from the shore and in deeper waters than current projects.

"These Round 3 sites are going to kick in by 2015, 2016 and beyond, creating even greater demand on vessel capacity," MPI's Robinson said in an interview.

Burgeoning demand was reflected in the $850 million acquisition of shipbuilder Seajacks International Ltd. last month by Marubeni Corp. and Innovation Network Corp. of Japan. The purchase allows Seajacks U.K. to boost its fleet of jackup barges, the third of which will be delivered in May, it said.

Seajacks vessels worked on Dong's Walney 2 wind farm in the Irish Sea, a project that was installed on budget and ahead of schedule, said Sebastian Brooke, Seajacks commercial director.

Norway's Fred Olsen Energy ASA is having two vessels built in Dubai for May and September, and Hochtief AG and DEME Group's GeoSea unit are building a jackup capable of operating in waters 50 meters deep.

Excess Capacity?

"All of those vessels are coming on stream now in 2012, 2013 and 2014," according to Make Consulting's Karst. "From 2012 and forward, there will actually be excess vessel capacity days."

The U.K. has more than 2 gigawatts of wind turbines installed at sea, representing more than half of the European total, and targets 18 gigawatts by 2020. Germany plans to build 10 gigawatts, the equivalent of nine atomic plants, as it phases out nuclear following Japan's Fukushima disaster in 2011. Such plans are dependent on a reduction in costs, according to Repsol YPF SA, which has stakes in three wind projects off Britain.

"We really need to see some significant cost reductions in the sector before we're going to see the build-out at scale," Ronnie Bonnar, managing director of Repsol's Nuevas Energias U.K. unit, said in an interview. That includes the costs of vessels, turbines and foundations, he said.

To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.net Sally Bakewell in London at sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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Eugene.

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