Joining forces

Thursday, 26 March, 2015 - 17:00
BBC moderator Stephen Sackur (l.) probed the sector, asking what exactly stakeholders feel that the slogan “united industry” means. Leo Schott (LM Wind Power), Rolf Normann (Fred. Olsen), Magnus Hall (Vattenfall) and ­Michael Hannibal (Siemens) were answering the ­questions (from right to left). Photos (2): EWEA
BBC moderator Stephen Sackur (l.) probed the sector, asking what exactly stakeholders feel that the slogan “united industry” means. Leo Schott (LM Wind Power), Rolf Normann (Fred. Olsen), Magnus Hall (Vattenfall) and ­Michael Hannibal (Siemens) were answering the ­questions (from right to left). Photos (2): EWEA

In March, the offshore wind industry’s big get-together was hosted in Copenhagen. Once again, the focus was on reducing costs. Of course, tightening the cost-cutting screw is getting more and more difficult, and new strategies are essential.

In terms of cost reduction, the general consensus is that the offshore wind industry has already mostly harvested the lowest hanging fruit. Claus Hviid Christensen, Dong Energy’s Vice President, ­nevertheless describes the situation in a positive light: “There will always be low hanging fruit – it just depends on how tall you are. If we want to pick them all, we must climb onto each other’s shoulders.”

“Reducing costs remains the greatest challenge for all of us,” agrees Siemens Wind Power CEO Markus Tacke. In opening EWEA with this statement, he went right to the heart of what this year’s offshore con­ference was all about. Currently, the efforts to reduce costs mainly rests on the shoulders of Siemens, the market leader. The company intends to fall below 10 €/MWh by 2020 – far from an empty promise, thanks to industrial production and well-filled order books.

However, Siemens certainly does not see itself as a lone rider.  “United industry” is the slogan that the company has launched with two other major players, Dong Energy and MHI Vestas Offshore. A position ­paper serves to bring together the companies that are otherwise competitors. Apart from working ­together to continue cost reduction, key aspects ­include developing industry standards and striving for cooperation and partnerships.

Although Leo Schott, CEO of LM Wind Power, is not one of the campaign’s initiators, he has come out in favour of it. With his words he came perhaps closest to what may really be meant by this plain motto: “Airbus, for example, is the result of united European industry.” Schott favours forming clusters and open partnerships between companies but also concedes that there will always be proprietary expertise that cannot be shared for competitive reasons. He ­recommends vertical over horizontal sharing.

The situation, therefore, still sounds somewhat complicated, with conflicts of interest between the campaign to aspire to a “united industry”, and the ­individual companies that are in direct competition with other companies. In the end, Siemens offshore wind CEO Michael Hannibal seems to describe the cost-cutting efforts best: “We must discover the waste in the system and eliminate it.”

Much-lauded

In fact, Vattenfall already seems to have discovered and disposed of a whole lot of waste. The Swedish company was recently awarded the tender – and much praise – for Danish offshore wind farm Horns Rev 3. The 15-year contract is for 77 ore/kWH, or 10.3 ct/kWh. The pace at which costs are tumbling in the offshore business is quite noticeable.

Politicians are pleased, including Rasmus Helveg Petersen, the Danish Minister for Climate, Energy and Buildings, who extols what has already been achieved: a 32 % drop in prices within five years, if one compares the offshore wind farms Anholt and Horns Rev 3. What he does not take into account is that Horns Rev is an exceptionally good location, thanks to on-site wind conditions and the distance to shore, which, at 20 km, is considerably shorter than for Anholt. Still, it is impressive that a 400 MW project can be set up and operated for this small amount of cash.

And there is even more potential. Mats Vikholm believes that cost savings can primarily be achieved with standards, better specifications and more volume in supply chains. At Dong, Vikholm is ­responsible for the procurement and cost of electricity and has broken down the cost into several blocks. According to his calculations, a mature supply chain to the quayside amounts to 9 €/MWh at the bottom line, while distance to shore has a positive or negative effect of 1 €/MWh for each 10 km. “One of the next steps will be to optimise the operation stage and form clusters for, say, maintenance and necessary materials. Here, too, we have learnt from experience how to gain ­efficiency, but we still need more volume,” he says.

In terms of volume, the UK remains the market leader. According to James Beal CEO of the Offshore Wind Investment Organisation, the region could see another 10 GW of total capacity by 2020. In line with a strategy drawn up by decision makers in politics and business, costs are to be brought down from 140 to 100 GBP/MW, which would be an equivalent of 138 €/MW. “To achieve this, we have established a process for monitoring cost reduction which helps us to assess new projects,” Beal says.

Katharina Garus, Torsten Thomas

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