Scale up smarter, not harder – why offshore wind ambitions can be met more efficiently if turbine growth is paused

Moving from cost to value

The offshore wind industry has become a mature industry primarily through early governmental support in the form of feed-in tariffs. The transition from feed-in tariffs to competitive tenders has further reinforced a downward trajectory of costs, with offshore wind having achieved a Levelised Cost of Energy (LCoE) level that enables it to be fully competitive with coal-fired power plants.

The highly competitive nature of the tendering process, which in some countries allows for negative bidding, compels developers to pursue the lowest possible LCoE, thereby increasing the likelihood of winning the tender. To achieve this, developers push turbine OEMs to keep developing larger and larger turbines, anticipating that such equipment will yield a better return on investment over time. However, this has spurred a development race among turbine OEMs that has proven to be highly unsustainable for the entire supply chain and infrastructure.

Given that offshore wind is now a cost-competitive technology, it is imperative that attention is shifted from cost to the value, speed, security, and resilience of the supply chain.

It is our firm belief that the ambitions and climate targets will be achieved faster and more efficiently if the unsustainable turbine arms race is slowed down. In fact, it’s the only way we stand a chance of reaching the targets in time.

Ramping up offshore wind requires slowing down on size

Let’s turn to a real-life example showing why the current arms race is not supporting reaching the targets. In the example we are comparing the costs of ramping up from 11 MW class turbines to 18 MW class turbines.

Sif Netherlands B.V., an offshore foundation manufacturer, recently took a final investment decision at a cost of €328 million to expand its current facilities. The company had to take this decision to be able to manufacture foundation for the newer generation offshore wind turbines.

Hence, Sif’s expanded facility will have an output of 4 monopiles per week that support 15-18 MW class turbines. This leads to a yearly output of 3.0-3.6 GW.

If Sif would have invested the same amount of €328 million in enlarging the monopile production capacity for the 11 MW class platforms, this investment would have yielded an output of 10 monopiles per week. The theoretical expansion would lead to a yearly output of 5.5 GW (10x 11MW x 50 weeks = 5.5 GW).

The real-world example above illustrates a suboptimal use of capital deployment if the overarching goal is to speed up Europe’s energy transition and offshore wind build-out.

If we replace the currently commercially available turbine platforms with larger ones, we will not only decrease the nominal output, but put the entire build-out of the offshore wind industry and thereby the green energy transition at risk.

Other tier one suppliers in the offshore wind industry face similar cases. Introducing a new turbine platform requires rethinking of the entire value chain. Together with partners and suppliers, the supply chain must develop new processes and tools and train and educate employees to use them in a safe and quality assured manner. We need new and bigger components, and this requires us and our suppliers to invest in new tools, new moulds, new trucks, cranes, and vessels. Vessels so large, that they potentially do not fit into existing harbors. And we need time to learn and build experience to continuously improve the quality of every module.

No room for paper turbines

The overarching challenge right now for the renewable industry is to deliver the growth required to ensure we realise the energy transition in time. To do so, we must focus on deploying the proven technology we already have, on enabling the development of a sustainable and scalable supply chain and on expanding the infrastructure needed to execute and operate our projects.

To ensure that there is sufficient manufacturing capacity available to meet surging demand, reducing investment risk for the supply chain is of utmost importance. The ongoing race to develop larger turbines poses a significant threat to supply chain investments, as manufacturers cannot be certain that their multi-million-euro capacity investments will remain future-proof and may be depreciated too quickly. This dynamic may result in investment decisions being delayed or not taken at all throughout the supply chain.

The success of the offshore wind industry will depend on the efficiency of the entire ecosystem, and this underscores the need for a highly effective and streamlined supply chain. This requires us to re-think not only the speed of new technology introductions but also auction design.

Non-binding turbine offers in auctions drive up uncertainty and risk, with high potential to delay projects. Requiring industrialised, proven technology (providing the ability to reinvest at scale) and binding turbine commitments between developer and OEM when going into an auction can stabilise both the market and the supply chain, while ensuring business case certainty, bankability, and project viability.

Overall, under the reign of ever bigger turbines, the accelerated roll-out of offshore wind will be challenged by squeezed timelines and stop-and-go production cycles, which poses a risk for the timely delivery and reliability of offshore wind projects. Hence, to meet offshore wind ambitions, pausing the arms race to extend product life cycles is a perquisite for the supply chain to ramp up more efficiently.