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Extract | T.A. Cook Offshore Wind Maintenance Study

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The offshore wind industry has seen a dramatic increase in concern over the costs and practicalities of operations and maintenance (O&M). There are strategic and operational concerns in the market: …

The offshore wind industry has seen a dramatic increase in concern over the costs and practicalities of operations and maintenance (O&M). There are strategic and operational concerns in the market: Strategically, projects will find finance more accessible and affordable if they can demonstrate properly developed O&M policies and costings for their planned wind farms; operationally because people need to know what challenges they are likely to face throughout the wind farm lifetime.

However, while in broad terms the industry is aware of problems arising from unforeseen failures or costs, objective data related to costs and performance has been hard to obtain from multiple sites to provide reliable benchmarks for O&M performance and practices.

This international study brings together critical information and analysis in one clear and digestible report; providing much-needed information on O&M costs, practices, cost drivers and the future evolution of O&M. This provides concrete information for the first time to the whole offshore wind industry including policy setters, R&D organisations, investors and manufacturers as well as wind farm operators and developers.

Because of the confidential nature of the source data, some information is presented as averages, aggregates or in an anonymised fashion. However, this provides the only comprehensive and coherent opportunity to benchmark O&M activities, costs and performance against the rest of the industry.

Published in: Investor Relations

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  • 1. EURoPEan stUDyoFFshoRE WinD FaRM oPERations & MaintEnanCEBEnChMaRks, Costs anD BEst PRaCtiCEs FoR CURREnt anD FUtURE WinD FaRMs» How well does the industry manage O&M today and at what cost?» What changes in strategy, techniques and control will provide quick gains in O&M performance?» What effects will changes in the industry, technology and service provision have upon O&M requirements and costs?Gain UniQUE insiGhts into:» OPEX and life cycle costs for o≠shore wind farms» Benchmarks for reliability, availability» The best strategies and systems for cost effective operations» Wind farm accessibility and transfer methods» Technical and business impacts on future wind farm O&M performance DVV MEDia GRoUP
  • 2. IMPRINT The T.A.Cook European Study "Offshore Wind Farm Operations & Maintenance" is published in first edition in April 2011. Publisher T.A.Cook Consultants Leipziger Platz 2, D-10117 Berlin Tel.: +49 30 884207-0 | Fax: +49 30 884307-30 www.tacook.com Authors: Alexander Lawrence, T.A.Cook (Author) Dr. Dirk Meissner, T.A.Cook (Author) Publishing House: DVV Media Group GmbH | Schiff&Hafen/Ship&Offshore Nordkanalstrasse 36, D-20097 Hamburg P.O.Box 101609, D-20010 Hamburg Tel.: +49 40 23714-03 | Fax: +49 40 23714-259 www.schiffundhafen.de | www.shipandoffshore.net Marketing/Sales: Günter Schmittberger, T.A. Cook Riccardo di Stefano, DVV Media Group This Publication is protected by Copyright of T.A.Cook. It may not be exploited, in whole or part, without the approval of the publisher. This applies in particular to any forms of reproduction, translation, microfilming and incorporation and processing in electric sys- tems. ISBN 978-3-87743-827-51 | Fehler! Kein Text mit angegebener Formatvorlage im Dokument. Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 3. Study exemplar of | T.A. Cook Contents CONTENTS .............................................................................................................. 3   1  MANAGEMENT SUMMARY ........................................................................... 6   2  ZUSAMMENFASSUNG (GERMAN SUMMARY) .......................................... 10   3  BACKGROUND AND OBJECTIVES ............................................................. 14   3.1   O BJECTIVES .............................................................................................. 14   3.2   I MPORTANCE AND ROLE OF O&M FOR OPERATORS , DEVELOPERS , FINANCIERS AND INSURERS ...................................................................................................... 18   3.3   M ETHODOLOGY AND APPROACH ................................................................. 22   3.4   O FFSHORE WIND FARMS – AN OVERVIEW .................................................... 23   3.4.1   Existing offshore wind farms ................................................................ 23   3.4.2   Planned offshore wind farms ................................................................ 28   4  LIFE CYCLE COST OF OFFSHORE WIND POWER .................................. 33   4.1   C OST ELEMENTS ....................................................................................... 40   4.1.1   CAPEX for planning and installation .................................................... 40   4.1.2   Operations and Maintenance Cost ........................................................ 46   4.2   L IFETIME COST ......................................................................................... 57   4.3   A SSET RELIABILITY IMPACT ON OPEX ........................................................ 59   5  O&M IN EXISTING OFFSHORE WIND FARMS ......................................... 67   5.1   W IND FARM CERTIFICATION AND INSPECTION .............................................. 67   5.1.1   Drivers for certification and inspections ............................................... 67   5.1.2   Types of inspection ............................................................................... 70   5.2   O&M STRATEGIES .................................................................................... 76   5.2.1   Major elements of O&M strategies ....................................................... 76  3 | Contents Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 4. Study exemplar of | T.A. Cook 5.2.2   Impact of O&M strategies on wind farm design ..................................... 81   5.3.1   Reactive (corrective) maintenance ........................................................ 86   5.3.2   Scheduled preventive maintenance ........................................................ 89   5.3.3   Condition based maintenance ............................................................... 91   5.4   K EY P ERFORMANCE I NDICATORS FOR O&M ............................................... 96   5.4.1   KPIs for O&M work preparation and scheduling ................................... 97   5.4.2   KPIs for materials and procurement .................................................... 101   5.4.3   KPIs for the work order process .......................................................... 102   5.4.4   KPIs for financial performance ............................................................ 105   5.5   O FFSHORE O&M ORGANISATION ............................................................... 106   5.6   W IND FARM TRANSFER AND ACCESS STRATEGIES ........................................ 113   6  TRENDS, OPPORTUNITIES AND RISKS .................................................... 127   6.1   E VOLUTION IN ASSET DESIGN AND MANUFACTURING .................................. 128   6.2   T ECHNOLOGICAL EVOLUTION TO IMPROVE FAILURE PREDICTION ................. 133   6.2.1   Gearbox and Bearing .......................................................................... 134   6.2.2   Generators .......................................................................................... 136   6.2.3   Power Electronics and Electric Controls .............................................. 137   6.2.4   Rotors and blades ............................................................................... 138   6.2.5   System-Level Fault Detection and Response ......................................... 140   6.3   D EVELOPMENTS IN WIND FARM ACCESSIBILITY .......................................... 141   6.4   C HANGES IN THE O&M M ARKET ............................................................... 144   6.5   O&M B OTTLENECKS ................................................................................ 145   6.6   C ONCLUSIONS .......................................................................................... 147   7  APPENDICES ................................................................................................ 150   7.1   L IST OF FIGURES ...................................................................................... 150  4 | Contents Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 5. Study exemplar of | T.A. Cook 7.2   L IST OF TABLES ....................................................................................... 151   7.3   R EFERENCES ............................................................................................ 152   7.4   P LANNED OFFSHORE WIND FARMS ............................................................. 161  5 | Contents Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 6. Study exemplar of | T.A. Cook 1 Management Summary The offshore wind industry is an industry in transition. The problems fac- ing it are typical of all industries as they scale up rapidly; unforeseen problems arise and are solved, forecasts prove not to equal real life and competition to be the principal market players is intense. After twenty years of offshore wind power, and ten of significant commercial growth in the market, we are coming to a more mature phase in the industry where the difficulties that have appeared need to be addressed in a coordinated and collaborative manner by the participants in order to support further growth. As regards O&M, certainly, the status quo will not be commercially viable for future wind farms:  While onshore wind farms routinely report operational availability of over 96%, offshore wind farms can report availability as low as 85%.  While onshore wind farm O&M typically costs around 10-15% of reve- nues, offshore the cost is more usually 20-25% of revenues.  Reactive maintenance activities currently account for around 60% of all trips to offshore wind farms.  Operating and maintenance costs for today’s wind farms can be up to three times more than originally projected, particularly in the case of the multi-MW turbines. On the other hand, with an O&M market worth a predicted €10 billion by 2030 there is a clear incentive to invest in measures to improve its effec- tiveness. The countries showing the strongest growth in offshore wind – the UK and Germany – currently support the market through the use of agreed energy prices or Renewable Obligations Certificates. However, the indus- try needs not to be reliant upon such support as it is not sustainable in the long term. Although CAPEX per MW will no doubt decline in time, the need for sizeable initial investment in an industry such as this is inevita- ble. Therefore the onus is upon operations to find ways to reduce costs or6 | Management Summary Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 7. Study exemplar of | T.A. Cook (preferably and) increase the wind farm’s productivity. For the foreseea- ble future this is likely to remain the case as demand for scarce resources keeps development and installation costs high. As the industry has developed larger turbines and pushed into harsher environmental conditions many wind farms have had a pioneering element about them. As a result, unexpected stresses have led to significant fail- ures in major components such as gearboxes, generators, and blades. Components theoretically designed with 20-year life spans have failed prematurely - in some cases in less than two years. Not surprisingly extensive warranty periods, in which the turbines are ser- viced by OEM technicians, are essential buffers against the effects of such problems and will continue to be so as wind turbines evolve further. Currently, roughly 79 percent of operational turbines are still under war- ranty. For the 21 percent of operators on the other side of the comfort zone, a cost efficient operations and maintenance (O&M) strategy is the deciding factor between commercial success and failure. At present, however, O&M strategies are relatively unsophisticated com- pared to other industries. For example, predictive maintenance is relative- ly rare for a number of reasons: First, as most wind farms are relatively young there is a lack of available data about component lifetimes and failure modes with which to assess component lifetimes in practice. This is exacerbated by OEMs’ requests for confidentiality which severely limit the data sharing between offshore wind farm owners. In several cases, although the owner has access to much operational data while the turbine is under warranty in many cases the owner’s operational team does not have the time or manpower re- sources to make the best use of it. In a few cases the owner does not even possess detailed operational data about their wind farm. Second, the dynamic loads placed upon the wind turbine’s systems in- crease the difficulty of making useful predictions considerably. As we will see later, this is being addressed today but there is still work to be done here before the problem is eliminated. Third, limited access to the wind farms themselves means that sometimes even where a potential fault is known about the operator cannot make a7 | Management Summary Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 8. Study exemplar of | T.A. Cook preemptive repair and must either accept a failure or shut down the tur- bine before it fails and accept greater revenue losses as a result. The cost of failures offshore is considerable. Where the cost to replace a gearbox bearing costing €1,200 may be in the order of €17,000 offshore – taking into account component replacement, vessel hire and operational losses – the cost of it failing catastrophically can quickly add up to around €200,000 owing to the need to replace the gearbox, hire a crane vessel, suffer greater operational losses etc 1. To reduce the number, cost and extent of failures a variety of strategies are available to the operator:  Improve preventive and predictive maintenance to reduce failure rates.  Change the turbines themselves to reduce the maintenance demands at the wind farm.  Improve access to the wind farm for better maintenance response.  Automate responses to faults and failures to minimise the impact of inaccessibility.  Reduce the commercial impact of failures through warranties, insur- ance and compensatory clauses in maintenance contracts. As will be seen, all five strategies are being pursued, each with their own strengths and weaknesses. We will see developments on all these fronts in the next few years although ultimately the balance of strategies em- ployed at any given wind farm will be determined by the individual climat- ic, financial and operating conditions of the wind farm. This study acts as an indispensable reference guide for O&M service pro- viders, wind farm operators, energy utility companies, investors, re- searchers, engineers, distributors and many more, who participate in the offshore wind energy industry. We present a comprehensive analysis of current European offshore wind power O&M costs, strategies, challenges and opportunities. In addition we 1 See Hyers et al 2006 for details.8 | Management Summary Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 9. Study exemplar of | T.A. Cook offer forecasts and recommendations to help readers meet the challenges and opportunities of the market as it evolves. Key features of the study include:  Forecasts of installed offshore wind energy generation capacity and related O&M expenditure over the next 20 years  Developments in the market structure for O&M services  O&M market size estimates 2011-2015 and forecasts to 2030  Future technical, logistical and industry trends affecting O&M strategies and costs  Projections of O&M cost evolution over the lifetime of a wind farm  Market outlook and insights that will help develop competitive business strategies  Challenges and opportunities for OEMs, service providers and in- house services  Future needs of the O&M industry9 | Management Summary Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 10. Study exemplar of | T.A. Cook 2 Zusammenfassung (German Summary) Die Offshore-Windindustrie befindet sich im Umbruch. Dabei steht sie vor Problemen, die typisch sind für alle schnell wachsenden Branchen. Es ent- stehen unvorhergesehene Probleme, unkonventionelle kurzfristige Lösun- gen werden gefunden, Prognosen erfüllen sich in der Regel nicht und der Wettbewerb der Marktteilnehmer nimmt beständig zu. Nach nunmehr zwanzig Jahren der Offshore-Windkraft und zehn bedeutenden Jahren kommerziellen Wachstums reift die Industrie zunehmend. Das lässt die Notwendigkeit erkennen, die auftretenden Herausforderungen auf eine koordinierte und kooperative Art und Weise von den Teilnehmern anzuge- hen und weiteres Wachstum zu unterstützen. Betrieb und Instandhaltung (im folgenden O&M) spielen dabei eine we- sentliche Rolle. Der Status Quo der O&M-Ansätze wird sich künftig als nicht dauerhaft wirtschaftlich tragfähig erweisen:  Während Onshore-Windfarmen eine technische Verfügbarkeit von mehr als 96%, erlangen, erreichen Offshore-Windfarmen meist höchs- tens 85%.  Die O&M-Kosten von Onshore-Windfarmen belaufen sich auf 10 - 15% der Erträge, Offshore-Windfarmen müssen 20 - 25% der Erträge auf- wenden.  Reaktive Instandhaltung (Fehlerbehebung) ist momentan für 60% aller Instandhaltungsmaßnahmen on-site verantwortlich.  Die realen O&M-Kosten der Offshore-Windfarmen betragen oftmals bis zum Dreifachen der geplanten Kosten. Die Ausgaben für O&M werden bis 2030 die Grenze von 10 Mrd. EURO durchbrechen. Diese Größenordnung ist ein klarer Anreiz, in die Erhöhung der Effektivität und Effizienz der O&M-Konzepte zu investieren. Gegenwärtig verzeichnen Großbritannien und Deutschland die höchsten Wachstumsraten bei Offshore-Windfarmen, welche die Industrie mit mas- siven Anreizen unterstützten - entweder durch langfristig garantierte Ab-10 | Zusammenfassung (German Summary) Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 11. Study exemplar of | T.A. Cook nahmepreise oder durch Renewable Obligation Certificates (Erneuerbare- Energie-Zertifikate). Gleichwohl ist es wichtig für die Industrie, trotz die- ser Anreize kontinuierlich in die Verbesserung des Status Quo zu investie- ren. Auch wenn die investiven Ausgaben (CAPEX per MW) mit Sicherheit weiter sinken werden, so handelt es sich bei der Größe der Windfarmen immer um substantielle Investitionen. Um diese wirtschaftlich zu rechtfer- tigen, sind Wege zur Kostensenkung und zur Erhöhung der Produktivität klare Prioritäten auf der Agenda der Windfarmbetreiber. Kurzfristig wird es zu Engpässen aufgrund knapper zur Verfügung stehender Ressourcen für die Windfarmbetreiber kommen. Diese werden die Preise für Anlagen und Dienstleistungen weiterhin auf hohem Niveau halten. Jüngste Erfahrungen zeigen, dass die O&M-Kosten im schlimmsten Fall das Dreifache des ursprünglich geplanten Budgets erfordern. Dieses Phä- nomen wurde insbesondere im Fall der Multi-MW-Klasse von Turbinen be- richtet. Die höheren als erwarteten Kosten resultieren aus mehreren Fak- toren: Ein wesentliches Kriterium ist, dass der jüngste Offshore- Windenergie-Boom die Kapazität der bestehenden Supply Chain über- steigt. In der Folge sind häufig Qualitätsmängel zu beobachten. In den neuen Multi-MW-Maschinen treten in den ersten Betriebsjahren über- durchschnittlich viele Fehler in Getrieben, Generatoren und Rotorblättern auf. Diese auf 20 Jahre Lebensdauer ausgelegten Komponenten haben meist eine deutlich verkürzte Lebensdauer von vier bis sechs Jahren. In jüngster Zeit zeichnete sich eine leichte Besserung des Zustandes ab, seit die Hersteller wieder Komponenten eigenentwickeln und Inhouse- Komponenten anstelle von "Off-the-shelf"-Komponenten eingesetzt wer- den. Gleichwohl ist Bauteilversagen nur die halbe Wahrheit. Die tatsächli- chen Kosten entstehen, sobald die Betreiber die defekten Teile ersetzen müssen. Beispielsweise können beim Austausch eines Getriebes die Kos- ten für das Ersatzteil, das Mieten eines Transportschiffes und die eigentli- che Installation 500.000 Euro pro Turbine betragen. Wenig überraschend bieten die Anlagenhersteller vermehrt verlängerte Garantiezeiten an, während die Windfarmen von den O&M-Experten der Anlagenhersteller gewartet werden. Es ist zu erwarten, dass dieses Modell auch künftig weiterhin ausgebaut wird. Gegenwärtig sind noch ca. 79 Pro- zent der Windfarmen in der Herstellergarantiezeit. Für die anderen Wind- farmen zeigt sich bereits, dass das richtige O&M-Konzept der entschei-11 | Zusammenfassung (German Summary) Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 12. Study exemplar of | T.A. Cook dende Faktor für den wirtschaftlichen Erfolg einer Windfarm ist. Im Ver- gleich zu anderen Industrien sind diese Konzepte aber noch auf einem Anfangsniveau. Eine vorausschauende Instandhaltung ist aus verschiedenen Gründen bis- her noch nicht weit verbreitet: Erstens legen die Anlagenhersteller die für das Verständnis der Kompo- nentenversagen benötigten Daten nur ungern offen, um sowohl das Risiko von Rechtsstreitigkeiten einzudämmen als auch potenzielle Wettbewerber vom Markt fern zu halten. Es zeigt sich, dass die Betreiber von Windparks, die noch unter Garantie sind, vielfach keinen Zugang und keine Kenntnis der O&M-Daten haben. Ebenso sind wenig öffentlich zugängliche Daten bekannt. Sofern solche Daten existieren, sind sie in der Vergleichbarkeit und ihrer Aussagekraft häufig limitiert, da sich die Standortfaktoren von Offshore Windfarmen meist sehr voneinander unterscheiden. Zweitens sind die Windturbinen und deren Komponenten gegenwärtig nur wenig oder teilweise standardisiert. Diese fehlende Standardisierung der Windturbinen und -komponenten bedeutet, dass neuen Komponenten- Lieferanten, häufig mit Misstrauen begegnet wird, während sie versuchen im Markt Fuß zu fassen. Sofern nicht Standards, Prozesse und Verfahren etabliert werden, ist es unwahrscheinlich, dass dieses Problem gelöst und der Anbieterkreis verbreitert wird. Drittens ist der Zugang zu den Windfarmen aufgrund von Wetterbedin- gungen und Engpässen in der Transportlogistik nicht immer gewährleistet. So geschieht es häufig, dass die Windfarmbetreiber über potenzielle Feh- ler in den Anlagen zwar informiert sind, jedoch keine rechtzeitigen Ge- genmaßnahmen ergreifen können und die Anlage konsequenterweise aus Sicherheitsgründen abschalten. Dabei sind die durch Anlagenfehler verur- sachten Kosten erheblich. Um die Anzahl, die Kosten und die potenziellen Folgeschäden zu reduzie- ren, können die Anlagenbetreiber verschiedene Strategien verfolgen:  Verbessserung der vorausschauenden Instandhaltung;  Verbesserung des Turbinendesigns zur Reduzierung der Instandhal- tungsnotwendigkeit;  Verbesserung der Zugangsmöglichkeiten zu den Windfarmen;12 | Zusammenfassung (German Summary) Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 13. Study exemplar of | T.A. Cook  Automatisierung der Fehlermeldung und –behebung zur Reduzierung der Wirkung der Nichtzugänglichkeit  Reduzierung der wirtschaftlichen Auswirkungen von Fehlern durch er- weiterte Garantien, Versicherungen und entsprechende vertragliche Vereinbarungen mit O&M-Dienstleistern. Die Studie zeigt auf, dass alle Strategien in der einen oder anderen Form bereits eingesetzt werden. Es wird sich zukünftig zeigen, wie der Balance- akt zwischen den Strategien am besten ausgestaltet und gehalten werden kann. Die Studie ist eine unabkömmliche Referenz für O&M-Dienstleister, Wind- farmbetreiber, Energieunternehmen, Investoren, Versicherer und Finan- zierer und viele andere, die in der Offshore-Windenergieindustrie tätig sind. Es wird eine umfassende Analyse des europäischen Offshore- Windenergie O&M-Marktes präsentiert. Ebenfalls werden die wichtigsten Entwicklungen der wesentlichen Komponenten - Getriebe, Generatoren, elektrische Geräte und Steuerungen, die nahezu 90% aller O&M-Kosten verursachen, vorgestellt. Im Mittelpunkt stehen dabei:  Entwicklung der installierten Offshore-Windenergie-Kapazität und damit verbundene Ausgaben sowie die O&M-Entwicklung von Inves- titions-und Betriebskosten über die nächsten 20 Jahre;  zukünftige Entwicklungstendenzen von O&M-Modellen;  typische O&M-Aktivitäten für Getriebe, Generatoren, Leistungselekt- ronik und elektrische Steuerungen sowie die durchschnittlichen jähr- lichen Kosten und Lebensdauer von Windparks und O&M;  O&M Marktgröße - Schätzungen und Prognosen des Marktes bis 2030;  Typische Kosten für Technik und Einnahmen für den O&M- Dienstleistungsmarkt;  Marktausblick und Einsichten, die bei der Entwicklung wettbewerbs- fähiger Geschäfts-Strategien erforderlich sind;  Chancen und Herausforderungen für OEMs, Dienstleister und In- house-Services und künftiger Bedarf der O&M-Industrie.13 | Zusammenfassung (German Summary) Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 14. Study exemplar of | T.A. Cook 3 Background and objectives 3.1 Objectives It is widely agreed that the offshore wind industry can contribute to Eu- rope’s transition to a green economy. Offshore wind generation can create innovative solutions, and innovation is a way out of a recession because it drives economic growth. It is believed that the emerging offshore wind industry has the potential to generate a substantial number of new jobs with existing but also emerging new firms. The array of jobs created will be considerable; with offshore wind farm operators, with equipment sup- pliers, facilities providers, logistics and also, in the longer term, with op- erations and maintenance service providers. While production, installation and connection of offshore wind farms are a one-off effect, operations and maintenance (O&M) will have an ongoing economic impact. At the same time O&M poses new challenges for wind farm owners, operators 2, equipment suppliers and financial service providers. The offshore wind energy industry is set to make an important contribu- tion to Europe’s energy production over the coming decades; from just over 1GW of installed capacity today, the industry is forecast to have 40GW capacity by 2020 and 150GW by 2030, when it will produce around 13% to 17% of Europe’s total energy.3 To meet these expectations de- mands a great leap forward in many respects, such as in installation methods, costs and speeds as well as supplying the vastly increased de- mand for materials and skills. One of the key challenges lies in operations and maintenance (O&M), which also needs a great leap forward in order to have profitable wind farms developed at the rate Europe needs. In- 2 Wind farm operators and owners are not always identical. In some cases wind farm operators are legal entities established by a consortium of different partners mainly from utilities industry. Such entities in many cases contract operational responsibilities to third parties, typically an OEM or one of the partners. 3 EWEA publication ‘Pure Power’, Dec 200914 | Background and objectives Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 15. Study exemplar of | T.A. Cook deed, estimates of O&M costs per MWh currently place offshore wind at 5 to 10 times that of onshore. 4 Even before the wind farms are built, O&M is of great significance. In the past O&M was often not considered very extensively in the design phase or during negotiations with financiers and insurers. Based on the evidence of early offshore wind farms it was believed that the cost of maintaining them would be very little relative to the cost of building, as with many onshore wind farms. However, more recent commercial scale farms, fea- turing larger turbines in stronger winds, have shown that offshore tur- bines to date tend to perform less reliably than onshore and a number of costly unanticipated problems have arisen at most, if not all, wind farms.5 These have reduced the power generated, lowering revenues and increas- ing costs to the point where project profitability comes into doubt. Conse- quently, investors in offshore wind today demand robust strategies, fore- casts and cost projections for operating and maintaining wind farms when determining whether to invest and upon what terms. Meanwhile, wind farm developers are planning to develop wind farms fur- ther and further offshore, increasing transportation times and costs for any site visits and reducing the available working window. Developers need to see significant improvements in the reliability of the wind farms being put in place, as well as to establish strategies that will provide the optimum power generation at optimum cost. For example, although the theoretical ideal would be to have wind turbines running at their maxi- mum load, in fact loads between 70 and 80 per cent of technical maxi- mum load appear to be preferable. This is because the wear on, and need to replace, such components increases with the loading and beyond a cer- tain point energy gains are more than offset by the increased incidence, and cost, of failures. When the first offshore wind farms began operation earlier this century hopes were high that experiences from onshore wind farm O&M could be 4 Onshore O&M costs of €1.2 to 1.5 per MWh (EWEA Economics of Wind Energy March 2009) versus €8- 12 per MWh offshore in the period 2009 to 2012 (New Energy Finance presentation, Nov 2009) 5 See reference material on BERR, DECC and Egmond aan Zee15 | Background and objectives Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 16. Study exemplar of | T.A. Cook applied to offshore wind farms. This has been true to some extent for the first offshore wind farms, which were relatively close to shore. However, most current and future wind farms are being installed at signif- icant distances, and travel times, from shore. Such wind farms are now planned or being installed up to, and in some cases more than, 50 km away from shore where wind speeds are more constant and greater than near-shore, and where wave heights tend to be greater as a consequence. This blocks access to the turbine on a more regular basis and renders even minor faults which, on land, would be fixed quickly and simply, much more significant. This places increased demands for reliability upon com- ponents and requires, for a cost-optimal approach, less reactivity to fail- ures and a greater ability to forecast, and thereby prevent, them. Offshore wind O&M Maintenance tends to fall into three categories:  First line maintenance including local and remote response as well as scheduled inspections and maintenance;  Second line maintenance which requires medium size component re- placement of moderate complexity; and  Third line maintenance, which includes major maintenance activity, requiring heavy equipment such as jack-ups or cable laying vessels. An O&M strategy should involve scenarios addressing different mainte- nance categories. A scenario technique allows the wind farm operator to compare options, for example including turbine design modifications, ac- cess design modifications or different scheduling options. These options can be fed into both CAPEX and O&M models to identify their overall im- pact on asset lifetime costs. In addition it is possible to review the effect of different options on HSE and identify the right balance between cost and safety risk in operations. However, in practice the data available to build objective O&M bench- marks is hard to access, causing practical problems for wind farm devel-16 | Background and objectives Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 17. Study exemplar of | T.A. Cook opers, operators, regulators and investors.6 For example, without a robust cost forecasting tool for new wind farms it becomes very difficult to iden- tify the optimum efficient level of incentives to encourage wind farm de- velopers. It also makes allocating research resources in the most effective way impossible, or at least unverifiable. For developers, lack of bench- marks makes operational forecasts more uncertain, leading to increased risks – and higher insurance – for the wind farm. With a few exceptions, most wind farm developers and operators today are increasingly willing to share information, in principle; however, there are a number of factors mitigating against openness in the industry. There are some fears still about sharing information in case it gives away a competitive edge 7, though increasingly there is a perception that poten- tial benefits outweigh the risks. More significantly, the amount of information developers have access to themselves varies considerably, particularly in cases where the wind farm is under warranty or contract by the OEM. In some cases these companies have been criticised for their lack of data sharing, although in more recent wind farms – particularly larger wind farms – this is starting to change as the developer is both in a stronger bargaining position and will have more resources available to make use of the data that is provided. The final major hurdle to data gathering is the contract between wind farm operator and OEM, which tends to limit what information the opera- tor can share. Each contract tends to be negotiated separately, so there are different nuances in each case, but broadly the effect is to either give the OEM a veto on potential data sharing or else to collect all mainte- nance data under an umbrella of confidentiality. As discussed above, there are reasons for optimism looking toward a more open future; however, OEMs still require some persuasion. 6 Even the EWEA struggles to gain information on O&M costs; in ‘Economics of Wind Energy’ 2009, p67, O&M costs for all offshore wind farms (save Middelgrunden) are assumed to be consistently €16/MWh – but are ‘subject to considerable uncertainty’. 7 Exceptions to this rule tend to have been built with a clear purpose of sharing information; for example, the Egmond Aan Zee offshore wind farm, Netherlands, or Alpha Ventus, Germany. However it needs to be taken into consideration that such data tend to be for scientific and pure basic research purposes only. Commercially sensitive data are still hard to access at these sites.17 | Background and objectives Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 18. Study exemplar of | T.A. Cook 3.2 Importance and role of O&M for operators, de- velopers, financiers and insurers In the absence of many years of commercial experience, the offshore wind industry is faced with significant levels of uncertainty when it comes to operational expectations and maintenance predictions. This is empha- sised by the fact that many wind farms to date have some element of in- novation to them; either by pushing into deeper water or harsher cli- mates, or else by using new turbine models. Despite pre-production test- ing, the fact remains that the new wind farms are to some extent an ex- periment. It is generally expected today that the cost of O&M in offshore projects will be higher than for equivalent onshore wind farms. However the ex- tent of this increase still remains unclear. As discussed above, the EWEA uses €16 per MWh as a rule of thumb in its publication ‘Economics of Wind Energy’ 2009, compared to onshore costs of €5-6 per KWh. O&M costs make a substantial contribution wind farm economics and thus it is important to include them even in an ’order of magnitude’ calculation. Although O&M costs are very difficult to predict, and the relevant quanti- ties closely interlinked it can be concluded that the major factors affecting O&M costs are:  The distance of the wind farm from shore (or ports),  Climatic conditions at the site,  The size of the wind farm,  The reliability of the turbines,  The maintenance strategy under which they are operated and  The availability that is required. For a long time one of the most important risks associated with the de- velopment of onshore wind farms has been that related to the predicted long-term wind resource and energy production. Today these "wind risks" can be reliably quantified if high quality onsite measurements are con- ducted and a suitable source of long-term reference data is available. Re-18 | Background and objectives Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 19. Study exemplar of | T.A. Cook cent validation studies of predictions show that estimates can be quanti- fied accurately, if rigorous methodologies are applied. Consequently cur- rent discussions of O&M cost forecasting are centred upon risks concern- ing turbine and generator reliabilities and wind farm accessibility. O&M predictions are of a very uncertain nature. Problems with accessibil- ity can prevent a two-hour repair being effected for anything up to sever- al weeks. O&M cost item EURO/kW/year EURO/kWh (approx.) Service contract* 4-8 0.15-0.6 Administration Cost basis varies 0.1-0.3 Insurance 4-7 0.15-0.5 Land rent** 2-4 0.08-0.4 Local taxes*** 3-5 0.1-0.2 TOTAL 13 to 24 0.58 to 2.0 * Service contracts refer to O&M contracted to third parties ** Land rent refers to renting office and storage facilities for wind farm operator *** Local taxes vary considerably with the location of the wind farm Table 1 | O&M Cost Elements Scheduled maintenance or servicing is implemented by the crews within a specified service interval, where possible. However, repair work tends to take precedence over scheduled maintenance, especially if the turbine to be repaired is inoperable. At this point crewing resources become signifi- cant; discussion with OEMs and operators suggests that a two-layer staff- ing strategy, involving separate crews for regular maintenance and ex- traordinary repairs, may become one leading solution. Scheduled maintenance operations are also subject to weather delays in the same manner as those associated with repair work.19 | Background and objectives Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 20. Study exemplar of | T.A. Cook There are a number of major legal and administrative cost components, which are illustrated inTable 1.8 As can be seen in the range of the total, these costs can vary dramatically between offshore wind farms. Note, these costs do not include direct maintenance-related costs such as transportation or components. The composition of O&M cost changes considerably according to the age of the wind farm. While direct O&M costs (which include material & transport costs, human resources and vessel hire) make up almost three quarters of total O&M costs after 2 years of operation their share de- creases to two thirds after 10 years of operation. Some of this discrepan- cy reflects the fact that, on average, older wind farms tend to be closer to shore and offer lower obstacles to access; however, it also reflects an increasing familiarity with the individual wind farm and developing more efficient ways to work, or simply becoming more practiced at dealing with characteristic faults. In contrast insurance becomes increasingly expensive with aging equipment (Figure 7). While for many wind farms in operation warranties play a role, they are a mechanism for transferring responsibility and risk from owners and lend- ers to contractors. Currently many offshore wind farms are still under warranty and face the challenge of deciding and negotiating new O&M contracts at the expiry of the warranty period. At this point O&M costs and strategies will become far more of a significant concern both for the operator and for industrial insurers. Warranties vary among wind farms; however, by and large the warranty will ensure a minimum performance for wind farm operations, covering component replacement and often involving some reimbursement of lost revenues. Under these circumstances insurance companies do not have to carry much risk. At the expiry of the warranty O&M strategies become more central to insurance risk (and thus premium) assessment and calcu- lation. Insurers are increasingly requesting wind farm operators to devel- op and present sustainable O&M strategies as part of the basis of negotia- tions. Such strategies usually include fundamental considerations such as 8 Note: figures displayed in the table are average figures regardless of wind farm distance to shore, type of wind turbine, wind farm size and age .20 | Background and objectives Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 21. Study exemplar of | T.A. Cook the ratio of reactive and preventive maintenance, turbine loading, stores and spares strategies, access methodologies, third party contracts and more. Thus a clearer perspective on O&M issues associated with offshore wind projects will allow improved distribution of operational risk between own- ers, lenders and contractors.21 | Background and objectives Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 22. Study exemplar of | T.A. Cook 3.3 Methodology and approach This study was conducted between November 2009 and April 2010. Within this timeframe, we collected and collated the data required for the analy- sis using the following research methods:  Desk Research  Expert Interviews (face to face and telephone)  Open Interviews  Standardized questionnaire Desk Research and Questionnaire Extensive desk research was carried out over three months to collect fac- tual background data for the study. The sources used include specialist and trade articles, the press, conference papers, company documents, the internet and specialist databases. The results of the desk research were used in the following work processes:  Identifying target groups (wind farm operators, service companies, equipment manufacturers)  Identifying framework conditions  Working out hypotheses and trends The collected data provided the basis for a comprehensive overview of the offshore wind power industry, which was used to calculate key figures for this industry. Desk research was supplemented by a standardized questionnaire which was distributed to offshore wind farm operators. Data gathered through the questionnaire has been treated as confidential and, in many cases, gathering or usage was limited by the authorisation of the OEM or other parties. Consequently, while this has been used to validate and supple- ment other data, for the present study little questionnaire-based data can be presented by itself.22 | Background and objectives Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 23. Study exemplar of | T.A. Cook Expert Interviews Explorative expert interviews were carried out to support the analysis and evaluation of market conditions. Applying this methodology makes it pos- sible to gain insights into the market and identify trends. The interviews used a semi-structured interview guideline, giving interviewers the oppor- tunity to supplement or revise questions to gain further estimates and background information. This combination of methods enables responses to be interpreted more accurately, leading to much more reliable results. Further open interviews were carried out with experts to compare and evaluate the working hypotheses of this study. Interviews were not tied to a structured questionnaire and were conducted by telephone or face-to- face. The main objective of such interviews was to monitor key topics throughout the discussion and to explore them further using funnel tech- niques. The target population of 32 wind farms in operation (April 2010) resulted in a total of 35 interviews (online, telephone and face-to-face) represent- ing 10 wind farms in total. These accounted for around 750MW installed energy production capacity out of a total of 2.4 GW installed capacity. Thus the study represents roughly one third of installed offshore wind farm capacity. It can be assumed from the scope of the survey that the findings of this study are by and large an accurate representation of cur- rent industry conditions. Much data and information disclosed by wind farm operators and other parties must be treated as confidential. In the following report infor- mation and data of a confidential nature are presented as aggregate, anonymised data only. 3.4 Offshore wind farms – an overview 3.4.1 Existing offshore wind farms Currently commercial wind farms have been successfully installed and commissioned in Denmark, Sweden, The Netherlands, Finland, Great Brit-23 | Background and objectives Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 24. Study exemplar of | T.A. Cook 7 Appendices 7.1 List of figures Figure 1 | Annual Investment in Offshore Wind Energy in the EU 2011-2030 ... 33  Figure 2 | Offshore wind farm CAPEX per MW 2011-2030 ............................. 34  Figure 3 | Investment per MW capacity by distance from shore ..................... 44   Figure 4 | O&M cost per annum according to year of commercial operation ..... 48  Figure 5 | Contributing factors to wind farm O&M costs ................................ 51  Figure 6 | O&M costs for selected ages of turbine ........................................ 55  Figure 7 | Share of O&M cost during wind farms life time ............................. 56   Figure 8 | Share of downtime by cause ...................................................... 64  Figure 9 | Development of O&M Strategies – SSE Example ............................ 77  Figure 10 | Maintenance approaches used currently and in future .................. 85   Figure 11 | Share of O&M work done by third parties .................................. 108   Figure 12 | Share of maintenance work taken by in-house staff, OEMs and other contractors ..................................................................................... 109   Figure 13 | Monthly ‘Weather days’ at Egmond Aan Zee, operating years 1-2 . 115   Figure 14 | Norfolk offshore wind farm wave statistics ................................ 120   Figure 15 | O&M expenditure of all European Wind Farms to 2030 ................ 127  150 | Appendices Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 25. Study exemplar of | T.A. Cook 7.2 List of tables Table 1 | O&M Cost Elements ................................................................... 19  Table 2 | Operating wind farms, 1 October 2010 ......................................... 26  Table 3 | Power Production from Offshore Wind in the EU (2011-2030) .......... 28   Table 4 | Forecasts for Installed Offshore Wind Energy Generation Capacity in Europe to 2020 ................................................................................. 29  Table 5 | Planned wind farms, October 2010 ............................................... 31  Table 6 | Typical life cycle stages of wind farms – year 1 and 2 ..................... 37   Table 7 | Typical life cycle stages of wind farms – year 3 and 4 ..................... 38   Table 8 | Typical life cycle stages of wind farms – year 5 and 6 ..................... 39   Table 9 | Typical life cycle stages of wind farms – end of life cycle ................ 40   Table 10 | Location adjustment factor for investment and installation costs..... 41   Table 11 | Investment Costs For Current Offshore Wind Farms ...................... 43   Table 12 | Average Investment Costs per MW Related to Offshore Wind Farms 45   Table 13 | Operations and maintenance cost types ...................................... 46  Table 14 | Breakdown of approximate O&M Costs (€k) ................................. 49  Table 15 | OPEX as share of CAPEX annually .............................................. 58  Table 16 | Reliability characteristics .......................................................... 62  Table 17 | Downtime hours by cause ......................................................... 66  Table 18 | Components subject to inspection and inspection focuses .............. 74   Table 19 | Typical gearbox condition monitoring techniques , ........................ 95   Table 20 | Maximum operating capacities of different transport vessel types .. 116   Table 21 | Journey duration and maximum wave heights for safe transit to Norfolk offshore wind farm ................................................................ 117   Table 22 | Percentage of time sea states are acceptable for safe journeys to Norfolk offshore wind farm ................................................................ 117   Table 23 | Comparison of transfer methods ............................................... 124  151 | Appendices Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 26. Study exemplar of | T.A. Cook Company profile T.A. Cook & Partner Consultants GmbH T.A. Cook is a management consulting firm focusing on Asset Performance Management with offices in Berlin, Birmingham, London, Raleigh and Rio de Janeiro. The core competence of the consulting business is the sus- tainable implementation of asset, operations and service-oriented excel- lence. As a change management specialist, the firm delivers measurable value enhancement and bottom-line productivity gains. In order to achieve these results T.A. Cook offers a wide range of professional ser- vices which ensure that all business processes - from strategy definition through management to organisational design - are effective, efficient and sustainable. Complementing the consulting business, the T.A. Cook Academy has become a leading organiser of international conferences and seminars relating to Asset Performance Management. Annual events in- clude the MainDays summit as well as conferences centered on topics such as Shutdowns &Turnarounds and Capex Management. T.A. Cook’s clients are typically businesses, their suppliers and contractors working with significant industrial assets across multiple sectors. The company has particular expertise in the petrochemicals, plastics, pharma- ceutical, transport, mining and food sectors as well as excellent knowledge of the regulated environments occupied by gas, water and electricity utilities. T.A. Cook Research & Studies The Research & Studies team is responsible for market analyses. We ana- lyse markets and niche markets from the perspective of supply and de- mand, providing our clients with a sound basis for the development of future strategies and successful decision-making. Independent, in-depth research forms the basis of all our studies, prognoses and concepts. Our core target groups are plant operators in the process industries and their technical service providers.176 | Appendices Copyright 2010 T.A.Cook & Partner Consultants GmbH
  • 27. Study exemplar of | T.A. Cook Contact: T.A. Cook & Partner Consultants GmbH Sabine Honigmann Leipziger Platz 2, 10117 Berlin, Germany Tel: +49 (0) 30/88 43 07-0, Fax: +49 (0) 30/88 43 07-30, Email: s.honigmann@tacook.com177 | Appendices Copyright 2010 T.A.Cook & Partner Consultants GmbH