Navigant Research Blog

Vestas, Mitsubishi Settle on Offshore Turbine Design

— February 24, 2015

In 2014, Mitsubishi Heavy Industries (MHI) formed a joint venture with Vestas called MHI Vestas Offshore Wind. The strategy behind that joint venture is now substantially clearer. MHI’s decision to stop the commercialization of its 7 MW SeaAngel offshore wind turbine, to focus instead on the Vestas V164-8.0 MW turbine under MHI Vestas Offshore Wind, makes sense given Vestas’ expertise in the offshore market and the need to move forward without confusion or conflict between the two turbine platforms.

Technology-wise, the SeaAngel’s novel Digital Displacement Transmission Technology (DDT) looked like the more advanced drivetrain system. It employs a sophisticated series of hydraulic pumps, values, and motors to transfer the energy from the constantly varying rotor speed to a fixed speed generator, without the use of a gearbox. No other wind turbine employs a hydraulic drivetrain like this.

That novel technology, however, adds uncertainty to the construction and operation of offshore wind farms.

Risk Avoidance

The increased construction and turbine servicing costs and associated risks for offshore wind increase the rate of return that investors expect to up to 12% compared to an onshore wind farm’s 7% to 9% in developed markets. Once you add the risk of employing a completely new transmission technology system, you likely outweigh the benefits offered by the new drivetrain design. The joint venture with Vestas provides access to a similarly sized turbine based on a proven and more conventional, medium speed geared technology, eliminating the added risk.

Although Vestas’ turbine is also new in the market, the company’s offshore turbine reliability has dramatically improved since 2004, when it had to replace the transformers and generators in all 81 of its then new V80 machines at Horns Rev offshore wind farm. Much refinement and advancement specific to offshore has been achieved by Vestas and its peers.

No Confusion

It’s also important to send a clear signal to the market that the Vestas V164-8.0 turbine is the primary turbine offering of the joint venture, without a separate Mitsubishi-branded product offered outside or within the joint venture. Although the SeaAngel turbine will disappear as a stand-alone brand, testing of the hydraulic technology will continue.

Onshore testing of the full-size 7 MW turbine officially began on February at a test center in the United Kingdom for validation of the drivetrain design. A similar hydraulic-powered turbine may be installed later in 2015 in Japan on a floating platform,  depending on the results from the U.K. tests.

Ultimately, the aim of the effort is to focus on refinement and validation of the hydraulic drivetrain for possible future use under the MHI Vestas joint venture. The floating platform may, in coming years, become part of the joint venture’s offerings as well. For now, though, the V164-8.0 turbine using proven Vestas technology is marching out to sea, having recently landed its first order of 32 units for the 258 MW Burbo Bank Extension project on the west coast of the United Kingdom in the Irish Sea. Hiring has just begun to build the 80 meter turbine blades.

Roberto Labastida contributed to this post.

 

Intellectual Property Battles Roil the Wind Power Industry

— February 11, 2015

Wind turbine vendors vigorously pursue intellectual property (IP) advantages in technology and ruthlessly defend them to maintain an edge over their competitors. The 2010 clash between GE and Mitsubishi over low-voltage ride-through and variable speed operation reportedly caused Mitsubishi to start sweeping its cavernous exhibit booth at trade shows, on the lookout for electronic surveillance devices planted by rivals. In another example, IP battles between Kenetech and German supplier ENERCON—the world’s third-largest wind turbine vendor by market share in 2013—resulted in ENERCON abandoning the U.S. market entirely.

One of the latest patent fights to spill into the headlines is between ENERCON and Siemens, over so-called de-rated operation. Who will win this round is anyone’s guess, but it’s another example of the rapidly advancing technology that continues to improve the performance, efficiency, and grid-friendly capabilities of wind turbines.

Slowdown, Not Shutdown

De-rated operation is the ability of a wind turbine or an entire wind plant to operate below its maximum capacity during times of high wind speed. Traditionally, when wind turbines reach their thresholds for maximum wind speed (around the 25 meter per second range), they will enter a cut-out and shutdown mode to protect the rotor, tower, and drivetrain from damaging stress. However, this process takes the electricity production offline, which can destabilize the broader power grid. As the commercial-scale deployment of wind turbines increases, this becomes a larger concern.  De-rating uses a range of control methods, from pitch control of blades to generator torque control to operate a wind turbine at below its maximum capacity.

For example, instead of a 2 MW wind turbine shutting off once it encounters its threshold cut-off wind speed parameters, it can reduce its output to (for example) 50% capacity, or 1 MW. This ensures that the wind plant remains operational, balancing the grid, and that kilowatt-hours continue to be produced instead of lost due to a full shutdown. There are also economic inefficiencies associated with stopping and restarting wind turbines that can be avoided by running at reduced load. This approach can be used to continue the operation and revenue generation of a wind turbine that is experiencing high operating temperatures within the turbine drivetrain, which can trip a control system that shuts everything down to prevent damage to the turbine. De-rating can allow power production to continue while temperatures are reduced to acceptable levels without entirely shutting the turbine down.

Storm Warning

ENERCON named its system Storm control; Siemens calls its system High Wind Ride Through (HWRT). GE Energy—likely as a way to avoid a similar IP battle with ENERCON—uses a de-rating approach that collectively de-rates all of the wind turbines at a wind plant. Spain’s Gamesa fought a 3-year battle to invalidate ENERCON’s patent, but lost in February 2014. Other vendors currently have or are bringing to market similar strategies—and all are certainly watching this patent fight closely from the sidelines.

 

Cape Wind Project Faces New Hurdles

— January 26, 2015

The prospects for near-term offshore wind take-off in the United States dimmed at the end of 2014, as the two utilities that had agreed to buy the electricity output of the 468 MW Cape Wind offshore project terminated their contracts.  The deals collapsed because the developers of Cape Wind had failed to reach key contractual milestones for project financing and construction launch by December 31, 2014.  National Grid signed a conditional power purchase agreement (PPA) in 2010 for 50% of the project output, and utility NSTAR agreed to purchase an additional 27.5% of the project’s output in 2012.

Saying they do not regard the terminations as valid, Cape Wind officials claim that force majeure provisions in the contracts stipulate that the milestones should have been extended.  Once again, the embattled project is in a legal dispute – and this one with potentially show-stopping consequences.  No offshore wind project in the United States can proceed without the price certainty of a PPA.  The outcome of these contract disputes could deal a fatal blow to a project that has been under development for 14 years.

Not in My Ocean

Planning for Cape Wind has taken so long partly because it was the first to navigate the unchartered waters of offshore wind development in a country that has little offshore wind policy and, as yet, no steel in the water.  Vociferous and well-funded opposition to the project’s location off Nantucket Island – a popular vacation destination for the affluent and influential – plagued it from the beginning.  The developers have been fighting a two-front battle against the challenges of offshore wind and the legal hurdles put up by anti-wind activists, coastal homeowners, and conservative billionaires.

The unfortunate reality is that, while the United States has excellent offshore wind potential along the Eastern seaboard and growing need for diversified and clean electricity generation, U.S.  policies are ill-suited to support offshore wind.  The production tax credit (PTC) and investment tax credit (ITC) for renewable energy projects subsidize around 30% of the cost of building an offshore wind farm.  European countries like Germany, Denmark, and the United Kingdom provide similar levels of subsidy.  The major difference is that those incentives have been consistent and long-lived enough to support projects that are years in development.

Back and Forth

Unlike most developed countries, where tax law is permanent until changed through legislation or other decrees, many U.S. tax laws and incentives are increasingly enacted on a temporary basis.  This is partly because U.S. lawmakers count on industries like wind power to help finance their election campaigns.  As a result, tax favors are largely granted on a 1- or 2-year basis, resulting in boom and bust cycles (13 GW of wind installed in 2012 in the United States, for example, followed by 1 GW installed in 2013).  This also results in severe inefficiencies in manufacturing and human resources as factories lay off workers only to rehire again when incentives resume.

The onshore wind industry grudgingly copes with this back-and-forth because onshore wind can be built in 1- and 2-year cycles.  But offshore projects require much longer to develop and build.  Eventually, U.S. lawmakers may realize the benefits of offshore wind and provide suitable long-term incentives.  Unfortunately, that will likely come decades after more progressive countries in Europe – and now China – are far ahead in offshore wind.

 

Tailwinds Pick Up for U.S. Wind Market

— November 2, 2014

The U.S. wind market, in the third quarter of 2014, showed clear signs of recovery, with 1,254 MW installed, eclipsing the total of 1,084 MW installed all of last year.  The American Wind Energy Association (AWEA) reports an additional 13,600 MW under construction across 105 projects.  In our March 2014 World Market Update, Navigant Research forecast that by year’s end, the 2014 total could reach 6,300 MW.  The last 3 months of the year typically see more capacity installed than in the previous 9 months combined because of the construction cycle peaking at the end of the year.

Some wind projects may to slide into 2015, though, given that there’s not a policy-driven deadline to commission projects by year’s end.  A number of factors have contributed to a slower construction cycle, despite over 12 GW of wind projects with announced construction for next March.  The supply chain in the U.S. wind market exhibits some unavoidable inefficiencies due to the stop-start nature of U.S. wind power policy.  Wind turbine manufacturers, along with their component suppliers for blades, towers, drivetrains, and other equipment, were forced to throttle back manufacturing capacity in 2013 due to the down market.  Re-hiring and training workers and ramping up capacity is not an overnight process in an industry that produces aerospace-grade products at industrial levels.

Delivery Delays

There are also signs of transportation bottlenecks for some of the largest components.  The majority of wind projects under construction use rotors around 100 meters in diameter and towers that are 90 meters or higher.  Transport companies that move this equipment have been reluctant to invest in new trailers designed for larger wind turbines, given that the equipment could sit idle if the U.S. market falls into another slump.  Railways have also been bottlenecked, partly due to the huge volume of crude oil being shipped around North America.

The turbines installed in 2014 so far have come largely from the Big Three vendors: GE, Vestas, and Siemens.  Most of these installations use GE’s 1.6/1.7 MW turbine.  More than 4,500 MW of the capacity under construction uses GE turbines, followed by 2,775 MW for Vestas, 1,792 for Siemens, and around 3,500 MW not yet reporting a turbine.  Notably, however, turbine vendors that have limited manufacturing presence in the United States continue to secure business, with over 800 MW under construction using turbines from Acciona, Gamesa, and Nordex combined.

Flexible Financing

Also notable is the return of the merchant, or hedged, wind plant.  Most wind projects under construction either have signed a long-term power purchase agreement (PPA) or are utility owned.  But a substantial amount of wind capacity is proceeding on a merchant basis, which is operating without a contract. Most of this is occurring in Texas.

A few years ago, following the financial crisis, it was nearly impossible to secure outside project financing for a wind plant that did not have a PPA.  That rigidity has softened as wind developers seeking higher potential returns are finding ways to move forward and secure project financing without a fixed PPA contract.  In many cases, hedge agreements that went out of style during the recession of 2008-2009 are back in use.  These financial tools allow a wind plant to take advantage of fluctuating electricity spot market prices.  Spot prices in Texas generally range from $45 per MWh to just over $60 per MWh.  Special merchant contracts provide a type of insurance that enables wind plants to be paid the fluctuating spot price while also being protected by a price floor and ceiling – thus reducing risk while not limiting wind power providers to a low fixed price, as is typically the case with a PPA.

Moving forward, all eyes will be looking to the end-of-year project commissioning to see how much the U.S. wind market has recovered from its 2013 doldrums.

 

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