Navigant Research Blog

States Ring in 2018 with Offshore Wind Momentum

— March 6, 2018

2018 feels like a turning point for the “always about to take off but just not quite yet” US offshore wind market. First, the degree to which the US market lags Europe can’t be overstated. In 2017, the US wind market saw no new capacity installed. Meanwhile, also in 2017, Europe’s first offshore wind farm was decommissioned because it was too old to continue operating. The 4.95 MW Vindeby using 11 Bonus 450 kW turbines was commissioned in 1991 and operated for 26 years. Europe also commissioned 3,148 MW from 560 turbines spread over 17 wind farms, bringing cumulative capacity to over 15,700 MW.

The US is at least formally in the game, with one 30 MW project brought online in 2016. The next project, however, is likely to be commissioned in 2019 or 2020 at the earliest. Nevertheless, a number of major announcements in early 2018 from New Jersey, New York, and Connecticut show the US market slowly building inevitable momentum to soon see year-over-year steady installations beginning in the mid-2020s.

New Jersey

In New Jersey, Governor Phil Murphy signed an executive order on January 31 calling on the state’s Department of Environmental Protection and the Board of Public Utilities (BPU) to reach a goal of 3,500 MW of offshore wind energy by 2030. The first step in this process involves BPU formulating and administering a competitive power contract auction for a first 1.1 GW stage. Planning and coordination with neighboring states, such as New York, will also be ramped up. Some of the early stage has already been set up for development in New York, with Statoil having secured an offshore wind site lease of 321 km2 that could support over 1,000 MW of wind. This was through the federal government’s Bureau of Ocean Energy Management, which to date has awarded site leases capable of producing over 15,000 MW.

New York

On January 29, in his annual State of the State Address, New York Governor Andrew Cuomo announced that the New York State Energy Research and Development Agency (NYSERDA) would administer two power contract solicitations in 2018 and 2019 as a first 800 MW stage toward achieving the 2.4 GW goal he announced in last year’s address. NYSERDA has filed a white paper with the Public Service Commission laying out seven procurement options.

Connecticut

Connecticut also announced offshore wind ambitions in late January. It released a request for proposals (RFP) for new clean energy, including offshore wind that can produce 825,000 MWh/year, which represents around 200 MW or more of offshore wind. Rhode Island also issued a renewables RFP on February 6. It is not specific to offshore wind but it includes offshore in the list of resources to be considered. These early 2018 announcements come just after Massachusetts launched an auction for 800 MW of offshore wind in late 2017, the winners of which are likely to be chosen before the end of 2018.

States Aside, General Electric Makes Headlines

Meanwhile, US-based General Electric announces it is committing $400 million to the engineering, testing, and supply chain necessary to build a 12 MW turbine prototype in 2019 that will be 267 meters tall (853 feet) and will have a 220 meter rotor (721 feet) enabled by 107 meter (351 feet) long blades. As the US market grows, turbine supply will no longer be solely dominated by the European turbine vendors.

 

New Wind Turbine Battleground Focused on 4 MW Units

— September 28, 2017

The latest battleground in the ever tightening wind turbine market is with onshore wind turbines in the 4 MW range. Until now, this segment has had few offerings and only minor commercial deployments. No less than four turbine OEMs announced new 4 MW turbine models over the past few months. The overwhelming majority of annual onshore wind turbines installations are in the 2 MW to 3 MW range, and innovation continues to occur rapidly in that nameplate space.

Power Contract Auctions Prevail

However, a number of factors are pushing turbine OEMs to design more turbines with higher nameplate capacities. This includes the steady shift in Europe and other markets from fixed priced contracts for wind to highly competitive power contract auctions. These auctions squeeze power purchase agreement pricing for wind projects as low as developers and investors are willing to go, and taller tower, larger rotor, larger nameplate machines promise higher annual energy production (AEP). Larger turbines also maximize AEP in a geographically limited location. Europe in particular is already a population-dense continent and land availability for wind projects is becoming increasingly constrained.

There are also efficiencies of scale with producing the most megawatt-hours from each single wind turbine foundation and tower. This factor is more quantifiable with offshore wind, where foundations and installation cost is proportionally much higher than it is for onshore. In general, onshore turbines represent around two-thirds of onshore project CAPEX while offshore turbines represent one-third of offshore project CAPEX due to the higher foundation cost. This is why offshore wind turbines may double in size by 2025. The same principle applies (to a lesser degree) that the more AEP per turbine in the onshore realm, the better the project economics.

Competitors Abound

The following are summaries of the most recently announced turbines competing in this new 4 MW battleground:

  • GE Renewable Energy: GE Renewable Energy announced its first turbine offering in the 4 MW range with a new 4.8 MW unit that features a 158-meter rotor enabled by carbon blades. GE has historically avoided carbon fiber for most of its blades, but the demands of longer blades for this oversize turbine may have made carbon use unavoidable. The turbine will have around 30% higher AEP than GE’s previous 3 MW range turbines. Tower heights are 101 meters, 120.9 meters, 149 meters, and 161 meters. GE’s acquisition of Alstom Wind, LM Wind Power, and Blade Dynamics likely played a role in this new 4 MW platform.
  • Vestas: Vestas upgraded and uprated its 3 MW range to now include three models in the 4 MW range. This includes the high wind V117-4.0/4.2MW, which is designed to handle wind gusts up to 80 meters per second that would enable it to handle hurricane and typhoons. V136-4.2MW and the V150-4MW/4.2MW are medium to low wind turbines designed for most areas in Europe and other global markets.
  • Nordex: Nordex is uprating its 3 MW Delta series into a 4 MW-4.5 MW turbine with a 149-meter rotor for medium wind speeds. The turbines are planned for prototype testing in the third quarter of 2018, followed by several pre-series turbines and series production starting in 2019. The company touts the turbine’s wide power range from 4 MW to 4.5 MW, which is ideal for adapting individual installations to a specific grid operator’s requirements and to local wind conditions or noise restraints. Steel towers come in 105- and 125-meter hub heights and concrete-hybrid towers offer hub heights of 145 and 164 meters.
  • Enercon: Germany’s Enercon has been ahead of all other turbine OEMs with 4MW class turbines, having had its EP4 turbines (4-4.2 MW) E-126 and E-141 already commercially available roughly 2 years ahead of Vestas and others. In fact, the newest E-series turbines are downrated from a previous E-126 model that had exceeded 7 MW nameplate capacity as far back as 2012. The E-141 units feature concrete-steel hybrid towers to enable a 159-meter hub height. Enercon is also rapidly evolving its 4 MW class turbines with some radical design departures, which is thoroughly explained by Windpower Monthly.
 

First Dedicated Vessel for the US Offshore Wind Industry

— August 1, 2017

The US offshore wind market has been caught in the classic “the chicken or the egg” conundrum for years. The lack of purpose-built offshore wind installation jack-up vessels in the United States—necessary for the deployment of wind turbines in marine environments—has added uncertainty, complexity, and financial risk to the nascent offshore wind market in the country. It is also a key factor contributing to the slower-than-expected growth of offshore wind in the United States.

Multiple Issues

I wouldn’t attribute all the blame for the United States lagging behind Europe with offshore wind to this issue. European countries and China have been willing to provide generous regulatory and financial support for offshore wind, along with policies that are set up with a long-term framework. By contrast, the US market’s primary incentive mechanisms, the Production Tax Credit and Investment Tax Credit (PTC/ITC), have been enacted in short-term on and sometimes off again schedules for more than a decade.

Onshore wind developers with projects in advanced development can go from a turbine order to commissioned project in less than 8 months. The offshore wind industry, however, takes substantially longer for project development, turbine procurement, and project construction. Large wind projects in Europe typically require 2 years for construction. Prior to construction, the development and investment phases usually take at least 3-5 years.

That reality is the main reason offshore wind has been slower to take off than expected, but following at a close second is the lack of US-based jack-up vessels. These vessels have not been built in the United States because the offshore wind market demand has not been there to justify their pricey construction. Then why not simply bring a vessel or two from Europe?

The Jones Act

An antiquated maritime law from the 1930s called the Jones Act plays a major role in this issue. The law makes it illegal for vessels that are not built in the United States and crewed by American staff (a US flagged vessel) to deliver goods and conduct work from port to port. It is largely considered a protectionist measure to protect the US shipbuilding industry. One offshore project was commissioned last year, Deepwater Wind’s 30 MW Block Island wind farm off the Rhode Island coast. The Jones Act forced additional cost and complexity because the developers had to contract a jack-up vessel from Europe due to the lack of US vessels. Yet, the vessel could not touch US shores, where normally it would pick up the wind turbines, towers, and blades. Instead, Deepwater had to use smaller US flagged barges that towed wind turbine equipment out to the site, where it was transferred to the European jack-up vessel, thus increasing the cost, complexity, and risks of the project.

A Step Forward

One small but important step has arrived to mitigate the Jones Act problem. Two Texas-based companies active in the oil & gas industry, Zentech Inc. and Renewables Resources International (RRI), recently announced they would be the first to build an offshore wind construction jack-up vessel. The vessel will be a four-legged, self-propelled dynamically-positioned level 2 (DP2) jack-up vessel based on a US-built barge. Zentech plans to install four truss legs with spud cans, a proven oil & gas design, integrated in a newly built hull. It will be able to install in each port-to-site voyage three 6 MW-9 MW range wind turbines. Commissioning is expected in 4Q 2018.

The US offshore wind industry still faces challenges, but this recent announcement is a positive step toward minimizing the Jones Act as one of the industry’s impediments.

 

2016 Reshuffles the Top 10 Global Wind Turbine Manufacturers

— June 8, 2017

Navigant Research’s annual World Wind Energy Market Update ranking of the top 10 wind turbine vendors is closely observed every year. This benchmarking goes back 22 years—before other similar analyses existed and when commercial wind turbines had 50 meter rotors and a top nameplate size of around 750 kW. Today in 2017, there are rotor diameters pushing beyond 140 meters for some onshore turbines and 164 meters for offshore turbines. Nameplate capacities for onshore are mostly between 2 MW and 4 MW and 9 MW for offshore, and 10 MW capacities are just around the commercial corner.

In 2016, a total of 54.3 GW was installed globally, a 14.0% annual decrease. This annual downturn is largely the result of China dropping from 30.2 GW installed in 2015 to 23.3 GW in 2016 due to changing incentive rates in that market. The new wind capacity added in 2016 brings new cumulative wind capacity up to 486.8 GW globally, a 12.1% annual increase.

The downturn in China from an unbelievable amount of capacity installed in 2015 to a merely astonishing level installed in 2016 resulted in a shake-up of the top 10 ranking, as a few Chinese vendors dropped in capacity and rank against their peers. Merger and acquisition (M&A) activity also effected the ranking, with GE now including Alstom wind activity and Nordex including Acciona activity.

The Top 10 in 2016

The actual megawatts and market share numbers installed in 2016 are available in the full report, but the following summary describes the year 2016 annual top 10 ranking:

  • Vestas regained its longtime No. 1 status globally for annual wind installations with double-digit growth rates. It even achieved higher capacity additions in the United States over GE Energy, which has normally held a perennial lead.
  • GE Energy saw its strongest year to date and moved from 3rd place in 2015 capacity in last year’s Navigant Research World Wind Energy Market Update report to 2nd place for 2016 capacity. Its acquisition of Alstom’s wind turbine division helped, but it was largely momentum with GE Energy’s wind portfolio that drove its move upwards.
  • Goldwind fell in 2016 to 3rd place from its briefly held No. 1 position in 2015, when it rode the cresting wave of the record Chinese market.
  • Gamesa took 4th place in 2016, underlining why it was a target for M&A with Siemens’ wind division, a mega-merger that was made official in April 2017. Despite no Spanish home market, Gamesa saw continued success in a variety of global growth markets, propelling it from 8th place globally in 2014 and 5th in 2015 to 4th in 2016.
  • Enercon had a strong 2016, moving up the ranks to 5th place in 2016, thanks to a strong domestic German market, a reputable direct drive turbine portfolio, and well-diversified sales internationally.
  • Siemens again fell two positions in the 2016 top rankings to 6th place from 4th in 2015—and from 2nd in 2014, when it nearly took the top slot from Vestas. In 2016, a commanding lead in its offshore wind division could not offset lower installation rates in its onshore segment.
  • Nordex broke into the top 10 category, taking 7th place globally. This jump in 2016 was due largely to its acquisition of Acciona in 2015, which rapidly shifted Acciona’s international success to the Nordex Group.
  • The final three top 10 companies in order were all Chinese: Envision, Ming Yang, and United Power. All three saw lower installation totals in 2016 than in 2015 as the Chinese market cooled. Envision moved up the rankings within the large group of Chinese turbine OEMs.

Top 10 Wind Turbine Suppliers Market Share, World Markets: 2016

(Source: Navigant Research)

 

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