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Global shortage of installation vessels could trouble waters for offshore wind

SNL Image

A rendering of Jan De Nul's Voltaire offshore installation vessel, currently under construction. It will be one of the largest vessels able to install the next generation of supersized turbines.
Source: Jan De Nul

Towering 260 meters into the ocean skies and boasting generating capacity of a record 12 MW each, General Electric Co.'s Haliade-X wind turbines are set to enter commercial use in 2021. But the deployment of the world's largest machines — and those that will follow — could be hampered by a global shortage of shipping vessels capable of installing the next era of megaturbines out at sea.

Installation vessels are used to push the turbine bases into the platforms, lift the tower and turbine into the air, and host the dozens of crew members working on a project. Some boats are primarily used for installing the foundations.

And according to Frederik Colban-Andersen, divisional director for offshore renewables at ship broker Clarksons Platou AS, only a handful will be able to install the new supersize turbines once they become commercially available. "The way we see it is that there are currently three existing vessels and two under construction at shipyards" capable of installing the Haliade-X worldwide, the director told S&P Global Market Intelligence in an interview.

SNL Image

Turbines outgrowing ships

The capacity of wind turbines is growing rapidly, and for the ship owners supporting the sector, the speed of innovation can be a concern. "The contractors have invested money in ships not too long ago that could install turbines up to 10 MW," said Jan-Peter Elffers, founding partner at advisory firm Amsterdam Capital Partners, or Amscap, who has worked on several offshore wind financings in Europe.

The vessels required for installing turbines will usually be booked out for several months. Thanks to improvements in efficiency, vessels can install one turbine in under two days, Colban-Andersen said. Hiring costs can be around €150,000 per day, with some reaching €200,000 per day, and the rates are expected to increase in the future.

Jack-up vessels cost up to €320 million to build, Colban-Andersen said, with prices varying across the globe and generally on an upward trend, buoyed by higher steel and labor costs.

Until recently, the vessel fleet used to install smaller turbines in the 6.5 MW to 8 MW range was sufficient for the wind industry. But as the need for larger vessels intensifies, the smaller vessels will likely be displaced into emerging markets, such as Asia, and will be used for servicing jobs.

Industry body WindEurope anticipates at least 10 new vessels will be needed to deal with the fleet of larger turbines, with each able to install up to 100 turbines or foundations each year. "This may include some new heavy-lift floating vessels for deep water sites," it said.

General Electric, manufacturer of the 12-MW Haliade-X, when asked about a possible shortage of vessels capable of installing the turbine, said its analysis showed there "are enough vessels to install [the] Haliade-X for future projects." It added that it had been in contact with several vessel owners to get them to invest in more ships. "They have shown a lot of interest," it said.

Developers committing to building new capacity is seen as the best incentive to get ship operators behind bigger vessels. "If there is indeed a market [for the large ships] and we have projects lined up with hundreds of these [10-MW turbines or bigger], ship owners will invest," said Elffers.

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But the shipowners will not play catch-up forever, and the growth in turbine size may level out eventually, said Clarksons' Colban-Andersen. "There is no way that ship owners will get funding to build a new vessel every five years."

Finding that balance will involve close engagement between the turbine manufacturers, developers and ship owners, he said.

Jones Act challenges

The U.S., which is planning a significant push in offshore wind development in the coming years, with Ørsted A/S, one of the players making a play for the East Coast, has an additional challenge to contend with. Under the country's maritime legislation known as the Jones Act, ships not operating under the U.S. flag are not allowed to work out of the country's ports.

The U.S. does not yet have a vessel under its flag capable of installing the 12-MW turbines, which could become challenging for developers looking to build wind farms. Ørsted has already ordered GE's 12-MW turbines for planned offshore wind farms on the East Coast, one of which is set to be commissioned in 2022.

"A missing piece in the growing American based offshore wind supply chain is a Jones Act compliant vessel," Ørsted told industry website Recharge on Dec. 3. "In order for the industry to have the most optimal set-up for installation of the turbines, a vessel will be needed." The company declined to provide detail on capacity shortfalls and its vessel procurement to S&P Global Market Intelligence, citing competitive reasons.

Turbine manufacturer Vestas Wind Systems A/S had also raised the transportation bottleneck in its most recent earnings call. "Our type of products requires special vehicles, both on land and also on sea. And there you have a shortage," Marika Fredriksson, CFO at Vestas, told analysts. "[We] have to time those boats with what we need at any given point in time."

There are, however, potential ways to steer around the Jones Act, for example by using jack-up vessels from Europe, not entering them into U.S. ports and "feeding" them with smaller U.S. barges which are Jones Act compliant.

Vessels in construction

Two supersized vessels in the construction pipeline, named Voltaire and Les Alizés, were ordered by contractor Jan De Nul Group this year.

"[Voltaire] will enable us to cope with our increased number of offshore wind projects worldwide," Philippe Hutse, offshore director at Jan De Nul, said in April, when the company announced its order of the vessel. "We recognize the global trend towards larger wind turbines for increased green energy demands. The Voltaire will have all the required specifications to meet the upcoming challenges."

Les Alizés, a floating vessel designed to install foundations, will be built by the Chinese CMHI Haimen shipyard, and the Voltaire is being made by COSCO Shipping Heavy Industry, also in China. Shipyards in Asia tend to be favored for their comparatively lower costs.

The sector has long lead times, with all sides looking for planning security years ahead. Ships under construction now already have contracts secured. Jan De Nul's Voltaire has already been tapped for the U.K.'s Dogger Bank offshore wind farms, even though it will not be ready until 2022. "If you order the vessel, you are quite likely to get the contract," said Colban-Andersen.