Offshore wind news

No subsidies. No bids.

Denmark disappointed after offshore wind tender draws no bids
https://www.reuters.com/sustainability/climate-energy/denmark-disappointed-after-offshore-wind-tender-draws-no-bids-2024-12-05/
Denmark’s latest offshore wind farm tender in the North Sea has failed to attract any bids, authorities said on Thursday, in a further setback for the industry. After a year of challenges, the global offshore wind industry no longer has much prospect of hitting the lofty targets set by governments in the U.S., Europe and elsewhere, hindering efforts to fight climate change. “This is a very disappointing result,” energy and climate minister Lars Aagard said in a written statement…

Denmark had in April launched its biggest offshore wind tender to date, offering no subsidies to companies competing for the right to erect turbines on six sites with a combined capacity of up to 10 gigawatts.

DB2

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Not surprising given the current economic situation. The EU 2024 GDP growth is expected to be <1%. Energy prices have been declining over the last two quarters due to rapidly increasing use of renewables, which reached 52% of electricity production in Q2. That’s a tough environment to launch a big offshore project that is more costly than land-based wind/solar or simply increasing energy efficiency. Worth repeating that energy prices are declining because of increasing renewable use, reduced energy demand, and reduced purchases of fossil fuels.

Worth waiting to see which way the wind blows (heh, heh) with respect to energy prices in the near future. If the EU economy starts to cook (doubtful given the likelihood of a trade-war world), energy prices might rise enough to make the project more attractive.

Meanwhile, good news abut EU natural gas demand:

In the April-June 2024 period, EU gas consumption continued its structural decline, driven by a decline in fossil gas-fired power generation, higher energy savings, reduced demand, and growing renewable energy production. Overall, EU gas import volumes remained on a downward trend, while already historically high storage levels continued to rise further. Gas retail prices were 4% down compared to the previous quarter and 10% lower than in Q2 of 2023, returning to levels last seen in 2021, before the outbreak of the energy crisis.

We’ve reached the point in the energy revolution where the EU getting more than half its electricity from renewables for an entire quarter is not news.

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Bob,

How much of this is mechanical engineering? Salt water destroys equipment. There is discussion of windmill blades washing up on shore.

Will the industry even exist going forward?

And the European Commission writes that “The electricity market report for the second quarter 2024 also confirms the continued improvement of market fundamentals that supported lower wholesale electricity prices after the crisis situation in 2022.” Demand is just now getting back to pre-Ukraine levels.

Important question – are subsidies necessary?

It is true that the marine environment is a very harsh one. I don’t know if those problems are occurring more often than expected. Something to look into. We have seen in previous threads that insurance costs for the industry have been rising steeply.

Plus there are the well known supply chain and inflation issues. How many years do they go on?

DB2

Look around for real life examples rather than opinions from anonymous posters of unknown expertise.

The Chinese believe subsidies are important for BEVs even though ICEs in China are essentially dead because they believe BEVs are the future of the automobile industry and they want Chinese companies to dominate that future. They are thinking long-term.

Europe has expertise in offshore wind development and it seems pretty clear that for economic, national security, and environmental reasons, renewable energy is the future of electricity generation. Makes sense to continue subsidizing offshore wind to facilitate continued innovation in this technology and help European companies remain competitive in the coming non-fossil fuel world.

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Those are strategic reasons, but what about economically? It certainly appears that without subsidies offshore wind in particular is a poor economic choice. Which reminds me of what Warren said on his company’s wind projects – “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”

DB2

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And yet, somehow, we have thousands of ships delivering products across the ocean all the time.

Mike

Any estimates on annual maintenance and down time?

At any rate, most of the boats don’t have long propellors sticking out. Maintenance is usually done onshore. They also don’t have high-voltage electrical cables connecting them to the mainland.

Block Island was the first offshore wind in the US. In 2020, after only four years of operation, it was forced to shut down for maintenance.

The rocky saeabed around Block Island has been worn away by tides and storms, sometimes exposing high-voltage cables in a popular swimming location that developers failed to bury deep enough when the facility was brought online in 2016. To splice in newly buried cables, the wind farm will go offline for a brief period this spring.

At $30 million for one leg of the fix and an undisclosed amount for the other, it’s a costly problem to crop up for the nation’s first offshore wind farm, and it’s not totally isolated.

DB2

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Earlier this year the DoE put out a report that focused on operations & maintenance for offshore wind.

They note that offshore wind projects are using turbine technologies that are not fully mature. There is also a lack of standardization.

A study by Hoffman and Sperstad found that the benefits of going from 5MW turbines to 10MW are easily outbalanced by higher failure rates and maintenance costs.

In the real world, insurance costs have been rising. Last year there was a report from Cube Insurance:

…ensuing from the deployment of ever-larger offshore wind turbines.

Among the findings of the report, underwriters are concerned that 55% of all claims by frequency come from component failures during construction from 8MW+ machines, which now represent a larger share of total insured values (TIVs). This, combined with an increase in average offshore wind losses, up from 1 million GBP in 2012 to over 7 million GBP in 2021, is creating unsustainable financial risk, right when scaling is needed to bring about the energy transition.

Another major finding is that 8MW+ machines are suffering from component failures within the first two years of operation. This is juxtaposed against the time frame (five years) for component failures during operation in the 4 MW-8 MW category of turbines…

DB2

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The high voltage cables to shore have proven to be a weak point.

The trade body, which champions the UK’s £8billion underwater industry, says that reliability of subsea cables is “paramount” to the success of offshore wind and the energy transition. But failure of these cables is all too common, to the point that the cost of insuring them is becoming prohibitive.

GUH chief executive, Neil Gordon, said: “It’s estimated that around 85% of the total value of offshore wind insurance claims relate to subsea cables. Insurers are losing money underwriting cables with the average settlement claim in the region of £9million. Brokers have warned that the high number of cable claims is affecting capacity and coverage and the cost of repairs typically runs into millions, with warranties rarely covering the high cost of business interruption.

DB2

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The strategic reasons are economic. It borrows from the Chinese playbook of looking five years into the future and extrapolating what industries are going to be dominating.

It is a risky economic choice for companies that tend to think in quarterly time periods rather than years. Tesla lost money for a number of quarters, indicating that BEV manufacturing was a poor economic choice for some time. But continued investment during that “poor economic choice” period, helped significantly by government programs, made it possible for the US to have at least one viable electric car company today that can compete with the Chinese.

If only we had had the foresight to have done the same with batteries and computer chips. Well, better late than never.

Nations are learning that being dependent on other countries for energy is an economic negative over the long term. Far better to switch to renewables and domestic energy generation that provides resiliency to the uncertainties of global politics and economics.

Renewables, including offshore wind, makes it possible for the EU to become energy independent. Anything that reduces the economic importance of the Middle East, an area still fighting Medieval wars of religious intolerance and tribalism, is a good thing for global stability.

But if the costs are high then there is 1) a drag on their economy and 2) an uncompetitive industrial position and 3) increased percentage of those in energy poverty.

DB2

DB2

Saving for college means making some short-term economic sacrifices for greater long-term benefits. Same principle applies here.

The US spent a lot of resources building a national highway system that was underused for a while. During that time the expenditure was probably a drag on the economy.

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I have no idea. But over the course of centuries all sorts of ships have figured out how to set prices, do maintenance and provide products and be profitable.

Mike

As noted upthread, there are significant differences between ships and wind turbines.

In addition to the supply chain and inflation issues, there appear to be two major categories of problems (also neither of which apply to ships):
a) rapid changes in technology and scale which extends and steepens the learning curve,
b) the undersea high-voltage cables.

DB2

These all have little to do with my comments, in that ships have operated in the harsh conditions of the salty water and figured out how to set prices to handle the maintenance.

Certainly some projects may make no sense when all is considered.

Mike

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Troubles on land as well…pricing this pesky intermittent stuff is proving a problem.

The expansion of thousands of wind turbines in Sweden over the past two decades means there’s so much power around that electricity prices are increasingly dipping below zero, both for whole days and individual hours, and are expected to remain very low for years.

The market turmoil is discouraging investors from backing new renewable developments in the country as rock-bottom power prices offer little return. Doubts are also growing over what demand will be in the future…

Sweden, which ended its main subsidy system for new renewable projects three years ago, is offering a glimpse into a world where investments in clean power are driven by the price of energy alone…

No new turbines have been ordered in Sweden since the first quarter, according to the latest data from industry group Svensk Vindenergi, the longest such stretch in two years. It now takes as long as 8.5 years to bring a wind park in Sweden from application to operation, up from 2.5 years in 2010…

DB2

Tried it, but can’t do without the subsidies.

Denmark to halt offshore wind tenders to revamp subsidy model
https://www.reuters.com/business/energy/denmark-halt-offshore-wind-tenders-revamp-subsidy-model-2025-01-31/
Denmark will halt all ongoing offshore wind tenders as the existing framework where no subsidies are offered does not work under current market conditions, its energy minister said on Friday.

The global offshore wind industry has been hit by surging costs, rising interest rates and supply chain bottlenecks. Denmark said in December that its latest tender for wind at sea had failed to attract any bids…

“Our assessment right now is that we might be required to support offshore wind. It’s not because we’re happy about it, but it’s necessary,” Aagaard said.

DB2