Commercial in confidence Offshore Wind Cost Reduction Pathways Supply Chain Work Stream Subtitle May 2012 Table of Contents EXECUTIVE SUMMARY 1 INTRODUCTION............................................................................................................................................................11 1.1 Background ......................................................................................................................................................... 11 1.2 Aim ...................................................................................................................................................................... 11 1.3 Approach ............................................................................................................................................................. 11 1.4 Structure of the report.......................................................................................................................................... 16 2 CURRENT SITUATION..................................................................................................................................................17 2.1 Introduction.......................................................................................................................................................... 17 2.2 The Global Wind Energy Market ......................................................................................................................... 17 2.3 European Offshore Wind Energy Market............................................................................................................. 20 2.4 Programme considerations – case study: Thanet ............................................................................................... 26 2.5 Analysis of Key Players and potential entrants.................................................................................................... 27 2.6 Summary of current capacity assessment........................................................................................................... 41 2.7 Supply/demand balance...................................................................................................................................... 42 2.8 Summary............................................................................................................................................................. 50 3 COST REDUCTION LEVERS ........................................................................................................................................51 3.1 Introduction.......................................................................................................................................................... 51 3.2 Competition ......................................................................................................................................................... 51 3.3 Vertical Collaboration (and Interface Risk) .......................................................................................................... 54 3.4 Asset Growth and Economies of Scale ............................................................................................................... 55 3.5 Horizontal Co-operation....................................................................................................................................... 57 3.6 Contract Form ..................................................................................................................................................... 58 3.7 Uncontrollable Risk.............................................................................................................................................. 59 4 SUPPLY CHAIN COST REDUCTION PATHWAYS: STORY 3......................................................................................61 4.1 Introduction.......................................................................................................................................................... 61 4.2 Story 3 by Cost Element...................................................................................................................................... 61 1 4.3 Installation ........................................................................................................................................................... 62 4.4 Wind turbines ...................................................................................................................................................... 73 4.5 Support structures ............................................................................................................................................... 83 4.6 Planned and Unplanned O&M............................................................................................................................. 90 4.7 Array cables ........................................................................................................................................................ 99 5 COST REDUCTION PATHWAYS: STORIES 1-4 ........................................................................................................100 5.1 Introduction........................................................................................................................................................ 100 5.2 Story 3: Supply Chain Efficiency ....................................................................................................................... 100 5.3 Story 1: Slow Progression ................................................................................................................................. 104 5.4 Story 2: Technology Acceleration...................................................................................................................... 106 5.5 Story 4: Rapid Growth ....................................................................................................................................... 107 5.6 Cost Reduction Pathways Post 2020 ................................................................................................................ 109 6 SENSITIVITIES ............................................................................................................................................................110 7 PRE-REQUISITES AND TIMELINE .............................................................................................................................111 7.1 Pre-requisites .................................................................................................................................................... 111 7.2 Timeline............................................................................................................................................................. 113 7.3 Priority ............................................................................................................................................................... 119 7.4 Other Stories ..................................................................................................................................................... 119 APPENDIX A METHODOLOGY.................................................................................................................................................120 APPENDIX B: OIL AND GAS CASE STUDY..............................................................................................................................128 APPENDIX C: LIST OF COMPANIES CONSULTED .................................................................................................................137 APPENDIX D: LIST OF ACRONYMS.........................................................................................................................................139 2 Table of Figures Figure 1: Sites and Story definitions ...............................................................................................................................................6 Figure 2: Cost Reduction Pathways................................................................................................................................................7 Figure 3: Story 3 Cost Reduction 2012-2020 Timeline .................................................................................................................10 Figure 4: OWCRP Study Stories...................................................................................................................................................13 Figure 5: Story 1: World Wind Markets - Additional and total wind capacity 2006 to 2010 ...........................................................18 Figure 6: Comparisons of Forecast Wind Growth Rates 2006 to 2011.........................................................................................19 Figure 7: European offshore wind capacity – 2001 to 2011..........................................................................................................20 Figure 8: Growth in European Installed Onshore and Offshore Wind Turbine Capacity – 2006 to 2010 ......................................21 Figure 9: Project Capacity and Number of Turbines, UK and Major European offshore wind farms. Get onto one graph............24 Figure 10. UK Developer Portfolios ..............................................................................................................................................27 Figure 11: UK offshore turbine market