LONDON — Dong Energy A/S will install Vestas Wind Systems A/S’s biggest wind turbines at an offshore power generation plant in U.K. waters in what would be the first order for the 8-megawatt machine.
Vestas is the preferred supplier for the Burbo Bank Extension Offshore Wind Farm, a project of up to 258 megawatts about 7 kilometers (4 miles) off the coast of western England, Dong said today in an e-mailed statement. The project would use the V164 8-megawatt machine.
It would be the first bulk order for the V164 device, which Vestas and offshore wind partner Mitsubishi Heavy Industries Ltd. are betting on to grab a share of the growing market for wind turbines at sea. The first prototype of the 224-meter high device was installed at a test site in northern Denmark last month.
“The performance of the 8-megawatt turbine from Vestas is very promising,” Samuel Leupold, an executive vice president at Dong, said in the statement. “I see this as a very concrete step towards reducing the cost of electricity from offshore wind.”
Dong is trying to reduce the cost of offshore wind by 35 to 40 percent. Using bigger turbines contributes to that goal because they require fewer foundations and reap more wind power per machine. Bloomberg New Energy Finance estimates offshore wind costs about $189 per megawatt-hour over the life of a project, more than double the cost of wind farms on land, as well as gas and coal plants.
The offshore wind turbine industry was once evenly split between Vestas and Siemens AG. The German manufacturer has taken the lead in recent years, and now accounts for 61 percent of all machines installed at sea in Europe through the end of 2013, according to New Energy Finance. Vestas has 22 percent of the total historical market.
Vestas in September agreed to set up an offshore-wind joint with Mitsubishi Heavy that will incorporate the V164, and is due to start operation in March.
Dong’s choice of the V164 “is exactly the blueprint for the future of the technology that the new Vestas-Mitsubishi joint venture needs,” Jacob Pedersen, an analyst at Sydbank A/S, said today in a note to investors. It “may mark the first step in a significant comeback in the market for offshore wind turbines” by Vestas.
The Burbo Bank deal is subject to Dong and Vestas finalizing an agreement, according to the statement. It’s also dependent on Dong’s final investment decision for the project, and the company signing a contract guaranteeing future power prices.
Burbo Bank was one of 10 projects listed in December by the U.K. government as eligible for early contracts under its so- called Final Investment Decision-Enabling program. The contracts are due to be finalized in the spring, according to the government.
Copyright 2014 Bloomberg
Lead image: Offshore wind via Shutterstock