Offshore, Onshore, Project Development, Utility Scale, Wind Power

Fitch Finds Offshore Wind Power Complex But Doable

Fitch Ratings said in a recent report on offshore wind energy that the engineering and economics of such operations are complex but manageable.

Fitch said in the April 21 report that offshore wind power projects exhibit greater completion risk, more complex operations and greater risk of one-off major failures compared with onshore peers. On the other hand, stronger wind speeds offshore result in higher and more stable generation per MW compared with onshore projects.

Offshore wind energy is still in an embryonic stage in the United States with the Interior Department signing numerous leases for offshore wind rights. The Fitch report cites a good bit of data from places such as the United Kingdom and the Netherlands.

Differences from nation-to-nation also affect offshore wind economics on issues such as responsibility for subsea cables and so forth.

Operational offshore wind projects may be rated investment-grade, subject to adequate mitigation of technical and operational performance risk.

Offshore wind plants under construction, however, are exposed to materially greater challenges compared with onshore projects and their ratings are likely to be constrained in most cases to speculative-grade.

Challenging weather conditions lead to uneven availability and operating and cost profiles for offshore projects compared with onshore peers. Dependency on vessels to transport personnel, equipment and perform maintenance, if not adequately managed, may result in material deviations from budgets.

Key factors driving Fitch’s assessment of operating risk are the project’s location, the operation and management set-up, the technology used and the project’s technical design and scope.

Positively, higher turbine capacity and wind speeds result in greater and more stable offshore generation per MW compared with onshore projects. Estimated capacity factors average 45 percent compared with 33 percent for Fitch-rated onshore wind projects, although the accuracy of energy production forecasts is still open to debate.

In Fitch’s opinion simpler topography reduces some of the uncertainties in offshore production estimates while wake losses are more difficult to estimate due to the larger size of arrays and projects.

Offshore Turbine Size Getting Bigger

The average offshore wind turbine size employed in the industry is growing, with 4.2 MW on average installations in 2015, a 13 percent increase over 20142. This is due to the increased deployment of 4 MW to 6 MW turbines, expected to be followed by the gradual introduction of 6-8 MW turbines towards 2018.

Fitch notes that Siemens technology for a 6-MW, and later 7-MW turbine with no need for a gearbox have fewer moving parts than traditional gearboxes, but with “a more limited or no performance history.”

Fitch expects offshore wind project availability to be lower than onshore although still high.

“Across a portfolio of 19 Fitch-rated onshore wind projects, annual site availability averaged 95.7 percent, with 25 percent of annual observations showing availability of 97 percent and above,” Fitch said. “Based on the indications from the technical advisors and some actual operating data available, actual wind project availability offshore is lower by a few percentage points.”

“Turbine availability guarantees typically include several excusable events, such as expected service downtime, inability to access the turbines in case of adverse weather, force majeure events, and a certain grace period for the procurement of jack-up vessels in case major blade repairs are required,” Fitch said in the report.

The majority of offshore wind maintenance activity is associated with turbine maintenance. Scheduled maintenance typically involves major annual service in the summer months to minimize weather downtime.

Unscheduled maintenance may vary from a simple inspection and restart, which might take a couple of hours, to the replacement of offshore substation transformers, which could take months to carry out.

Turbine suppliers like Siemens and Vestas play a key role in turbine O&M due to their expertise and equipment warranties, which are typically for five years. Depending on the chosen O&M strategy, turbine maintenance agreements may be for five years or for longer.

Fitch analysts involved in the report included Jelena Babajeva, Federico Gronda, and Gregory Remec.

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