23 September 2024
Floating Offshore Wind: Our Roadmap to Grid Scale
Floating offshore wind, a pioneering sector at the frontier of the energy transition, is unlocking a wealth of locations with deeper waters and higher wind speeds – previously inaccessible to fixed bottom offshore wind. From a technical perspective, it holds enormous potential: 80% of the offshore wind-suitable seabed is in floating areas.
Early projects, like the pioneering Hywind Scotland and Kincardine, have been instrumental in providing a wealth of lessons learned in construction and installation. Since its launch in 2017, Hywind Scotland has consistently outperformed expectations, achieving the highest average capacity factor of all UK offshore windfarms. However, it has also faced recent challenges, necessitating five (of six turbines installed) needing major maintenance tows to a Norwegian port in the last 18 months and two of Kincardine’s five machines needing tows to Rotterdam also for heavy maintenance.
After years of cautious speculation, institutional investors and governments are becoming more receptive to funding these projects, but adequate insurance is crucial to securing investment. Nevertheless, insurer appetite is limited, partly due to insufficient premium volumes but primarily because most of the new floating projects are still prototypical in nature.
Today, the floating offshore wind industry faces a series of interconnected technological, licensing, contractual & commercial challenges and while these challenges are not insurmountable, achieving lasting profitable success in this cutting-edge arena hinges on developing a carefully designed roadmap to secure bankable insurance.
Challenges to navigate
Prototypical technology
The industry's largest wind turbines, floating foundations, dynamic cables, and floating or subsea substations are all essentially in the prototype stage or, at best, represent unproven technology.
While these new, large-scale components are indeed being installed and tested onshore, and various floating wind projects have been deployed offshore in the waters of the UK, Norway, France, and Portugal as pilot projects or demonstrators, significant challenges remain. These projects are diverse in their design, and not all have been constructed to the fully economically viable grid scale. Moreover, they have yet to consistently demonstrate resistance to accelerated wear and tear, which poses substantial operational cost and downtime risks that will test warranties, insurability, and ultimately bankability.
The extreme year-round marine environment into which this technology is being placed means they are subject to unique stresses and potential failures, some of which are currently being addressed by array developers who are having to look to their insurance as well as warranties for cost relief. It is not a great secret that insurers have had to consider potential claims related to the Kincardine and Hywind Scotland floating arrays, with some repairs still ongoing.
Port suitability
The challenge of port suitability for floating offshore wind is significant due to the substantial space required and the limitations of many ports. Not all ports are suitable for handling the logistics of floating platforms, wind turbine components, and blades, especially when aiming for rapid project installation in deeper waters, often 20 miles or more offshore. The need to store and transport large quantities of equipment adds to the complexity, and this situation draws parallels to the challenges faced in the oil and gas industry with floating production storage and offtake units (FPSOs).
For example, Hywind Norway, installing only a few turbines, had its construction load out and installation phase spread out over two years due to limited shoreside quay laydown space in Norway, with the assembly work being done in three to four-month windows each summer.
Logistics and weather windows
Weather windows can substantially impact the timing of a floating offshore wind project. During winter, storm conditions and big wave heights will often be prohibitive to predictable access to the assets, making adhering to a construction or planned maintenance timeline difficult let alone the need to carry out unplanned maintenance. These narrow weather windows not only affect construction but also impact repair schedules, with potential revenue loss while waiting for suitable weather conditions for towing to port. Therefore, port suitability and logistics play a vital role in managing the impact of weather windows on the project's timeline.
Vessel availability
Unsurprisingly, projects tend to focus on having a vessel or vessels available for a contracted period. However, what happens when unexpected maintenance issues requiring a tow to port occur outside the contracted period? The recent bearing failures in Hywind Scotland and Kincardine Offshore Wind Farm, for instance, resulted in extensive tow-to-port costs. Therefore, vessel contingency planning is paramount to have suitable vessels on priority mobilisation call-off contracts during the operational phase.
Dynamic cables
These are a major hurdle to overcome in the move from fixed cables serving fixed bottom wind arrays. The scaling up in rated size of dynamic cables required for Floating Wind, from that seen before in oil and gas developments including Power from Shore and small-scale floating wind pilot examples, is equal in technical manufacturing and installation challenges to that for the floating turbine foundations themselves.
The constant movement of the floating platforms results in dynamic loads on the cables, which inevitably causes fatigue that leads to wear over time. This environment requires cables to flex and bend without losing functionality, posing a significant engineering and materials challenge. Additionally, the installation and maintenance of dynamic cables in deepwater locations present logistical and operational hurdles, requiring specialised equipment and expertise. Balancing the need for durable, flexible cables with cost-effectiveness and practicality remains a fundamental challenge in developing and maintaining floating offshore wind projects.
Major component repair/exchange
The offshore wind industry faces a significant challenge regarding major component repair or exchange (MCR/MCE) due to the tension between two prevalent repair solutions: "tow to port" (TTP) and "in situ" repairs. The TTP method is currently the default approach and involves towing the entire wind turbine generator (WTG) back to port for repairs. This method is required until offshore repair solutions and new crane technologies, which are still under development, become viable for executing major in situ repairs.
However, the feasibility of such offshore repairs remains contentious among industry stakeholders, particularly given the scale and complexity of the ultra-large machines currently being adopted. These machines, such as the new 15MW WTG, present unique challenges due to their considerable hub heights (ranging between 125-145 meters) and substantial weights. Additionally, performing repairs on a floating platform introduces further complications, as both the WTG and the platform are subject to movement, even in calm weather conditions. The original assembly of these WTGs typically occurs alongside a quay in port, dry dock, or yard, where stable conditions are assured.
Forces of wear and tear on the tower and turbines
The forces of wear and tear on the tower and turbines are not only from the wind but also from the perpetual rocking motion caused by the waves. Like dynamic cables, this has only become a topic of clear concern in recent years since the first floating pilot arrays were deployed in harsh environments. The additional force, combined with wind speeds from which the turbines generate power, poses a risk of advanced deterioration. Explaining this risk to insurers and demonstrating that the platform and wind turbine have been tested and proven in various wave and wind conditions are crucial.
Bearing failures
The remote location of floating offshore wind projects makes it difficult to perform regular maintenance check. Additionally, offshore wind turbines are exposed to harsh environmental conditions, which can lead to premature decline. The risk of accelerated flattening reducing bearing efficiency and lifespan caused by the constant motion of floating wind turbines is a serious concern to the industry. When failures occur, the repair costs can be extremely high due to difficulties in accessing the wind turbine, the need for specialised equipment and skilled technicians, and the logistical challenges of towing to port to replace the bearings. Moreover, unscheduled maintenance can cause significant downtime, leading to substantial energy production and revenue loss. Designing and manufacturing to prevent early life-bearing fatigue and failures in offshore wind turbines is also challenging due to the complex loading conditions and the interaction of various turbine components.
Insurance buying implications for floating offshore wind
One of the most significant challenges in the floating offshore wind industry is navigating the intricate insurance landscape. Insurers typically prefer to underwrite risks associated with proven technology—defined as technology that has been operational 'in the field' for a minimum of 8,000 hours or at least one year, with a preference for three years or more.
The preference stems from insurers' natural limit on the amount of premium they can charge and their aversion to, or even inability to price for, unproven risks. In an era where data-driven underwriting decisions are paramount, insurers are increasingly reluctant to cover risks where they lack sufficient operational data.
The feasibility of in situ repairs versus TTP solutions adds another layer of complexity. While TTP solutions may become more cost-effective with increased availability of vessels and ports, the uncertainty surrounding the capability for major in situ repairs leaves insurers cautious. This doubt affects the breadth of coverage available, leading to a spectrum of insurance solutions for proven versus unproven technology, as well as varying pricing and coverage scopes.
Coverage spectrum: wide vs. narrow
Insurance coverage for floating offshore wind projects can vary widely. Narrow coverage often excludes many potential faults and risks, whereas wide coverage, such as the LEG3/06 clause, offers more comprehensive protection. LEG3/06, for example, covers the repair of the fault itself as long as there is damage to other parts of the property, though it does not cover the mere discovery of latent defects or improvements made during repairs. This clause provides a degree of reassurance for offshore projects by covering the cost of vessels needed to recover and transport repaired or replacement items.
Navigating external and internal risks
Floating offshore wind projects are susceptible to a range of risks, from natural hazards and the activities of other vessels (collisions or allisions) to human errors. Accidents caused by negligence can result in clear, immediate damage, whereas faults may be more subtle and go undetected for years, potentially leading to latent defects in design, materials, or workmanship. Insurance typically responds to damage cases, but the extent of coverage can vary significantly. For instance, LEG1 excludes fault coverage entirely, LEG2 covers consequential damage to other property but not the fault itself, and LEG3/06 offers the broadest coverage, including the repair of the fault if it causes damage to other parts of the property.
The tension between warranties and insurance
A key tension in the industry lies between warranties provided on equipment and services and the subsequent role of insurance recoveries. Being certain about what can be claimed and the extent of insurance recoveries is rarely straightforward, often leading to disputes resolved in courts. Recent US cases involving onshore construction claims have tested the LEG3 clause, highlighting the complexities and legal challenges that can arise.
How Gallagher can help
Gallagher plays a pivotal role in guiding energy operators through the process of obtaining a bankable insurance package, which is essential for project finance and commercialisation. By engaging with businesses and insurers early on, we ensure you are well-prepared to navigate the complexities of achieving commercial success in this industry
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