Cable-lay market to transition from over- to under-capacity

Uncertainty about when demand for cable-lay vessels might spike was among the key takeaways from the Cable-lay for offshore wind: a massive new market webinar, in Riviera’s Offshore Wind Webinar Week.

Reports suggest more than 16,300 km of subsea power cables will be needed over the next five years to build new offshore windfarms worldwide. According to RenewableUK’s Project Intelligence team, global offshore wind capacity will grow quickly from 20.5 GW today to more than 55 GW in 2024, largely driven by new projects in the UK, Germany, Taiwan and the US.

That growth will create huge opportunities for manufacturers of array and export cables and companies that specialise in installing subsea cables, with more than 9,600 km of array cables and 6,750 km of export cables needed between 2020 and 2024. Less than 25% of the cabling identified in the report has been contracted to date, which means there is a huge opportunity for manufacturers, suppliers and other companies involved in producing and installing offshore wind power cables. A handful of vessels have been ordered and two highly capable units are approaching completion, but there has been no rush to invest in new vessels.

MAATS Tech Ltd business development director Gavin Rippe told delegates the offshore wind industry was experiencing “remarkable growth.” Mr Rippe said most companies have a good backlog already. Globalisation of offshore wind will increase demand, he said.

DEME Offshore UK representative Jonathan Wheatley said that, currently, there are sufficient cable-lay vessels to meet demand but acknowledged that demand would undoubtedly increase at some point because of the way the offshore wind industry is taking off around the world.

Mr Wheatley also highlighted another important factor that will influence the future development of the market. Barriers to entry in the cable-lay vessel segment are high, so it will be difficult for new entrants to enter the market when demand accelerates. In the cable-lay vessel segment, Mr Wheatley said, companies must have a strong balance sheet, a track record of executing projects, technical capability and the ability to perform.

“Bidding for cable-lay projects is all about performance,” he explained. “It’s a very aggressive market right down the supply chain.” Apart from performance, cost also plays an extremely important role, driven by price agreed for electricity in a contract for difference.

Global Marine Systems director of engineering Martyn Drye told delegates that the market tends to be concentrated in the hands of a small number of players, not least because cable manufacturers prefer to use their own assets. He suggested that far from being under-supplied at the moment, the market was over-supplied, but agreed that demand will undoubtedly increase.

All three presenters at the event agreed it takes time to bring new vessels to the market. They also agreed that with markets such as the US set to take off rapidly, new capacity would be needed and that new markets would bring new challenges for cable-lay companies. The US has a pipeline of around 30 GW of offshore wind projects off the east coast, but as Mr Drye noted, there is no US-owned cable-lay capacity comparable to that in Europe. “When the US market goes, it will go fast,” said Mr Wheatley.

Mr Wheatley also noted that companies such as DEME are already bidding for projects in the early to mid-2020s, and bidding remains “very competitive,” which suggests there is no over-supply yet.

Mr Drye said vessel owners need to take a long-term view if they are to invest in new ships, but said a 20-year view of how demand might develop is very difficult. “There will be a shortage of vessels at some point,” he said, “but it’s not clear when.”

However, many of the delegates at the webinar felt that demand could pick up more quickly than expected by the presenters. A poll taken during the webinar found that around three quarters of those responding (74%) believe there are not enough cable lay vessels to fulfil the global requirements of the offshore wind industry.

Asked if there is appetite for more cable layers in the global market, 82% of those responding answered ‘yes.’ Only 20% answered ‘no.’

Asked in another poll whether existing cable lay and burial technology is sufficiently capable to meet the needs of the industry, 70% of respondents said they think it is not.