Owners of wind turbine installation vessels can expect to see earnings and demand grow, but oversupply might be looming if too many vessels area ordered
Wind turbine installation vessels are a fundamental part of the offshore wind industry and, as turbine capacity and hence size has grown, so we have seen many of them become too small to install the latest generation of wind turbines.
An upcoming supply bottleneck has been seen by many as an opportunity to move into the sector, leading to several newbuild orders. Most of the vessels ordered are only options for the time being but if all of them were to get the green light, the bottleneck could turn into oversupply.
Will we see a speculative vessel-building spree similar to that in the drilling rig sector in 2012-14? One can argue that the fundamentals of offshore oil and gas were as strong then as the case is for offshore wind now.
Back then, the cost of building a jack-up rig was in the same ballpark as a wind turbine installation vessel today, which is perhaps an indicator of what is to come, even if financing vessels has become more difficult. But will the experience of overbuilding rigs seven to eight years ago be sufficient to enforce discipline this time around?
To assess how this scenario might unfold, MSI performed calculations using vessel days from historical windfarm installation projects. The number of days required to install a turbine (see Figure 1) has a high variance, mostly falling between 1.5 and nine days (D. Ahn et al., 2016).**
The main factor is how installation vessels are operated, because if they have to carry all the turbine components themselves to the windfarm, a significant amount of time will be spent in transit and at berth, loading components. However, this method is only expected to be used for windfarms very close to a supply base or with a low number of turbines.
Looking at future operations, we expect wind turbine installation vessels to remain in a windfarm while turbine components are carried by feeders, such as deck cargo vessels. Commissioning turbines after installation can also be done from other vessels, so it is likely that vessel days for wind turbine installation vessels will remain in the lower end of the 1.5 to nine day range.
This calculation does not consider time spent on mobilising and demobilising vessels, or time when they are undergoing maintenance, all of which vary significantly. Nevertheless, if all the vessel deliveries go ahead as assumed in our forecast, the probability of oversupply is fairly high in the long term.
Of course, there are unknowns, such as whether non-US-built installation vessels will continue to be allowed to carry out lifting operations in US waters, or what opportunities non-Chinese-flagged vessels will have in China. Another important factor to take into account is that some existing units will be too small to install turbines of greater than 14 MW capacity. To continue working they will need crane boom extensions or for their cranes to be replaced by larger ones.
It is also possible that the number of turbines installed in the long term will be higher than we have projected (Figure 2). That would alleviate issues with oversupply.
It is worth taking a look at smaller wind turbine installation vessels – of 500-1,200 tonnes lifting capacity – too, as there are still many wind turbines under 10 MW capacity to be installed in the next few years, especially in Asia.
In the lower specification segment, the installation-related demand outlook is positive for the first half of the decade (Figure 3). However, as the shift to larger turbines spreads to Asia, we cannot disregard the fact that these lower-spec vessels will become too small to install new turbines.
We expect corrective windfarm maintenance work such as blade changeouts to alleviate oversupply in this segment and perhaps see some of these units retrofitted with larger cranes as well. Any newbuild orders in this particular vessel segment look risky, however.
We can conclude that demand for larger turbine installation vessels and other types of vessel serving the offshore wind sector will increase tremendously in the next few decades. Will vessel owners show self-moderation and not kill this booming market? We will see in a few years.
*Ferenc Pasztor is senior offshore analyst at Maritime Strategies International
**Reference: Ahn, Dang & Shin, Sungchul & Kim, Soo-young & Kharoufi, Hicham & Kim, Hyun-cheol. (2016). Comparative evaluation of different offshore wind turbine installation vessels for Korean west–south wind farm. International Journal of Naval Architecture and Ocean Engineering. 9. 10.1016/j.ijnaoe.2016.07.004.