Scale economies of large deeper water windfarms

1. Scale economies of large deeper water windfarms Lorne Gifford Offshore field development engineer

2. UK Electricity Generation Large, Deeper Water Windfarms

3. Nuclear Gas Oil Coal 1999 1990 Source: DTI UK electricity generation Natural Gas - Main fuel Coal - Major pollutant Nuclear - Public opinion Hydro - At capacity Wave/tidal - not yet commercial OTEC/geothermal - not applicable Onshore & offshore wind - commercial

4. Natural Gas UK peak production this year Global demand will exceed production around 2012 UK demand UK production

5. UK electricity demand set to rise • Transition from gas to electricity for cooking & heating • Hydrogen production for automotive use Source: ASPO

6. Nuclear Gas Wind Coal Other renewable The only energy source that is currently commercialised and available to meet the energy shortfall is wind power

7. Nuclear Gas Wind Coal Other renewable • The UK needs to install a large amount of wind power • A large number of small windfarms or small number of large ones?

8. UK Electricity Generation Large, Deeper Water Windfarms

9. The industry has started in areas that are • Small, shallow water developments • And has not optimised contracting strategies • High contingencies & offloading risk Future success = bigger, deeper, owning risk

10. Per phase of development • 120 to 150 turbines • 500+MW Target Size • Further offshore • 20 to 35m waterdepth Target Locations

11. Reduces costs to US$1,500 per kW • Reduces risks - quantifies weather risk • Makes projects bankable at today’s economics • Maximises use of suitable sites Why

12. Size & depth influence Fast and efficient offshore construction: • Single SSCV or large jack-up installation campaign • DP cable & DSV Ops Large grid input: • There are not many ideal sites, therefore make the most of them • Existing nuclear stations (550MW single reactor 1100MW twin reactors)

13. Weather risk Small developments in shallow water have high weather risk (short exposure, weather sensitive equipment) Large development in 20+m water depth will typically have 9.0% +/- 2.5% weather delay with SSCV based installation For a large development the weather risk is tightly quantified

14. Location influence • A strong transmission grid or decommissioned power station close to landfall • Transmission grid moves electricity south, giving commercial benefits to locating plant in the south via TUoS costs • Ideally a suitable site for cable landing • Reduce public objections by going further offshore

15. Location & depth influence • Higher wind speed further offshore, to the North and the SW peninsular • Security through geographical diversity • Less than 20m water depth increases weather risk by limiting construction vessels & technology • Shallow water diving is riskier and less productive • Above 40m wd increases turbine/substructure/soil dynamics and changes foundation economics.

16. 96 % 102 % 108 % Lyme Bay 25m depth contour Exeter Weymouth Torquay Plymouth Target Location 108 % Example Development UK Mainland Development • Target area free of Crown Estates restrictions • High wind speed • Good geology • Ideal water depth • Low tidal flow • Easy landfall • 132kV 1 mile from landfall • 400kV at 5 miles Example only

17. 96 % 102 % 108 % Lyme Bay 25m depth contour Exeter Weymouth Torquay Plymouth Target Location 108 % 10m L1 L2 Example Development • Low visibility from coast (Nearest turbine 8 miles) • Regional electricity consumption significantly more than generation Example only

18. Example Development Development scenario: • Existing turbines • SSCV installation • Open cell GBS substructures • Transformer platform • Sat diving from DP DSV • Rockdump for seabed preparation, GBS stability & infield cable protection • Export cable trenched

19. Example Development • Mechanically locked & levelled tower with grouted permanent connection • Dynamic positioned rockdump is accurate - fines & armour layers • Helideck on transformer NUI’s only (CAP 437)

20. Example Development Phase 1: • 500MW for US$750m • US$1,500 per kW installed capacity • Includes contingency & weather risk • $$ TUoS income pa • 2 year project from sanction

21. Example Development CAR Insurance 0% Contingency Cost breakdown for 500MW phase 1 Phase 2 • Lower CAPEX per kW • Shorter project duration • Additional 700MW • Requires some MoD area Target • 1200MW by 2008/09 Turbines & Transformer Cables, installation, mgmt, grid connection Substructures

22. Developer Finance Project Director Externa l Project Manager Project Engineer 1 Turbines & Superstructure Project Engineer 2 Substructure & foundations Project Engineer 3 Electrical Systems Project Engineer 4 Installation & cable lay HSEQ Manager Consents & approvals Planning engineer Level 1,2 & 3 project plans Contracts Manager Legal Manager Accountant Example Development Main risk sources: • Schedule • project management, large vessels, weather included • Technical • geology, substructures, turbines • Personnel • offshore construction & diving can be very dangerous • Legal & political • avoiding dispute or delay

23. Projects Director Client Board Example Development Development Manager • Managed risks • Good IRR / NPV • Confidence A bankable project An example of the type of project for next round Finance Director Development Manager Legal Affairs Director Commercial Director Finance Data Collection Offshore Facilities Onshore Facilities Services & Contracts Commercial (Elec. Sales) Accounts Environmental Turbines Landfall Planning & Consents Geophysics Structures & Foundations Grid Connection Contracts Geotechnical Cables Cost Control Client OREAL

24. Electrical Generator Electric motor Fuel oil engine Example 2 Constant power, voltage and frequency of generated electricity UK Island example • Offshore wind farm with wind/hydrocarbon coupled generation • Coupled generation allows very high penetration into island grid • With future hydrogen technology dependence on hydrocarbons can be completely removed Mechanical or soft grid coupling Electricity from wind turbines, with variation in power, voltage and frequency Hydrocarbon fuel, with potential for later substitution to wind generated hydrogen fuel

25. Example 2 • US$1,650 per kW installed capacity • Includes contingency • Weather risk partially quantified (too small for full inclusion) • Conventional construction or SSCV ‘fly-by’

26. Example 2 Contingency UK Island development cost breakdown • With substructures optimised for jack-up installation CAR Insurance Cables, installation, weather risk Management,etc Turbines 132kV Transformer Substructures

27. Nuclear Other renewable Gas Wind Coal How • Pre award engineering & site survey • Contracting strategy • ‘Own’ the weather and geotechnical risk • Realistic contingencies • Good project management • Fast track developments

28. Evaluation Implementation Lease Operation • Concept Development & Selection • Economic Evaluation • Front End Engineering • Permits & Consents • Contracting Strategy • Detailed engineering • Project Management OREAL….…a total solutions provider