Not enough vessels: offshore wind giants look to long-term deals to beat bottleneck

Offshore wind developers could increasingly turn to longer-term contracts to secure turbine installation vessels in a sector facing supply chain bottlenecks even as a proliferation of government targets drives demand up.

With many offshore wind projects already working on tight margins and vulnerable to rising costs or delays, concerns about the availability of WTIVs is bringing a shift toward longer-term strategies and contracting partnerships.

An example of this came this week when German utility RWE signed up for the exclusive use of two next-generation wind installation vessels from Jan de Nul Group, a Belgian offshore services provider.

Describing the contract as a “strategic partnership”, RWE stressed that the vessels will also be available for maintenance campaigns at its existing wind farms as well as future projects to come.

“RWE has taken a big step in securing the necessary installation vessels and services to deliver our large-scale offshore wind farms," stated Sven Utermohlen, chief executive of RWE Offshore Wind,

"These kinds of agreements are exactly what we need against the backdrop of the challenging market situation,” he added, stressing that the charters were partly a response to European demand for more offshore wind power to reach ambitious climate targets.

As well as helping meet RWE's own requirements, Urermohlen said that the long-term contracts helped change the profile of WTIVs from a financial perspective, ultimately facilitating investment in the supply chain.

Burgeoning demand

This picture of an improving investment environment for new wind vessels was backed up by a new report by the research arm of London-based shipbroker Clarksons, which forecast a fivefold expansion in active offshore wind capacity by 2030.

Clarksons assessed today’s installed global capacity at 62.3GW, generated by 14,200 turbines on 283 wind farms. Its projections suggested that active capacity will hit 250GW by the end of the decade, from 30,000 turbines.

Clarksons’ long-term scenarios suggest offshore wind will provide between 7% and 9% of global energy supply by 2050, compared with just 0.4% today.

"Growth on this scale will require a 20-fold increase in generation capacity from offshore wind," said Steve Gordon, managing director of Clarksons Research.

The same report foresaw $56bn of new capital commitments for the sector in 2023 – some $22bn of which is for Chinese markets – leaping to $70bn in 2024.

Clarksons expects the number of countries hosting offshore wind farms to reach 34 by 2030 — up from 19 now —driven by energy transition and energy security focus.

With WTIV orders in the US and elsewhere falling far short of what is needed, growth forecasts such as these have led to concerns about a looming lack of vessels, especially for the increasingly large turbines being built.

“The very short answer is that there may not be enough vessels,” said Alexander Dobrowen Flotre, vice-president of offshore wind at Rystad Energy, an Oslo-based consultancy firm. “It is not too late, but getting this right by mid-decade requires action now.”

Rystad’s own modelling of present and future projects, taking into account a host of variants including turbine and foundation types, sees capacity overtaking the backlog of firm orders only in 2028

“In reality, no vessel works at 100% utilisation and there are sub-optimal contractual overlaps,” so the challenge is even greater,” Flotre said.

Bottleneck easing?

The Clarkson Research report points to a global fleet of 1,300 vessels supporting offshore wind farm construction and maintenance, with close to 200 under construction. The current year has so far seen orders for five WTIVs, 10 commissioning and service operation vessels and 23 transfer vessels, Clarksons said.

“We are projecting $8bn of newbuild orders to be placed in 2023 and a total of $76 billion over the 2020s as a decade," Gordon said.

While most of these vessel are being built in China, the pipeline of orders has also led to South Korean yards getting in on the act and, to a much lesser extent Singapore.

"The bottleneck is looking less pronounced than it was a year or so ago when activity levels were growing but there was more uncertainty about inflation and demand. The banks were not queuing up for specialised and rather complex contracting structures that seemed unable to support more than two years of work. This has changed. " said Flotre

Rising long-term demand has opened new rotes for operators, including stock markets, and helped float the increase in newbuild orders, Flotre noted.

Norway’s Havfram Wind recently secured $250m in equity funding plus loans to ordered a second WTIV from China's CIMC Raffles shipyard after a winning a clutch of installation contracts.

The owners say this GustoMSC NG20000X type jack-up on order can install 20MW wind turbines with a rotor diameter of more than 300 metres — or monopiles weighing up to 3,000 tonnes — at water depths of up to 70 metres.

Only one WTIV is under construction in the US so far, but a recent move to circumvent Jones Act restrictions on foreign vessels has raised the possibility of boosting capacity in that market, noted Flotre.

Maersk Supply Service has been developing a new feeder barge concept to allow a specialised wind installation vessel to work together with US-built tugs and barges in compliance with The Jones Act.

The "feeder vessel" concept was taken forward when Maersk Supply Service won a firm contract with Empire Offshore Wind, a US joint venture between Equinor and BP, for transport and logistics and forged a partnership with a subsidiary of US offshore supplier Kirby Corporation.

The wind installation vessel is being built in Singapore by Seatrium, formerly Sembcorp Marine, and the jacking units, load transfer system and crane will be provided by NOV, with design work supported by classification society ABS. Delivery of the vessel into US waters is expected in 2025.

There is a caveat, however, in that most of the new vessels currently being built are for the Chinese market.

China is the clear leader in installed offshore wind capacity, with 30.5GW compared to the UK’s 13.7GW in second place, according to Clarksons Research.

Chinese seabed characteristics mean that WTIVs are not following the same upscaling trend seen elsewhere and there is, as yet, little of the growing premium for higher crane capacity vessels seen in other international markets.

"There is quite a big newbuilding order book now, but it is important to understand which of these are for Chinese markets and which are for the international market.

"The same vision of a tighter international market emerges in the here and now." European WTIV utilisation reached 96% at the start of June as we approach the peak summer season.

Eleven WTIVs on order are European-owned and all are set to feature large cranes with more than 2000t SWL), while there is also one Japanese-owned WTIV and one US-owned WTIV on order.

In the European/international sector, the leading owners are Eneti with five active WTIVs through its subsidiary Seajacks, as well as two on order, and Cadeler, with two active WTIVs and a further four on order.

In the Chinese market, leading owners include Nantong Ocean Water, with three active WTIVs and five on order and Shanghai Ouyang, with five active vessels with a further two on order, Clarksons informed.

The decision to finance and build higher capacity units carries risk of its own, points out Flotre, not least due to the ever changing dimensions of wind turbines, but the lengthening demand curve for offshore wind is changing the perception of uncertainty.

Project developers and lead contractors are now looking to mitigate risks and uncertainties through partnerships and framework agreements of the kind often seen in the offshore oil and gas sector.

Jan De Nul Group has already provided installation services for RWE’s Kaskasi offshore wind farm off the German coast and on the inter-array cable installation scopes on the Thor offshore wind farm.

Jan de Nul's chief executive for offshore energy Philippe Hutse stated in Monday's announcement: “This multi-year approach creates much-desired planning security for our state-of-the-art installation vessels and will allow safe and efficient installation of a large number of offshore wind farms.”