The Local Content, Carolina Lease, Floating Wind/Hydrogen, & Grid Edition

Welcome dear subscribers!

Thanks for clicking ???? and deciding to read this edition, always really appreciated. I try for a mix of my offshore wind opinion??, some of our news?? and as usual some stuff on coffee? and metal????...remember you don't have to scroll all the way down, but if you don't you will be missing a great recommendation!

It's been a bit of gap since the last one, but holidays and work...

Where do we start? Well this edition brings you ? a piece on local content and the focus on the cost challenge this brings with a look at the recently published ScotWind SCDSs, ? my colleague Craig Brown (OWC Principal Consultant) looks closer at the up-coming Carolina Long Bay offshore wind energy lease auction, ? I have a chat with hydrogen expert Jamie Frew on hydrogen and floating wind, ? a look at a recent Stanford study on 100% renewable grids ?, we look at recent news in offshore wind, your next adventure at OWC!,...and of course some ? coffee and ???? metal!

So please read on and share this with colleagues...get them to subscribe!

I focus today again on the supply chain in the wake of the published ScotWind SCDSs and some of the challenges around cost.

We are of course pleased to see the news last week of Navantia opening a UK subsidiary. It reflects well the strength of the UK offshore wind pipeline, but also let’s face it, the realities of our post-Brexit relationship with the EU. Navantia will “rely on partnerships with local industries across the United Kingdom”; but how much of this results in actual industrial/economic activity will be seen. At the very least, Navantia may just need a UK entity to receive contracts, but it should still be welcomed as it is also a route for UK supply chain companies to work with Navantia…one hopes. It likely reflects the positive changes in UK content requirements coming from ScotWind leasing and the upcoming AR5 CfD round. 

ScotWind SCDSs

On that, the Crown Estate Scotland published the Supply Chain Development Plans on the 27th April of the 17 successful ScotWind projects. They interesting reading. Now we must remember not all of the project spends will be included on each SCDS, we only put in numbers we could stand behind. The most conservative would have been those who came to the bidding process late. 

From analysing the statements (see the table above), we see UK total content %’s ranges from 32% at the lowest to 100%, and Scottish content ranges from 17% to 63% (for the full lifetime of the project). Projects will differ, of course, it will be more challenging to push high content for a project incorporating steel jackets, but easier for concrete floating turbines. So site and project design matters.  

There will be a huge shakeout and my worry is that the ambition numbers, the above are the commitment numbers and they are linked to contractual remedies, could be virtually ignored if we don't address supply chain development seriously in the next 2-4 years. 

Three factors will decide whether these projects hit the committed content levels: capacity, capability, and competitiveness. 

Capacity, capability, and competitiveness

Capacity. The UK in the last 12 months has added 33GW to the pipeline with Round 4 and ScotWind alone. A recent study showed some recent UK projects achieving 48% UK content, the average from the SCDS’s is 56%, an increase of 8%. 

The pipeline and the UK government’s 2030 ambition will mean a steep increase of annual build-out numbers by the end of the decade, so supply chain demand will be driven by the increased number of projects being realised AND the increasing UK share of the content in the projects. This will be a challenge, from the required port infrastructure to WTG components and assembly and down the tiers, our current baseline is too low. 

Capability. The UK is still the 9th biggest manufacturer in terms of total output, but heavy industry and shipbuilding have been largely decimated by successive governments, and that is what a region would normally lever to produce monopiles, jackets, and steel floaters. In other words, while we could build a facility, where are all the skilled welders going to come from? We talk about the 15GW of floating being the opportunity to build a leading global supply chain...it is. But many oil and gas companies that see this as a new market will have to develop or align their products and services, position and prove themselves, and that may take time and that does not take into account any investment case lag. 

Competitiveness. As a director at TAG Energy, I saw first-hand the challenge to supply steel monopile foundations competitively from a UK cost base. Now, it is exciting news that SeAH Wind will build a 150-unit-per-year facility in Teeside (my old TAG stamping ground), 700 potential jobs, and the expected socio-economic impact in an area that needs levelling up. But you cannot magic away the cost base differential between the UK and say Southeast Asia or the Middle East…we know P&O are trying with some, erm, mixed results…

Higher local content comes at a cost

Higher local content can come at a cost. It needs investment to develop it in time, and whether we like it or not, some labour-intensive elements may even need some kind of subsidy support to compete with foreign suppliers. 

And this is happening while we are seeing crippling cost increases. Inflationary pressures driven by high commodity prices and post-pandemic supply-chain issues are a tsunami that will hit our shores very soon. If Boris Johnson puts any materiality into rhetoric (I know…), then his vaunted Energy Security Strategy and his claim of a “made in Britain, for Britain” plan needs to be exactly that, a plan. 

I wrote earlier in April about Boris Johnson's "high-wage, high-skilled jobs" vision and the challenge and risks posed, so won't repeat here. But I mentioned a 'moonshot' approach is needed, in the comments the case was made for an almost war footing to develop the capability and skilled resource needed. This can be seen as a mobilisation/start-up cost for UK plc. if this is not realised and we all end up looking at one another (the public and private sector), then we will have missed the opportunity. There are some great initiatives, forums and engagements pushing for such joined up policy and action, including RenewableUK, but we need more and we need it fast. But we need to address the topic of cost honestly.

CfDs as economic stimuli

How can we not see higher strike prices for AR5 from the developers? Forget about local content, we are in a different world than when AR4 took place. But the government needs to understand that local content and it's mobilisation needs to be financed and they need to understand the reality of the UK cost-base.

Should we be looking at a form of mechanism that allows developers to get a banding of CfD price linked to the level of UK content for a specific project? This is not a subsidy to developers, it’s an understanding that higher UK content and it's development has a price, and it is an economic stimulus payment as much as anything. But there is a downside to this and I will cover that in a later article. 

I go back to what I wrote earlier in the year before the ScotWind Results (The Real ScotWind Prize). ScotWind (and R4) is a huge prize, but it has a price. And the clock is ticking.  

NB I am sure developers know they are in a fierce competition for the most capable, competitive, and AVAILABLE UK and Scottish content, because as it stands it won't serve everyone's stated local content targets. Myself and the OWC team are happy to explore how you can upscale your supply chain development strategy or plan, or if you are a supply chain company, get yourself fit to compete. Get in touch with us now!

OWC's Craig Brown looked at what we can anticipate during the May 11th Lease Auction.

The Carolina Long Bay offshore wind energy lease auction will be the second lease under the current administration – and follows on the heels of the wildly successful New York Bight lease auction in February.

The May 11th timing of the auction was chosen by the Biden administration to get ahead of the 10-year moratorium on any offshore energy leases in the Carolinas, which was announced in 2020 by the Trump administration. That moratorium will begin on July 1 of this year. 

However, that timing may also help carry over the momentum from the New York Bight Auction.

Compared to New York, the Carolinas’ lease auction probably won’t see anywhere close to $4 billion in total bids. The lease area is substantially smaller in size (110,000 acres for the two sites against the 400,000 acres auctioned for the New York Bight). There are also various local economic factors such as lower power prices and lack of offshore renewable energy credits that influence the valuation. However, we do expect to see price per acre remain buoyant.  

Reaching the ~$10,000 per acre that we saw in some of the New York lease areas is unlikely, but many multiples of the ~$75 per acre that we saw for Kitty Hawk in 2017 is a certainty.  

We wouldn’t be surprised to see $5,000 per acre or more for the Wilmington East sites.  

More important than the lease valuation though is the impact of the multi-factor bidding format, and how supply chain and labor force commitments will coalesce with others in the mid-Atlantic region.

The new supply chain commitments could shift the dynamics of the emerging US supply chain. Cheaper land and labor in the South could be more conducive to new port infrastructure as well as large tier-1 manufacturing sites, which could serve the local projects as well as potentially other projects on the east coast. The N.C. Department of Commerce has already released a supply chain study, and a tri-state consortium of North Carolina, Maryland, and Virginia is exploring ways to collaborate and coordinate regional offshore wind supply chain and infrastructure.  

Combined with whatever developer commitments we see in the multi-factor auction, a clear picture will start to emerge next month as to how the region could develop as a major supply chain hub.  

The other potential game-changer we are looking out for is the entrance of another large U.S. electric utility company. Among the qualified bidders for the Carolina auction is Duke Energy (as Duke Energy Renewables Development).

Dominion Energy is already a dominant force in the region. Having another large U.S. player could alter the competitive landscape of U.S. offshore wind and potentially even how projects are developed. U.S. companies would be guided by the experience of European developers, but can also contribute their own ways of doing things in their own backyard. This could hopefully advance the industry even further, especially given the unique characteristics of the U.S. market with regards to Jones Act considerations, among others.

Overall, what we anticipate from the Carolina Long Bay auction is not so much the eye-popping lease valuations we saw in the New York Bight Auction (we think those need to cool down a bit), but rather more clues as to how this huge new offshore wind industry will emerge at scale in the U.S.

Contact Craig Brown to discuss this leasing round or any other early policy or strategy area.

Jamie Frew and I had an excellent call last week touching on ScotWind, hydrogen, and floating wind. I came away with a much clearer, and excited, view on how instrumental hydrogen should be in floating wind. 

John MacAskill: Hi Jamie, great to meet you, can you please introduce yourself and what you do?

Jamie Frew: Hi John, thanks for having me. I have over 20 years of experience in energy and chemicals and now have a consultancy which is focused on green hydrogen for industrial-scale applications. The consultancy grew out of my experience as a Business Development Manager with Air Liquide in the Port of Rotterdam, where I got involved in some of Europe’s most significant low-carbon hydrogen projects. It was here I became fascinated with the potential of green hydrogen to enable the development of a renewables-based energy system. I started to see that there was a path for this to become economic in the near term, and I have been advising on a wide selection of 1st of a kind hydrogen projects over the last few years. Low-cost hydrogen storage is crucial for green hydrogen to be successful, so I also have a project to develop a new floating wind turbine foundation that produces and stores hydrogen within the structure: HyFloat. It is ambitious, but the prize is worth chasing.

JM: This topic is moving fast, we have seen ambitions to make green hydrogen competitive by 2030. Where is the economics of green hydrogen right now? 

JF: People need to be careful in believing what they read about price parity, as a lot of reports are based on optimistic assumptions about cheap gas. Right now, almost all hydrogen comes from natural gas, which made up 60 - 80 % of the cost stack when gas was in the 10-25 ￡/MWh range. Now we are looking at gas prices of 70 - 200 ￡/MWh, whilst carbon pricing is also surging, so the energy cost is huge. The resulting eyewatering prices mean that many hydrogen consumers have curtailed operations as the costs are just too high, and the energy security situation means that gas hungry technologies such as blue hydrogen are pretty much “dead on arrival”.

On the other side, renewables have drastically reduced in cost, and the capex for electrolysis equipment is also plummeting. Electricity makes up about 70% of the green hydrogen cost stack, so it is easy to see that, at current gas costs, green production based on stable power purchase agreement pricing at perhaps ￡50/MWh is a clear winner. On the production technology, some doubt that the capital cost reductions required to scale up hydrogen will be achieved. However, if you go to a current electrolyser factory, you will likely see that these units are being built by teams of technicians like Ferraris, with prices to match. In the future, highly industrialised manufacturing will mean pricing will be more Fiat like, and the investments to make this happen are coming in thick and fast. This is essential if European suppliers are to compete with China on the almost unbelievably low costs being offered there.

JM: why should this excite the offshore wind industry?

JF: There is a lot of talk about solar hydrogen due to super cheap LCOEs, but from the cases I have been involved in, it is clear to me that wind can be competitive based on its higher capacity factor, particularly for floating projects such as HyWind which is just shy of 60% (vs solar at ~25%). High capacity factors really drive down the capital cost contribution in hydrogen unit costs so windy regions will attract major projects. Obviously there needs to be innovation in floating to get the capex where it needs to be to benefit from this.

JM: So with that acceleration in the economic rationale of green hydrogen, what are the opportunities for floating wind?

JF: My conclusion is that hydrogen production may come to dominate the floating wind sector where the best resources are, and this could be up to 1/3rd of offshore wind capacity or 667 GW globally by 2050, a huge number that keeps revising upward. This is driven by the fact that floating sites tend to be deep and remote, and electrical transport from these locations is going to be very expensive and technically challenging. Hydrogen seems more suited here and the O&G value chain already have the skills to build remote offshore gas networks and this can be replicated in the offshore hydrogen industry, so that part seems doable with limited innovation.

JM: How could that change how we look what we expect 1GW projects to look like?

JF: There is a big debate in the industry about what a 1GW “hydrogen farm” will actually look like. The Danish are proposing dual HVDC/Hydrogen connected islands but likely this only works closer to shore. Further out, we may see concepts where hydrogen production is either going to be centralised or distributed. The centralised schemes will look pretty much like a standard wind farm with a large platform or ship in the centre. This is similar to an O&G FPSO and this is where the electrolysis units will be located as well as any equipment for hydrogen storage and export. However, the solution many are really excited about is the distributed model particularly for remote floating projects. This is because there is a potential to cut the equipment in the field and costs pretty drastically and utilise reliable and low-cost pipeline for hydrogen transport. There are also upsides in optimising the turbine to capture more energy than may be possible in a traditional wind turbine where the electrical transport is the bottleneck. Distributed units will need to control O&M costs so automation and designing for reliability and redundancy are key. The challenges are there for sure but if offshore hydrogen production can be achieved economically this could get past power grid development unlock the massive potential of offshore wind across the world’s oceans. These are the kinds of developments Net-Zero demands.

JM: Thank you Jamie, this has been an enlightening conversation and an exciting one, I am sure there will be interesting developments around future GW scale floating wind, ScotWind especially. If you are interested in checking out Jamie and what he does, see the link here >> link.

At the weekend I read a Stanford study on deploying 100% renewable energy into the US grid. This followed a great chat with an old colleague in a developer about areas of innovation he is seeing in this area. My thoughts on this study >> read the study

One of the frequent claims against renewables is it’s unreliability and the impact on grids. Renewable energy IS reliable, it’s intermittent which is not the same thing. Every year we see countries managing higher levels of renewable energy in their grids without the black outs foretold by fossil fuel lobbyists and their ilk.

It’s an area of fascinating innovation, and with the UK pushing for ever increasing renewable energy shares of a complex grid, we are well placed to develop leading solutions in this area.

The recent Stanford study above looking at the US and it is an interesting read, some takeaways:

• A 100% wind, water, and solar (WWS) system can avoid black outs in winter and summer;
• Connecting markets (or States in this study) is key, ‘islands’ are stranded and fragile from a system perspective and so exposed to black out, such as the Texas 2021 winter black outs;
• Batteries with no more than 4hr storage is needed;
• Costs per unit would also be reduced by a system ensuring excess WWS produces heat, cold, and green hydrogen;
• This transition (in the US) also creates 4.7 million more long-term, full-time jobs than lost; and
• The footprint (in the US) needed is btwn 0.29% & 0.55% of land, much lower than the current fossil fuel footprint today.

This this study is based on the US, but the lessons are there for countries globally. Only social and political issues hold back the transition. Not technical issues.

Let’s get to it!

I also watched a very insightful NREL video where this was modelled ????

Some recent news from OWC and the rest of the ABL Group in the offshore wind (and onshore renewables, hydrogen & the general energy transition) sector:

1. OWC's Luany Dantas talks to BBC World service on women in wind >> listen to the BBC programme
2. OWC commits to Vietnam with new office, headed by Riccardo Felici >> read more
3. ABL Group supports Hollandse Kust Noord build-out >> read more
4. Marine renewable energy specialists Innosea expands to Spain, headed by Jordi Serret >> read more

1. Innosea supports ocean energy expansion with digital marine data toolbox >> read more
2. Innosea completes FLOTANT floating wind scope >> read more
3. IPCC Climate Change 2022 – Adapt or Perish. Our Chief Energy Transition Officer Dr RV Ahilan FREng explores some of the implications of the recent IPCC reports. >> read more

Please watch out for OWC and ABL group colleagues out and about at the following events:

• Join the debate. A hybrid event, London (UK). 5 May. ABL Group is hosting an industry panel discussion in partnership with the British Ports Association, to debate the following question: Is shore power the key to unlocking net-zero ports? Attend in person and network in a post panel drinks reception, or join virtually. >> read more

Watch this video presenting our emiTr ? product ????

• Foundation Ex 2022, Bristol (UK). 10 May. OWC's Fran Pitkin is talking on "The impact of ‘Scaling Up’ on foundation supply chains".
• All Energy 2022, Glasgow (UK). 11-12 May. OWC's Katherine Phillips joins an industry panel discussion offering some insight into the opportunities and challenges in developing floating wind projects: Offshore Wind: Floating Wind – Opportunities and Challenges. >> read more

• Intersolar 2022, Munich (DE). 11-12 May. Discuss your onshore or floating solar project with Maria Ikhennicheu, Felix Gorintin or Rich Abrams who are all attending this event. >> read more
• FOWT 2022, Montpellier (France). 16-18 May. OWC's Alan Smith is attending, contact Alan if you would like to meet up and discuss our work on over 35 floating wind projects including Erebus in the Celtic Sea.
• Financing Wind Europe 2022, London (UK). 26 May. Katherine Phillips, Rich Abrams, and John MacAskill will be attending covering offshore and onshore wind. reach out to any of us for a catch up at the event.
• Wind Investment Awards 2022, London (UK). 26 May. OWC are sponsoring the Developer of the Year award and our Katherine Phillips is also up for an award. Will Cleverly, Rich Abrams, and John MacAskill will also be attending with Katherine.

And of course we are also exhibiting at Global Offshore Wind in Manchester in June. More on that in the month ahead. please keep an eye out on our Linkedin company pages and our website event section. >> Events page

Be part of the transition! Work in the most exciting emerging markets and challenging projects. Join #TeamOWC! Check out our jobs page on LinkedIn and choose your next adventure: OWC adventures >>

We want to do a lot of stuff; we're not in great shape. We didn't get a good night's sleep. We're a little depressed. Coffee solves all these problems in one delightful little cup. - Jerry Seinfeld

Hello coffee lovers! I have some beans from Union Gajah Mountain, and I have to say they are some of the best 'shelf beans' I have bought from my local Sainsbury's in recent memory. I used my small french press on some freshly ground beans this morning.

Now, I never drink milk with coffee, unless it's some foam sitting above an espresso. And since atmosphere is everything, that only seems right when outside a coffeeshop watching the world do it's stuff. It's a full coffee when drunk black, the advertised notes are quite strong IMO. I certainly get the truffle as advertised, I have read it is a hint, hmm, not with me. It's not in your face, but certainly not distant either. I love the lingering sour note at the end, a grapefruit like end.

I get a strong urge to prepare and brew another cup immediately finishing the first and I don't always get this, but my taste buds want a repeat...an encore! So you will have to watch this.

Sponsor

This edition comes to you powered by KAWA Coffee Ltd. Thanks again to KAWA founder Regan Black for his continued support of this Newsletter...it runs on coffee...and of course...

So it's been a while since the last Newsletter. A lot of great new albums and my first gig of the year. So first the gig...

I attended the Canadian mad genius Devin Townsend's Glasgow show at the O2 Academy, supported by the excellent VOLA. I attended with a good mate and as usual we waled away with the huge grin always associated with a HevyDevy gig.

His set from his SYL days to Empath is so diverse, but really deep too. To have the luxury to throw in fan favs such as Kingdom, Hyperdrive, Life and Aftermath so early in the set shows the depth of songbook the lad has.

Spotify links:

• Devin Townsend's 2022 UK & Ireland Tour setlist
• Vola

Great gig. Now I am looking forward to Download 2022 in 5 or 6 weeks, my first festival of the year. Let me know if you are planning to attend and we can grab a ??.

Some great albums have dropped since my last Newsletter; Nite's Voices of the Kronian Moon (NWOBHM with black metal vocals!), The Troops of Doom's Antichrist Reborn (for lovers of early Slayer, Sodom and Sepultura), Satan's Earth Infernal (At 40 years in, this legendary NWOBHM crew get younger with each year!)...and many others. But the album that stands out for me in April and late March was Undeath's It's Time...To Rise from the Grave.

>> Spotify link of the album.

Undeath has understood that Death Metal is entertainment. Yes there are (very) gruesome lyrics and the whole package could be taken the wrong way, but as vocalist Alex Jones in Spin magazine admitted "it's about having a good time with us," we are "revelling in this admittedly silly thing...death metal". Musically it's a continuation of their brilliant debut album, though I prefer the production on the first, but they have added more nuance and dynamics. Great OSDM grooves, but far more technical and some progressive/NWOBHM touches even. It's still all about the riffs! cannot wait for this Rochester, NY crew to make it to the UK.

Well that's it for this edition.

Thanks for spending some time reading it. Please subscribe and share with colleagues. The next edition will be out soon, hopefully end of May-ish.

So stay safe, enjoy life, and catch you next time and at events in the real world. ????

Cheers

John