Measured in comparable LCoE, offshore wind is not competitive with other energy sources [5
], with other renewable energy forms [23
], nor can offshore wind projects survive without government subsidies [5
]. Proponents of offshore wind argue that other factors should be considered when evaluating whether to continue offshore wind diffusion. Such factors include job creation [15
emission cost avoidance [25
], low offshore wind subsidy levels compared to subsidies for dark energy technologies such as coal [5
] (p. 7), and the issue of avoiding to take up scarce land areas onshore [27
]. Conversely, opponents of offshore wind diffusion argue that animal life is disturbed, that near-shore offshore wind turbines distort the view of humans, that wind power production cannot be stored, that the grid cannot handle an energy form which is intermittently on/off, and that the subsidy levels are too costly for tax payers.
When comparing LCoE across different energy sources [5
], renewable energy forms do not depend on a particular type of fuel to generate electricity and heat [28
]. Traditional fossil fuel based energy sources such as coal, oil, and gas do depend on fuel. For fossil fuels, the fuel itself therefore makes up a large portion of the LCoE life-time calculation for these energy forms. Within the European Union (EU), most energy research and development funding is by far directed into nuclear fission while offshore wind receives the least attention and funding [5
]. Within the EU, fossil fuels such as coal enjoy far more government subsidies than renewables such as offshore wind [5
]. Globally, fossil fuel subsidy levels stood at USD 490 billion against renewables of USD 135 billion in 2014 [26
] (p. 7), [29
]. Wind power was furthermore found to be the only power source not presenting a security risk to the EU [30
] which is important from a geopolitical perspective.
Government studies of LCoE for offshore wind in Denmark [31
], the United Kingdom [1
], Germany [2
], and across industry coupled with academia [3
] provide definitions of LCoE for offshore wind and create break-downs of the end-to-end life-cycle cost composition of an OWF [22
]. Consultancies [16
] and different wind energy associations [15
] provide historical data on actual offshore wind diffusion along with scenarios for deployment and costs going forward as forecasts until 2020, 2025, 2030, and 2050. Especially the government LCoE studies for offshore wind also point to possible areas of potential cost reduction opportunities. The government LCoE studies are often made with extensive input from industry practitioner representatives [1
2.1. Research Objectives
From a supply chain perspective, an OWF can be divided into four distinctively different life-cycle phases, i.e., Development & Consent, Installation & Commissioning, Operations & Maintenance, and Decommissioning [7
]. Logistics makes up a significant portion of the cost of each of these four life-cycle phases and is often embedded or hidden in other cost items not captured by current LCoE models [22
], let alone the O&M life-cycle phase with downstream implications (e.g., to failure mode and effects analysis [39
]). This paper presents an in-depth review of logistics aspects of the O&M life-cycle phase. The O&M phase starts [40
] (p. 4) when the construction of the OWF has been completed including full commissioning of the different wind turbines and offshore sub-station as well as grid connection [7
]. Typically, the OWF can operate for 20–25 years before it needs to be decommissioned including site abandonment/restoration [1
]. The annual OpEx costs to manage, administer, insure, operate, inspect, maintain, repair, and make replacements within the OWF are included in the LCoE calculations. Within the OpEx calculations, the logistics cost component had qualitatively been estimated at 26% by the world’s leading OWF operator [22
]. From this point of departure, this research project was conducted with the following upfront propositions and motivations:
Major LCoE models and cost reduction initiatives for offshore wind [31
] (pp. 1–3) are crafted by a certain type of people, organizations, and companies. These more conceptual studies have a certain audience and are generally characterized by a high degree of complexity, rigor, and financial backing. Is it indeed feasible for the industry practitioners to implement the identified LCoE savings opportunities from these government LCoE studies?
The harsh sea environment within offshore wind is not native for offshore wind inasmuch as wind turbines were first put up on land and subsequently moved into the sea. Do cultural differences exist between shore-based personnel creating the government LCoE studies and the offshore personnel of the industry practitioners required to implement many of the actual cost-out savings needed for LCoE to factually decrease?
The major government sponsored LCoE and cost reduction studies are very broad and cover the entire life-cycle of an OWF. These LCoE studies often involve a vast range of consultancies as well as management level industry practitioners and maintain a somewhat high-level perspective [31
] (pp. 1–3). Could a specific life-cycle phase, such as O&M, be examined in detail and generate practically implementable cost-out opportunities that can realistically be implemented by industry practitioners to reduce the cost of offshore wind?
2.2. Offshore Wind Operational Expenditure
A good definition of OpEx within offshore wind has been provided in a study for the UK Renewables Advisory Board [40
] (p. 4): OpEx “... includes all expenditure occurring from immediately after point of takeover, whether one-time or recurring, related to the wind farm, measured on an annual basis. Excluded are expenses inherent to the operation of the operators business but not directly related to the operation and management of the wind farm”. OpEx is sometimes referred to as variable costs [35
] (p. 45), [42
], operating & maintenance costs [43
], operating costs [1
], operations cost [2
], or operation, maintenance, and service costs [44
]. OpEx may be broken further down to separate costs between “physical maintenance” and “non-physical services such as insurance” [14
]. Some studies include added dimensions such as grid transmission charges and seabed rent [1
] whereas others point out that present calculation regimes do not include key parameters such as lost revenues due to downtime caused by ineffective operations [45
] (p. 365) or logistical factors such as weather windows and vessel availability [46
] (p. 5).
From an accounting point of view, the recurring operating costs (OpEx) of a project are deducted from the income in the profit/loss statement of the project on an annual basis. Conversely, the initial capital costs (CapEx) of a project are put on the balance sheet of the project when incurred and subsequently depreciated. Cash flows and profitability are therefore treated very differently accounting wise [47
] (p. 119). To be able to understand the value of any project at the time of making the investment decision, the corporate finance perspective prescribes that net of the future revenues less the future costs is discounted back to the time of making the investment decision using a discount factor often referred to as the weighted average cost of capital (WACC). CapEx and OpEx are therefore important terms to fully understand when making investment decisions [47
] (p. 121).
As a phenomenon, LCoE focuses on the cost aspect of some of these same accounting and corporate finance terms [1
] (p. vii) and as also described by Poulsen and Hasager [22
]. The goal of the LCoE measure is to be able to compare the lifetime costs by electricity output unit of different energy producing plant types (for a good example of how to compare costs, see for example Namovicz [48
]). According to the Megavind [3
] LCoE calculator, development expenditure (DevEx), CapEx, OpEx, and site abandonment expenditure (AbEx)/decommissioning costs make up the cost factors used in LCoE calculations for offshore wind. From the research presented in this paper, OpEx is the LCoE cost component with the single most variance between different studies, reports, and calculations. This variance has a big impact on the overall project LCoE as OpEx will incur during each year of operations over the entire O&M life-cycle phase of the project which is usually 20–25 years for offshore wind.
2.3. Offshore Wind Operations and Maintenance
Originally, maintenance as a concept can be traced back to work performed by craftsmen before the Industrial Revolution. Later in history, Admiral Nelson’s flagship, HMS Victory, was carefully maintained to an extent where almost all of her parts were replaced more than one time. The HMS Victory used timber corresponding to some 40 hectares of wood meaning that the effort to fell this wood, ready the timber, and ultimately replace it made the vessel a very valuable asset worthy of the expansive maintenance [49
]. A review of maintenance history and maintenance management literature based on a number of books published and extensive consulting efforts on the topic was presented in London and cited by many [50
]. Another study concluded that the concept of maintenance has evolved through four phases from being “a necessary evil”, to internal company focused “technical specialization”, through to being a “profit contributor”, to finally becoming partnership driven with “positive cooperation” [51
An early O&M example from the military context was the need for having US airplanes operational at all times for air combat during World War II which required intensive maintenance and repair (M&R) after completed missions in order to get the planes airborne again as soon as possible. The detailed need for such M&R efforts had to be balanced by researchers considering that the war time life-cycle of the airplanes was short and that “major parts” would therefore not need maintenance [52
]. M&R understood as “maintenance & repair” is often used as a separate academic theory stream in different fields such as construction [53
] and the electric industry [54
]. Competing theory streams use the same abbreviation of “M&R” differently, e.g., maintenance & renewal [55
], maintenance & replacement, maintenance & rehabilitation [56
Within the O&G industry, O&M is often referred to as inspection, maintenance, and repairs (IMR) thus including the inspection function as a means to diagnose the problem at hand [34
]. Another commonly used abbreviation [10
] within sub-sea O&G is inspection, repair, and maintenance (IRM). Different theory streams include a wider array of functions such as inspection, repair, maintenance, and replacement (IRMR) in their definition [59
]. The different groupings of several lines of thought into different theory streams make literature searches and comparisons of academic literature difficult across industries and one recent literature review found a total of 10 different maintenance management techniques within the many groupings of tasks [60
]. Each maintenance management technique is either quantitative or qualitative in nature and each technique such as Total Productive Maintenance (TPM) is described extensively in literature and across different industries (for TPM as an example, please refer to e.g., Nakajima [61
] and McKone, Schroeder, and Cua [62
O&M for OWFs can be split into four distinctively different generations of evolution according to Petersen [63
]: “Run to failure”, “systematic maintenance”, “condition based”, and “failure elimination”. An offshore wind O&M taxonomy built on several sources has been crafted by May [46
2.4. The Logistics Share of Offshore Wind Operations and Maintenance Costs
The logistics share of OpEx or O&M costs in offshore wind is not clearly defined in literature, nor in various cost reduction/LCoE studies Whereas the offshore wind industry is a young and somewhat immature industry [22
], the topic of logistics within offshore wind O&M academic literature has been covered at operational, tactical, and strategic levels as summarized by Shafiee [65
] and operations reviewed from a perspective of the wind turbine generator (WTG) and impact on the grid [66
]. As determined in a separate study [22
], logistics itself was previously not defined for offshore wind nor had a share of LCoE been attributed to logistics. The offshore wind logistics definition of that study [22
] (p. 13) encompasses the O&M logistics chain and when prior academic work on OpEx cost shares of LCoE is reviewed as a starting point, it was concluded that several recent and very extensive studies [46
] (p. 5), [63
] (p. 3) were based on relatively few and quite similar sources. Upon reviewing these sources, it was found that one source [42
] based its estimate that OpEx equals 30% of LCoE on a single study on offshore wind from 2007 but was very rich on onshore examples. Another source [68
] was rather specific on OpEx cost items but contained a variance between the referenced minimum and maximum monetary values equal to a factor 2.3. Therefore, it was found to be necessary to scope and define what O&M logistics is for OWFs and perform a more detailed study of this phenomenon. This tallied with a prior recommendation for researchers to perform further research in the form of specific quantitative studies of the logistics costs for OWFs [22
] (p. 20). In performing such a quantitative study as part of this research, with focus on logistics for the O&M life-cycle phase in particular, a total of eleven studies were analyzed in detail. These particular studies were selected because they had previously been included in related work scopes [1
] (pp. 1–2), [34
] (p. 3), [44
], because they were cited by major recent academically related O&M research efforts (such as May [46
], Petersen [63
], and Brink, Madsen, and Lutz [69
]), or because they have been broadly recognized by academicians and/or practitioners to be of major relevance to the offshore wind industry [35
]. These eleven different studies were performed by and on behalf of different—often government—constituencies from 2007 through 2015 (see Table 1
below for a high-level presentation of the eleven studies). Similar to earlier conclusions by e.g., Blanco [42
] (p. 1374) and Dinwoodie et al. [72
] (p. 8), it was determined as part of this research that the studies are very different in their fundamental assumptions and methodology including key parameters such as OWF capacity in MW and WTGrating. It was also concluded that none of the studies have a clear logistics definition nor does any single study break down logistics as a separate OpEx/O&M cost item.
The most detailed OpEx cost itemization was found in the study made for Scottish Enterprise and The Crown Estate [68
]. In this particular study, OpEx costs have been broken down into 18 different cost items which have been separately described in the study (see Table 5). Following overall logic of other studies for The Crown Estate at that time [1
], costs for a 500 MW OWF with a WTG rating of 6 MW has been modeled by GL Garrad Hassan [68
]. Of the 18 cost items, it was possible to attribute five fully to O&M logistics.
2.5. Case study Introduction
Leading OWF developer and operator DONG Energy Wind Power set out to reduce LCoE for offshore wind by 40% in 2020 compared to 2012 costs [22
]. This was supported by a number of EU governments [1
] as well as the EU Commission. In addition, many different initiatives were started by academia [64
], practitioners (for example the Cost Reduction Forum of OE which is the practitioner related topic of this paper), and academia in collaboration with practitioners [69
] in order to support this goal to reduce cost. DONG Energy Wind Power has committed to delivering the cost reduction targets for two Dutch OWF projects with a rated capacity of 700 MW [74
] as construction of these OWFs will be completed by early July 2020 with an option to extend the completion up to no later than July 2021 [75
]. Similarly, Swedish utility Vattenfall has committed to delivering the Danish Vesterhav Syd, Vesterhav Nord, and Kriegers Flak OWFs by winning even lower auction bids in Denmark [76
As an organization, OE is a non-profit cluster organization with members primarily from the small- to medium sized enterprise (SME) segment. OE focuses on offshore and separates between O&G and renewables. Offshore wind is the main activity within renewables for OE. OE is based in Esbjerg, Denmark which is the major European hub port for wind energy. Some of the key goals of OE are to facilitate strategic collaboration to create innovative solutions to promote the Danish offshore industry, to foster internationalization, and to act as an enabler when it comes to funding applications for industry, government, and/learning institution collaboration. To support the offshore wind industry’s attempt to cut costs by 40% in 2020, OE launched the Cost Reduction Forum (CRF) in August, 2014. This was done after extensive consultation with the offshore wind industry based in Denmark and internationally. Whereas each organization consulted felt that they were doing what they could in their own right regarding cost reductions for offshore wind, especially the SME members of OE felt that a lot more tangible results could be achieved if an industry-wide effort spanning all parts of the offshore wind market could be put together. OE set out to do so and in designing the set-up with the companies, it was important for the CRF initiative to have a learning institution representative actively join up and participate in the work process. This was done in the form of a case study [77
] with the detailed methodology applied being a combination of student learning project supervision, participant observation, interviews, focus groups, and action research [78
From January, 2015 the academic involvement was increased along with the active participation in the leadership of one of the five specific work stream working groups tasked to review potential cost reductions within the area of O&M logistics. Following two series of intensive meetings in the practitioner working group, five specific O&M logistics cost-out initiatives were in different stages of completion by the time academic case study participation was terminated in April 2016 (see Table 2
for an overview of the five cost-out initiatives).
In total, 30 organizations comprised the main CRF member organizations (see Table 3
From the time the case study coverage was initiated in August 2014 until coverage was terminated in April 2016, a total of 3 CRF meetings had been conducted as follows:
25 August 2014: Inaugural meeting and kick-off. Through a focus group set-up, rules of engagement established and the Anholt OWF chosen as a “base case” scenario to work from and ensure focus on tangible results [9
2 December 2014: Brainstorm meeting. The 30 participating organizations could attend an OE facilitated focus group session. The focus group session led to the establishment of five different working groups, each dealing with a single focus area on behalf of the CRF (see Figure 1
8 October 2015: Progress review meeting. Progress from the working groups engaged with the five different focus areas was reported back to the CRF forum. Only working group 4 on O&M logistics (the group included in this paper) had made real progress. Other work groups were kicked off including Group 3 which had obtained separate public funding to progress in a more comprehensive manner to review installation and commissioning (I&C) logistics. Figure 1
below outlines the structure of the Cost Reduction Forum compared to the work groups working on the individual areas of possible cost reduction.
The detailed research on potential cost reductions for offshore wind O&M logistics as reported in this paper is a direct result of the decision to actively join the work of CRF Group 4. The research team consisted of two researchers, both members of the CRF group 4 O&M logistics initiative. The Group 4 research design for the first series of meetings to generate cost reduction ideas and business cases was carried out in January and February of 2015 where an initial interview protocol was designed for open-ended semi-structured interviews [79
]. During March 2015, coinciding with the European Wind Energy Association (now WindEurope) Offshore Wind 2015 conference in Copenhagen, a total of 18 interviews were carried out. The interview guide was specific in terms of focus on the logistics processes involved in the O&M phase of the OWF life-cycle and ideas for cost reductions. Fourteen of the interviews were carried out face-to-face and four additional interviews carried out by phone. The interviews were summarized in writing with a focus on cost reduction ideas which were highlighted. The initial interview summary interview process yielded a total of 36 cost reduction ideas within the area of O&M logistics which were reviewed by the researchers and further grouped during a workshop focus group.
Effectively, Group 4 had a very narrow O&M logistics focus and as such, it made sense that some of the main CRF member forum organizations took part in the Group 4 work and that particularly knowledgeable subject matter experts were invited to join as well (see Table 4
). At the inaugural Group 4 O&M logistics meeting on 13 April 2015, a focus group setting was facilitated by OE to jointly review and qualify the 36 cost reduction ideas and the total number of ideas was increased to 44. The ideas were grouped into five categories and a delimitation session performed where only cost savings ideas from quay side up to and within the OWF site were deemed to be included for the group going forward. The findings from the focus group session were summarized in writing and shared with all participants for comments and edits.
Shortly after the Group 4 kick-off meeting, a follow-up meeting was conducted on 4 May 2015. At this meeting, two more ideas were generated and all ideas prioritized using a funnel technique with several criteria: Impact on LCoE, investment required, time need to implement the idea, alignment with the participating companies’ own strategies, and probability of successful implementation. Three projects were chosen at the meeting for sub-work groups to focus on in detail: How to make the O&M logistics process more lean (the lean sub-group), how to work daytime and at night for preventive maintenance and repair campaigns (the 24/7 sub-group), and how to more objectively evaluate safety. The work performed was again summarized in writing and shared with all focus group participants. The lean and 24/7 sub-groups subsequently gained the most traction and were chosen as the projects to move forward with.
During August 2015, the lean and 24/7 sub-groups each met twice to perform more detailed work on how to practically realize the selected projects, selection of elements to be focused on in a business case, and detailed discussions about business case calculations. These meetings were smaller sub-working group meetings facilitated by OE and were more hands-on and practical in nature. Each meeting was summarized in writing and the results were shared with the participants for comments/edits. The business case documents were also included as they started to take shape from the discussions (mainly Microsoft Excel spreadsheet models). A subsequent online focus group meeting was facilitated by OE and supported by emails in order to jointly review and actively evaluate the results of the work crafted by the two sub-work groups working separately on the lean and 24/7 business cases. Additional focus was put on implementation planning, risk analysis, and an evaluation of the likeliness of the success of each of the projects. The business case documents were updated further and the overall discussions summarized and shared along with the business case documents to all participants.
Three extensive face-to-face business case review meetings were conducted as semi-structured open-ended interviews with selected key players in terms of actual operational knowledge. The three interview participants were carefully hand-picked from the team members of working group 4 based on their perceived ability to evaluate the process of generating the business cases, answer questions to fill in the last remaining assumptions for calculations, and also review the business case calculations themselves. A single interview protocol had been developed for this purpose of final validation and the questions were split between the interviewees.
The final versions of the business cases for lean and 24/7 were presented at the 8 October 2015 CRF meeting where the key CRF member organizations were represented. The progress of Group 4 including the lean and 24/7 business cases caused the main CRF member organizations to express satisfaction with the work efforts rendered thus far. An extended focus group session itself, the CRF forum entered into a review of the work results generated by Group 4 including detailed feed-back and comments to the working group members. A further brainstorming focus session about subsequent and “second series” of group 4 O&M logistics cost reduction ideas took place as part of the 8 October 2015 CRF meeting itself. Already on 26 November 2015, the second series of cost reduction business case working group meetings was kicked off with a focus group meeting to prioritize this new set of O&M logistics cost reduction ideas. More participating organizations had now joined and the meeting was facilitated by OE by splitting the meeting participants in 3 groups working on different methods to prioritize the cost reduction ideas. At this session, three ideas were selected for further focus thus taking the total number of business cases being worked on by Group 4 to a total of five (see Table 2
Three of the organizations participating in the work efforts of Group 4 never really became actively involved in the detailed work efforts associated with building the business cases. Of the remaining 22 organizations, a total of 26 people were actively engaged and the organizational split was 38% top management, 38% middle management, 19% execution layer, and 4% site layer. In this paper, the 24/7 business case of extending working hours from day to night will be used as the representative example of the work efforts rendered within this practitioner case study.