How Expensive Is Expensive Enough? Opportunities for Cost Reductions in Offshore Wind Energy Logistics

Abstract

This paper reveals that logistics may conservatively amount to 18% of the levelized cost of energy for offshore wind farms. This is the key finding from an extensive case study carried out within the organization of the world's leading offshore wind farm developer and operator. The case study aimed to, and produced, a number of possible opportunities for offshore wind cost reductions through logistics innovation; however, within the case study company, no company-wide logistics organization existed to focus horizontally on reducing logistics costs in general. Logistics was not well defined within the case study company, and a logistics strategy did not exist. With full life-cycle costs of offshore wind farms still high enough to present a political challenge within the European Union in terms of legislation to ensure offshore wind diffusion beyond 2020, our research presents logistics as a next frontier for offshore wind constituencies. This important area of the supply chain is ripe to academically and professionally cultivate and harvest in terms of offshore wind energy cost reductions. Our paper suggests that a focused organizational approach for logistics both horizontally and vertically within the company organizations could be the way forward, coupled with a long-term legislative environment to enable the necessary investments in logistics assets and transport equipment.

The Role of Logistics in Practical Levelized Cost of Energy Reduction Implementation and Government Sponsored Cost Reduction Studies: Day and Night in Offshore Wind Operations and Maintenance Logistics

“…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 [22,45,64], 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 [66,67]. 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.…”

“…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 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:…”

“…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]).…”

“…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,[32][33][34] and different wind energy associations [15,[35][36][37] 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.…”