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Like a Journey to the Moon



Authors: Frank Reichert, Robert Kunze, Saman Kitvarametha
Like a Journey to the Moon

Half-baked logistics concepts and communication „by acclamation“: offshore wind logistics might turn out to
be an unpredictable blind flight. RWE Innogy GmbH, a German company specializing in renewable energy, even
states, “Compared to onshore logistics, offshore logistics is like a journey to the moon.”1




    The much-cited “energy transition” is on everyone‘s                          Apart from that, however, the odds are favorable, as
    lips, and has been even before the Fukushima nuclear                         the North Sea and the Baltic Sea are regarded as being
    disaster. Inner-European greenhouse gas emissions                            among the most promising offshore wind areas in the
    are to be reduced by at least 20%, energy efficiency                         world, and the initial tariffs for the first twelve years
    improved by 20% by way of energy savings, and                                have recently been raised from 13 to 15 euro cents per
    the share of renewable energy in the total energy                            kilowatt hour.
    consumption raised to 20%. The German government
    even aims to raise the share of renewable energy in                          More and More Players in the Offshore Logistics
    power generation to 25-30% by 2020. High hopes are                           Market
    being placed on offshore wind energy in particular.                          Not only constructors and operators of offshore wind
    The German government‘s resolution in the “National                          farms would benefit from growth, but also maritime
    Renewable Energy Action Plan” envisages 10 GW of                             economy, navigation, ports and shipyards. But growth
    installed output in offshore wind farms by 2020. By 2030,                    in Germany is stalling. The German special way of
    it is even planned for offshore wind farms with a total                      doing things is regarded as one of the reasons. While
    output of 20-25 GW to be set up in the North Sea and                         the construction of wind turbines on the open sea is
    the Baltic Sea. These farms alone could cover approx.                        definitely planned, they should not be located within
    15% of the electricity requirements in Germany, which                        eyesight of the shore. As the turbines move further
    equals an annual electricity yield of 85–100 TWh.2                           away from the land (approx. 30-100 km) and the
                                                                                 waters grow deeper (20-40 m), the total costs increase.
          German Offshore Wind Power Projects (in MW)                            Bureaucratic obstacles with diversified responsibilities
                                                                                 in municipalities, counties, and environmental agencies
                   North Sea                         Baltic Sea
                                                                                 lead to especially tedious approval processes. Another
                        470        Operational         51                        reason development is impeded is the slow expansion
                                                                                 of the German electricity grids.

            17,620                  Approved                          2,318
                                                                                 100 billion euros: this is the total sum that is estimated
                                                                                 to be invested in the offshore wind market by the year
                                     Awaiting                        2,295
       24,616
                                     approval
                                                                                 2030. The sum includes investments in wind farms and
                                                                                 their grid connection, areas of maritime installation and
                                                                                 service, and port infrastructure. Logistics services in
    Source: dena, Barkawi Research 2011
                                                                                 particular play an important role during the life-cycle of
    An ambitious goal, considering that a mere 470 MW of                         an offshore wind turbine, because apart from turbine
    installed output are in operation by now. But in order                       purchase costs, grid connection and the foundation,
    to reach the objective set by the German government,                         logistics contributes one of the largest shares of the
    based on the current state of affairs, approximately 3                       necessary investment in an offshore wind turbine.
    MW of offshore power would have to be installed every                        Considering the presently active wind farms, those
    day between 2012 and 2020 – a requirement that is                            already approved and those currently under review for
    currently by all means utopian, as it currently takes                        approval, there is enormous offshore logistics potential
    an average of 6 days to install 1 MW of output. The                          which consists of logistics services until startup and
    government‘s objective thus seems to slip out of reach.                      logistics services pertaining to support and maintenance.
                                                                                 Depending on the respective logistics concept, the
    1 Interview with representatives of RWE Innogy GmbH; July 21, 2011
    2 German Federal Ministry for Environment, Nature Conservation and Nuclear
                                                                                 strongly fluctuating logistics costs comprise between
      Safety, 2011
5% and 15% of the CAPEX of an offshore wind turbine.                             The “installation logistics” step, during which materials
This gives rise to different scenarios for the total logistics                   and staff are transported from the ports, is the biggest
potential: Barkawi estimates the logistics turnover                              cost driver in the entire logistics process. The share of
potential at 12 to 31 billion euros.                                             maritime logistics accounts for approximately half of
                                                                                 the significantly higher costs as opposed to the onshore
In this calculation, erection logistics represents the major                     sector. The domineering force here is a sellers‘ market:
part of the total potential, with the biggest cost drivers                       specialized vessels are scarce; moreover, the required
being the charter costs for installation vessels. It remains                     capacity clashes with the undwindling demand from
to be noted, however, that the specific characteristics of                       the oil and gas industry. Wind farm operators thus
                                                                                                       currently pay at least 150,000 euros a
    Potential Sales Volume for Logistics of German Offshore Projects                                   day for an installation vessel, plus labor
                               (in Mio. €)                                                             costs for approx. 60 workers. That is ten
             Low scenario                                       High scenario                          times as much as is incurred per day for
                                                                                                       installation units in the onshore business.
                                                                                 18,601
                                                                                                       But it could be even more expensive:
                                                                  13,782                               when the offshore wind farm “Alpha
                                                                                                       Ventus” was constructed, the leasing
                            6,847
                 5,074                After Sales                                                      of the Dutch heavy cargo ship “Thialf”
     19
                                      Erection
                                                        19                                             incurred costs in the amount of a stunning
   Opera-    Approved Awaiting                        Opera-    Approved Awaiting                      500,000 euros a day.5 At the moment
   tional             approval                        tional             approval                      there is no acute shortage of erection
                                                                                                       units as yet, but experts are convinced
Source: dena, Barkawi Research 2011
                                                                                                       that in 2-3 years‘ time, if the development
any offshore wind turbine (water depth, distance to the                          continues at the present rate, a veritable “bottleneck”
shore, service concept: shore-based; vessel-supported,                           will occur, as the construction of such facilities is
shore-based helicopter-supported; sea-based, etc.)                               expected to take two years. Simply settling the high
significantly affect logistics costs. Just under 90% of                          leasing payments, however, does not help overcome
that potential can be attributed to projects in the German                       the maritime technology challenges. The planned
North Sea . In addition to project planners, wind turbine
             3
                                                                                 German wind farms in particular, which are supposed
constructors such as Enercon, Siemens or Vestas, and                             to be erected in deeper waters and further away from
energy suppliers such as RWE or ENBW, numerous                                   the shore, pose yet another challenge to installation
large and small logistics service providers are trying to                        logistics. Heavier seas and stronger winds show where
jump on the band wagon and use part of that potential                            the limits of current maritime installation technology lie,
for themselves.      4


                                                                Development of Costs over the Course of the Individual Logistics Phases
Logistics on the Open Sea is                                                   in the Onshore and the Offshore Sector

Complex                                                                        Procurement logistics         Production logistics       Installation logistics     Service logistics

                                                                 Planning          Supply       Production        Assembly       Transshipment      Installation       Service
Alongside grid connection, funding and
                                                                                                                                                 offshore          onshore/offshore
technology, logistics is the fourth key
challenge in the offshore wind energy
sector. At first glance, the logistics
process in the offshore sector is strikingly                                                                  onshore/offshore                   onshore

similar to that in the onshore sector. In                        onshore
                                                                                      onshore                                                                          onshore

                                                                                                              onshore/offshore
both cases, the process can be broken                                                 onshore
                                                                 onshore
down into four main areas: procurement,
                                                                          Average duration of process steps when constructing a medium-sized offshore wind park
production, installation, and service                          24-36 months               12 months              12 months               18 months                  240 months
logistics.
                                                                  Cost development offshore logistics                Cost development onshore logistics

                                                          Source: Barkawi Management Consultants

3 Barkawi Management Consultants
4 Windenergie soll Seehäfen pushen [Wind Energy to Push Seaports] –              5 Windenergie soll Seehäfen pushen [Wind Energy to Push Seaports] –
  WirtschaftsWoche, http://www.wiwo.de/unternehmen-maerkte/windenergie-            WirtschaftsWoche, http://www.wiwo.de/unternehmen-maerkte/windenergie-
  soll-seehaefen-pushen-466792/, Christian Schlesiger, May 27, 2011                soll-seehaefen-pushen-466792/, Christian Schlesiger, May 27, 2011
often forcing operators and installers to improvise time-     projects, a project income return of 7.1% after tax would
and cost-intensive actions. An additional expenditure is      apply to an equity-financed model wind farm, taking
the coordination of the employment of various floating        the German Renewable Energy Act into consideration.
cranes, some of which have to be brought in and               In light of the technological and logistical challenges
mobilized from different locations. What exacerbates          and the even more meager experience in erecting
the current situation even more is weather conditions         and operating an offshore wind farm, this income
that are worse than was forecast, which lead to even          return does not seem sufficient to cover the specific,
more unexpected costs and increased shortcomings              higher risks of offshore wind projects.6 The projects
in maritime technology. Because while the foundation          therefore need to become more profitable. Since the
can also be installed at medium swell and fairly strong       turnover share of the profitability equation can only to
winds, the nacelle and the rotor blades can only be set up    a certain degree be influenced by higher commercial
when the wind has died down – at a place, of all things,      availability and larger facilities, the focus lies on the
where wind is supposed to be the source of energy             costs. Costs (CAPEX) per MW of offshore turbines have
once the turbine is in operation. Moreover, installation      hitherto amounted to between three and four million
logistics is complicated by a lack of expertise, reflecting   euros, depending on the project. That value must be
insufficiently sophisticated standardization.                 lowered by 25% in order to create long-term investment
                                                              security. Otherwise, the profitability of offshore projects
Delays in the Logistics Chain Reduce Turnover                 threatens to become so unattractive that it will no
and Increase Costs                                            longer be possible to raise any outside capital. After
Production, installation and service logistics all face a     all, even today the calculated income return of German
problem relating to surface and capacity. While Dutch         offshore wind turbines is distinctly lagging behind other
ports – due to their extensive experience in cooperating      countries. The logistics service provider DB Schenker
with the oil and gas industry for decades and due to the      came to the same conclusion: a cost reduction potential
construction of the first offshore wind farms such as Alpha   of 20–40% is currently assumed in the areas production,
Ventus – have sufficient expertise and handling space         supply, assembly and transshipment, realized by means
for large components, German ports are not prepared           of integrated planning, controlling and supervising of
for the offshore boom. Apart from large interim storage       holistic logistics systems.7
areas for the enormous turbine components, heavy-duty
access roads and harbor edges would have to be built          But how can we achieve savings of up to one million
to facilitate delivery to and loading of the ships. A 250-    euros per installed MW? What do experts in this field
MW offshore wind farm made up of fifty 5-MW turbines          consider to be the essential factors for successfully
would thus have the following dimensions per turbine:         improving efficiency in the entire logistics process?
weight (1,500-2,000 tons), rotor diameter (approx. 110
m) and tower height (approx. 90 m). These values mean
that a total volume of around 100,000 tons needs to be
transported. Handling and storage areas close to the
shore are especially important with regard to supplying
the wind farm with spare parts and staff at a later stage.
The costs and delays which might otherwise incur from
longer transport distances that are not systematically
planned not only reduce the commercial availability of
the farm, i.e. the turnover, but simultaneously increase
the costs.


Logistics is the Key to Increased Profitability of
Offshore Wind Projects
At the moment, offshore wind turbines are three to four
times as expensive as a comparable coal power station.
It is therefore paramount to get to grips with the costs
incurred and to drastically reduce their current levels.
Based on the data of current German offshore wind             6 Offshore wind farms in Europe, market study 2010, KPMG
                                                              7 Interview with Sebastian Peiler, DB Schenker, July 25, 2011
Good Project Planning is the Key to Success
Good project planning is of the essence when erecting         Bremerhaven             Production of foundations,
offshore wind farms, as the effects of poor planning are                              nacelles, rotors and towers,
                                                                                      shipment
much more palpable than in onshore projects. Small
delays can quickly lead to exceeding both schedule and        Brunsbüttel             Potential location for shipment,
                                                                                      assembly and production of large
budget. Most delays result from insufficient information
                                                                                      components
and decision-making processes, as well as when the
individual sequential steps in the logistics process are      Cuxhaven                Production of foundations and
                                                                                      towers, shipment
inadequately dovetailed. To avoid delays it is necessary
to involve all parties concerned more intensely and at        Emden                   Production of nacelles and rotors,
                                                                                      assembly and shipment
an earlier stage for the duration of the entire logistics
process. Logistics experts in particular are very keen        Husum                   Potential support base for
on being involved in the entire project planning                                      maintenance and construction
                                                                                      teams
phase as early as possible, so that they can plan for
the long term and be prepared to react adequately to          Rendsburg-              Potential location for shipment,
                                                              Osterrönfeld            assembly and production of large
any unforeseen events. Hence, all parties concerned
                                                                                      components
should be involved as early as in the first process
                                                              Büsum                   Potential support base for
step of internal planning: the viability review phase.
                                                                                      maintenance and construction
This way, the effects of delays on costs and thus the                                 teams
profitability of the project can be determined at an early
                                                              Lubmin                  Potential location for production,
stage. Efficient voting, coordination and communication                               shipment and maintenance, grid
processes must be established and adopted in order                                    connection point for the Baltic Sea
to guarantee a successful outcome. This helps to
                                                              Rostock                 Production of nacelles,
make sure that the internal project processes meet the                                rotors and towers as well as
requirements of each and every player. After all, the                                 shipment(onshore), potential
planning of an offshore wind farm requires the same                                   location for production (offshore),
                                                                                      shipment, maintenance
degree of integrated planning (sequential, parallel, and
continuous) as a large-scale project to avoid delays at       Sassnitz                Potential location for production,
                                                                                      shipment and maintenance
the points of intersection to the greatest possible extent.
If the coordination requirements are to be met, project       Stade                   Production of rotors
controlling must be carried out from a single source.         Wilhelmshaven           Production, platform, construction
The factors for successful project planning are therefore                             fleet location, shipment
based on those of classic large-scale project planning:       Dagebüll                Möglicher Stützpunkt für
foresight, agreement, coordination, and communication.                                Wartungs- und Bauteams
                                                              Helgoland               Potential support base for
Success of German Offshore Ports by Means of                                          maintenance and construction
Specialization and Cooperation                                                        teams
The expansion of the North Sea and Baltic Sea ports has
                                                              Source: Barkawi; dena Deutsche Energie-Agentur
already begun. There is a clear trend towards an „all-
round harbor“: a port which not only accommodates
interim storage and the loading of large components,
but also offers enough space for production venues and
the storage of all the necessary erection units. Siemens,
for instance, is planning a comprehensive, integrated
production and logistics venue in Ireland. Experts,
however, believe this trend is heading in the wrong
direction. From an economic point of view, they are all
in favor of a specialization of the ports which could be
suitable for the offshore wind market.
Expanding ports into all-round harbors would entail                              as harbors for assembling and manufacturing large
not only uncovered investments but also further                                  components, whereas the ports of Büsum, Dagebüll,
delays of the infrastructure setup: time we do not have,                         Husum and Brunsbüttel serve as reaction service
considering the objectives and the competition with                              ports. The logistics chain is completed by the ports of
British and Dutch ports. In addition, competition for the                        Heligoland, Hörnum, List, and Wyk Auf Föhr, which are
most promising port areas and facilities would cause                             responsible for supplies.9 This promising cooperation is
yet a further increase in costs. Moreover, experts see                           a good example of an efficient port capacity structure
a danger in setting up excess capacities for the long                            along German shores. The individual ports carry out all
term, both in storage and handling areas and space                               coordination at an early stage, thus avoiding resource-
allotted to installation units. Although expanding port                          consuming competition in the medium term and
logistics is immensely important for the growth of the                           eliminating the danger of setting up excess capacities
offshore wind market, doing things simply for the sake                           in the long term.
of doing them in all ports, and in an uncoordinated
fashion, would eventually lead to excess capacities.                             Irrespective of their specialization, German offshore
                                                                                 ports are not only facing challenges pertaining to loading,
Therefore experts in the field do not focus on competition                       but also new challenges in the fields of security and IT.
between the ports but rather on cooperation as a                                 After all, the targeted objective of 25 GW of installed
factor for success. The aim of cooperating is to link                            output means that an additional 22.510 million tons of
the locations and use the focal points of “production,                           goods will be handled by 2030 and must be included
logistics and service ports for offshore wind parks” in                 8
                                                                                 in and reflected by appropriate logistics, guidance and
order to provide potential customers with a closely knit,                        simulation systems.
specialized network of ports. The “Offshore Windpark
Logistik” cooperation [Offshore Wind Farm Logistics],
which consists of ports along the North Sea shore of
Schleswig-Holstein in Germany, is an example of how
tasks can be distributed successfully. The German
ports at Brunsbüttel and Rendsburg-Osterrönfeld act
                                                                                 9 Gesamtverband Schleswig-Holsteinischer Häfen e.V. (General Association of
                                                                                    Schleswig-Holstein Ports)
8 dena Deutsche Energie-Agentur                                                  10 Barkawi Management Consultants (estimate)




                                       Overview of Offshore Port Trends, Needs and Technologies

 Trends                                                Needs (for development)                                  Technologies
 New IT requirements due to an                         •	 Port IT and logistics systems                         •	 Port information and
 increase in the flow of goods and                     •	 Simulation systems                                       communication technology
 transshipment volumes                                 •	 Process-oriented control systems
                                                       •	 Terminal communication systems
 A growing logistics market, growing                   •	 Slot management                                       •	 Transport and logistics systems
 network of German seaports,                           •	 Logistics platforms
 rising requirements regarding port                    •	 Computer-controlled data sharing
 hinterland connections
                                                       •	 Feeder systems
                                                       •	 RoRo/ConRo terminals

 Global rise in security requirements,                 •	 Security management                                   •	 Security technology
 increasing requirements regarding                     •	 International security services
 maritime security
 Increase in seaport optimization and                  •	 Commercial vehicle loading facilities                 •	 Port and transshipment technology
 flexibility                                           •	 Cross docking center integrated into
                                                          terminal
                                                       •	 Planning systems for transshipment
                                                          equipment and carriers
 Increase in the number of                             •	 Hazardous goods management                            •	 Environmental technology
 environmental standards and                           •	 Sustainability strategy for Baltic Sea
 requirements in the port area                            ports
                                                       •	 Energy management consulting and
                                                          services


Source: Maritime Technologien Schleswig-Holstein, MC Marketing Consulting, and dsn Projekte und Studien für Wirtschaft und Gesellschaft (Kiel) [dsn Projects
        and Studies for Economy and Society, Kiel, Germany]
The Availability of Adequate Equipment must be                   commission third-party providers for implementation.
Ensured                                                          Their intention is to create a competitive environment in
Two approaches for overcoming erection unit shortages            order to bring down the costs. Yet in the long run, they
have proven to be successful, yet they could not be more         would not rule out that they might purchase their own
different: while RWE purchased two installation ships            equipment, too. However, they would only employ such
of its own11 in order to defy the shortages prevailing in        an approach if the number of their projects was sufficient
the competition, Vattenfall continues to pursue a pure           to ensure a high degree of equipment utilization. At first,
project controlling-based approach, meaning it relies            this rather cautious and risk-minimizing strategy seems
on commissioning logistics service providers.                    to argue for reluctant investments in new offshore
                                                                 projects or seems to be based on the assumption that
RWE‘s installation ships are primarily used for the              current shortages will wear off.
erection of the offshore wind park “Nordsee Ost” [North
Sea East]. From RWE‘s point of view, deploying a large           No matter which strategy will turn out to be the preferred
fleet of ships in order to attain better flexibility and avoid   choice of major wind park operators, the impact on
shortages is currently the key factor for success, and           the peripheral industries affected will definitely be
also the right strategy to pursue in the years to come.          substantial. If the vertical model applied by RWE takes
However, not all of the companies that are active in             hold, plant manufacturers will have to face losses for
the offshore wind power industry possess the funding             services provided beyond the warranty periods and
required for such an approach. The costs for a hotel ship        various niche providers currently benefitting from
with a four-year delivery period, for example, amount to         equipment and staff shortages will be subject to
120 million euros, while installation ships such as those        enormous pressure. However, such comprehensive
recently commissioned by RWE still cost approximately            structural changes take several years.
100 million each. Nonetheless, ensuring the availability
of the equipment required is one of the key imperatives          Independent of the chosen approach, the demand for
for successfully implementing offshore projects.                 special-purpose vessels and complex constructions will
                                                                 rise, thus entailing a huge potential for German shipping
Whether or not it pays off to purchase one‘s own                 companies. Provided that the political and financial
equipment strongly depends on the strategy chosen                development turns out to be favorable, forecasts project
by the respective company. A strategic approach                  a market potential from „classic“ shipyard activities
involving the purchase of its own equipment will give            (vessel construction, reconstruction, maintenance)
the company in question a good return if they intend             amounting to up to 6.5 billion euros until 2020. Beyond
to realize massive growth plans, as such investment              these classic activities, a further potential sales volume
decisions can be expected to give rise to enormous               from offshore structures (jackets and platforms) of up to
economies of scale, meaning they could provide a                 11.5 billion euros can be derived. Simply by exploiting
high degree of equipment utilization and thus present            these potentials, 6,000 jobs on German shipyards could
a good opportunity for achieving an adequate return              be secured13 – a potential that especially the economically
on investment (ROI). Moreover, the owners of the few             battered Baltic Sea regions could benefit from.
existing installation ships can rely on the so-called
„multi-vendor principle“ and rent out their equipment to         Realizing Significant Savings Potentials by
third parties whenever they do not need these capacities         Means of Standardization
themselves. This increases the degree of utilization             The logistics related to the installation of offshore wind
and thereby enhances the return on their investment.             power plants is not only to be regarded as one of the major
Furthermore, this strategy provides companies with a             cost drivers, but also falls into the project phase presenting
rare and highly valuable opportunity in the offshore             the most substantial challenges. The standardization of
business: it allows them to gain experience which they           both plant components and organizational processes
can benefit from in their future projects.                       during the installation – which is almost non-existent
                                                                 at present – would significantly contribute to saving
Some of the other UCs       12
                                 however, have positioned        time and costs. The degree of standardization in the
themselves as pure project controlling firms and                 construction of foundations, for example, is virtually

                                                                 13 KPMG; German Shipbuilding and Ocean Industries Association; Federal
11 RWE corporate website                                            Ministry of Economics and Technology; German Shipowners‘ Association;
12 UC = utility company                                             Offshore Wind Power Foundation
zero. Currently, each and every „jacket foundation“ is         plant industry or the aerospace industry are the examples
a unique piece and hugely expensive. Standardized              to turn to with regard to this aspect. The requirements
foundations are expected to remedy that situation, as          and challenges for logistics in these two industries
they are supposed to reduce the scale of pre-foundation        due to the sheer dimensions of the components, the
planning and the amount of installation work required,         distribution networks required and the safety and security
thus presenting a considerable cost reduction. The             regulations are substantial. The experience gained in the
gravity foundation developed by the ZÜBLIN company             field of aerospace logistics is highly valuable here, such
is a prime example for such standardization. This type         as the insight that transporting heavy loads on inland
of foundation weighs up to 5,500 tons and sets the stage       waterways instead of ground shipping has several major
for a reduction of installation costs: it allows for series    advantages. Load limits, for instance, are not as crucial
production.14 A high degree of pre-assembly as well as         in waterway transportation. The administrative effort
production close to the quay are expected to further           is considerably lower and fewer permits need to be
reduce the challenges posed to logistics. Standardized         obtained: planning and approving as well as carrying
foundations also contribute to a reduction of installation     out heavy-load transports on inland waterways is faster
technology investments, since it is no longer necessary        and more cost-efficient.
to have different erection units matching the respective
foundation types available. Standardizing foundations          With regard to the maritime technology required to
as well as all related services thus constitutes a major       install offshore plants and the experience with and
factor for reducing offshore installations costs, seeing       handling of changing weather and tidal conditions at
as these costs make up 25-30% of the total investment          sea, the only other industry the offshore wind industry
costs for each offshore wind power plant.                      can possibly be compared to is the oil and gas industry.
                                                               Both the experience and the offshore technology
Only Few Examples of Best Practice Available So                from the oil and gas industry were drawn on for the
Far                                                            construction of the offshore wind park „Alpha Ventus“,
Modern, coordinated logistics concepts and models in           for example. Nonetheless, Erik Pietsch, Project Manager
the offshore wind market allow for cost reductions and         for Logistics Planning at Vattenfall, points out that while
thus influence the profitability of a planned offshore         there is solid experience in certain areas of the oil and
wind park. Although the automotive industry and the            gas industry that can serve as inspiration, there are also
wind power industry do not seem to have much in                some fundamental differences compared to offshore
common at first sight, the automotive industry‘s cutting-      wind parks. So far, the erection of single structures
edge logistics methods can serve as a role model for           was often the main focus of activity, whereas offshore
most companies in the wind power industry (and for             wind power projects require the construction of large,
all other industries as well). Just in time (JIT), Merge in    contiguous offshore parks made up of wind turbines and
transit (MIT) or Just in sequence (JIS), to name just a        platforms. The supply chain for the construction and
few, are logistics concepts that can also be applied in        operation of such wind parks is far more complex, as
other industries, as they allow for successful logistics       both sequential and parallel – and considerably longer
at low cost. In the case of the offshore wind industry,        – logistics services have to be planned and controlled.15
for example, weak links in the supply chain can be
eliminated by employing the JIT concept, and a stronger        Aside from the industries mentioned earlier, it is
involvement of suppliers in the overall process can            worthwhile taking a look at further branches of industry:
help to reduce both stocks and costs. Implementing             let us not forget about the logistics of major construction
the JIT concept would make it possible to synchronize          sites, for example, where the scale of construction
procurement and production, as well as to provide              projects, construction site accessibility, the construction
information and coordination across the entire value-          technology employed and the usage of interim storage
added chain and among all parties involved.                    facilities is just as relevant as in the case of the offshore
                                                               wind power industry.
As opposed to the situation in the wind power industry,
the good handling properties of automotive components
facilitate transport across longer distances. Hence best
practices from industries such as the heavy duty and

14 Dr.-Ing. Udo Hartwig, Dipl.-Ing. Klaus Pöllath, ZÜBLIN AG   15 Interview with Erik Pietsch, Vattenfall, 08/09/2011
Industries with Best Practice Examples in the Offshore Wind Business

                        Process steps


          Grid connection



                Installation



               Foundation


                 Logistics
   (transport & shipment,
           methodology)

                                 Automotive       Oil & gas       Heavy duty         Civil           Onshore           Energy         Aerospace
                                                                    & plant       engineering         wind
                                                                   industry
                                                                                   Industries

                                  Industries with high degree of best practice transfer         Industries with low degree of best practice transfer

Source: Barkawi Management Consultants



The Synchronization of Technology, Funding,                                  issue presents another challenge. This is not only a
Grid Connection and Logistics is the Key for                                 question of costs incurred, but a more fundamental
Overall Success                                                              issue concerning the availability and deployment of
Germany‘s emerging offshore wind industry is at a                            resources and material throughout the entire service
crossroads. While plant manufacturers are called upon                        process. Sooner or later, non-existent or unsophisticated
to develop larger and less vulnerable plants in order to                     service concepts will aggravate issues relating to the
defy the harsh weather conditions out at sea, it will be                     availability of staff and spare parts as well as disposal
the duty of wind park operators and service providers                        and dismantling issues.
in particular to create a stable and profitable value-
added chain. In order to achieve that, project controlling                   If the challenges described here are not met in the short
has to really live up to its potential and assume more                       run, Germany will be at a risk of failing to meet its goal
responsibility. Stepping up coordination, consultation                       of achieving an installed capacity of 10 GW by 2020 and
and     communication            between       all    stakeholders           fail to keep up with the developments in the promising
involved would help to ensure efficient planning and                         offshore market, thus losing its position as one of the
implementation of logistics requirements while wasting                       trailblazers in the wind power sector. In the industry, the
as little time and as few resources as possible, seeing as                   German North Sea is seen as the offshore pilot project
efficient logistics and the prevention of shortages are not                  par excellence: if technology, logistics, grid connection
only key levers for the profitability of offshore projects,                  and funding work here, offshore wind power will also
but also a fundamental prerequisite for ensuring success                     work anywhere else in the world, because framework
and a positive outcome.                                                      conditions at almost all of the other locations are far
                                                                             more favorable than in the North Sea. Both in terms of its
However, it should not be neglected that the offshore                        reputation and its leading role in the technological field,
wind market faces numerous other challenges aside                            it would be a serious setback for Germany as a business
from the logistics challenges at hand. The challenges                        location if the economic and ecological potential of
regarding technological progress, grid connection and                        offshore wind power were to remain unused.
funding are interrelated and interdependent and thus
have to be overcome almost simultaneously. All in all,
even the most efficient logistics process can only make
a minor contribution to the profitability of such projects
if grid connection cannot be set up in due time and if
the technology employed is insufficient. And the service
Acknowledgements to the following companies
REpower Systems SE
RWE Innogy GmbH
DB Schenker
Vattenfall Europe AG
EnBW Erneuerbare Energien GmbH
GE Energy Deutschland
Hellmann Worldwide Logistics GmbH & Co. KG
NOW Nordsee-Offshore-Wind GmbH/Northern Energy Unternehmensgruppe




               Authors
               Frank Reichert is heading Barkawi’s After Market Services Practice as a Vice President.
               After graduating as a Diplom-Kaufmann at Munich’s LMU, including stopovers in Boston and London, Frank
               started his career as a consultant at Siemens Management Consulting. Followed by engagements at BayTech
               Venture Capital, Diebold and Detecon, he joined Barkawi Management Consultants in 2006, where he became
               responsible for the Aftermarket practice after a short period of time.
               Frank’s core consulting topics include innovative service concepts, business and market strategies as well as
               operational excellence projects.



               Robert Kunze is a Consultant in the After Market Services Practice at Barkawi Management Consultants. He is
               focusing on renewable energies, e-mobility and telecommunications. Within these industries he is specialized
               on designing and implementing complex Service and Operations Planning Processes.




               Saman Kitvarametha is a Consultant in the After Market Services Practice at Barkawi Management Consultants.
               Amongst other topics he is focusing on the optimization of Maintenance and Repair Processes in companies
               out of the renewable energies sector.
Barkawi Management Consultants I Baierbrunner Str. 35 I D-81379 Munich I Telephone +49-89-74 98 26-0 I www.barkawi.com

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Offshore Wind Power Logistics - Like a journey to the moon

  • 1. Background information Like a Journey to the Moon Authors: Frank Reichert, Robert Kunze, Saman Kitvarametha
  • 2. Like a Journey to the Moon Half-baked logistics concepts and communication „by acclamation“: offshore wind logistics might turn out to be an unpredictable blind flight. RWE Innogy GmbH, a German company specializing in renewable energy, even states, “Compared to onshore logistics, offshore logistics is like a journey to the moon.”1 The much-cited “energy transition” is on everyone‘s Apart from that, however, the odds are favorable, as lips, and has been even before the Fukushima nuclear the North Sea and the Baltic Sea are regarded as being disaster. Inner-European greenhouse gas emissions among the most promising offshore wind areas in the are to be reduced by at least 20%, energy efficiency world, and the initial tariffs for the first twelve years improved by 20% by way of energy savings, and have recently been raised from 13 to 15 euro cents per the share of renewable energy in the total energy kilowatt hour. consumption raised to 20%. The German government even aims to raise the share of renewable energy in More and More Players in the Offshore Logistics power generation to 25-30% by 2020. High hopes are Market being placed on offshore wind energy in particular. Not only constructors and operators of offshore wind The German government‘s resolution in the “National farms would benefit from growth, but also maritime Renewable Energy Action Plan” envisages 10 GW of economy, navigation, ports and shipyards. But growth installed output in offshore wind farms by 2020. By 2030, in Germany is stalling. The German special way of it is even planned for offshore wind farms with a total doing things is regarded as one of the reasons. While output of 20-25 GW to be set up in the North Sea and the construction of wind turbines on the open sea is the Baltic Sea. These farms alone could cover approx. definitely planned, they should not be located within 15% of the electricity requirements in Germany, which eyesight of the shore. As the turbines move further equals an annual electricity yield of 85–100 TWh.2 away from the land (approx. 30-100 km) and the waters grow deeper (20-40 m), the total costs increase. German Offshore Wind Power Projects (in MW) Bureaucratic obstacles with diversified responsibilities in municipalities, counties, and environmental agencies North Sea Baltic Sea lead to especially tedious approval processes. Another 470 Operational 51 reason development is impeded is the slow expansion of the German electricity grids. 17,620 Approved 2,318 100 billion euros: this is the total sum that is estimated to be invested in the offshore wind market by the year Awaiting 2,295 24,616 approval 2030. The sum includes investments in wind farms and their grid connection, areas of maritime installation and service, and port infrastructure. Logistics services in Source: dena, Barkawi Research 2011 particular play an important role during the life-cycle of An ambitious goal, considering that a mere 470 MW of an offshore wind turbine, because apart from turbine installed output are in operation by now. But in order purchase costs, grid connection and the foundation, to reach the objective set by the German government, logistics contributes one of the largest shares of the based on the current state of affairs, approximately 3 necessary investment in an offshore wind turbine. MW of offshore power would have to be installed every Considering the presently active wind farms, those day between 2012 and 2020 – a requirement that is already approved and those currently under review for currently by all means utopian, as it currently takes approval, there is enormous offshore logistics potential an average of 6 days to install 1 MW of output. The which consists of logistics services until startup and government‘s objective thus seems to slip out of reach. logistics services pertaining to support and maintenance. Depending on the respective logistics concept, the 1 Interview with representatives of RWE Innogy GmbH; July 21, 2011 2 German Federal Ministry for Environment, Nature Conservation and Nuclear strongly fluctuating logistics costs comprise between Safety, 2011
  • 3. 5% and 15% of the CAPEX of an offshore wind turbine. The “installation logistics” step, during which materials This gives rise to different scenarios for the total logistics and staff are transported from the ports, is the biggest potential: Barkawi estimates the logistics turnover cost driver in the entire logistics process. The share of potential at 12 to 31 billion euros. maritime logistics accounts for approximately half of the significantly higher costs as opposed to the onshore In this calculation, erection logistics represents the major sector. The domineering force here is a sellers‘ market: part of the total potential, with the biggest cost drivers specialized vessels are scarce; moreover, the required being the charter costs for installation vessels. It remains capacity clashes with the undwindling demand from to be noted, however, that the specific characteristics of the oil and gas industry. Wind farm operators thus currently pay at least 150,000 euros a Potential Sales Volume for Logistics of German Offshore Projects day for an installation vessel, plus labor (in Mio. €) costs for approx. 60 workers. That is ten Low scenario High scenario times as much as is incurred per day for installation units in the onshore business. 18,601 But it could be even more expensive: 13,782 when the offshore wind farm “Alpha Ventus” was constructed, the leasing 6,847 5,074 After Sales of the Dutch heavy cargo ship “Thialf” 19 Erection 19 incurred costs in the amount of a stunning Opera- Approved Awaiting Opera- Approved Awaiting 500,000 euros a day.5 At the moment tional approval tional approval there is no acute shortage of erection units as yet, but experts are convinced Source: dena, Barkawi Research 2011 that in 2-3 years‘ time, if the development any offshore wind turbine (water depth, distance to the continues at the present rate, a veritable “bottleneck” shore, service concept: shore-based; vessel-supported, will occur, as the construction of such facilities is shore-based helicopter-supported; sea-based, etc.) expected to take two years. Simply settling the high significantly affect logistics costs. Just under 90% of leasing payments, however, does not help overcome that potential can be attributed to projects in the German the maritime technology challenges. The planned North Sea . In addition to project planners, wind turbine 3 German wind farms in particular, which are supposed constructors such as Enercon, Siemens or Vestas, and to be erected in deeper waters and further away from energy suppliers such as RWE or ENBW, numerous the shore, pose yet another challenge to installation large and small logistics service providers are trying to logistics. Heavier seas and stronger winds show where jump on the band wagon and use part of that potential the limits of current maritime installation technology lie, for themselves. 4 Development of Costs over the Course of the Individual Logistics Phases Logistics on the Open Sea is in the Onshore and the Offshore Sector Complex Procurement logistics Production logistics Installation logistics Service logistics Planning Supply Production Assembly Transshipment Installation Service Alongside grid connection, funding and offshore onshore/offshore technology, logistics is the fourth key challenge in the offshore wind energy sector. At first glance, the logistics process in the offshore sector is strikingly onshore/offshore onshore similar to that in the onshore sector. In onshore onshore onshore onshore/offshore both cases, the process can be broken onshore onshore down into four main areas: procurement, Average duration of process steps when constructing a medium-sized offshore wind park production, installation, and service 24-36 months 12 months 12 months 18 months 240 months logistics. Cost development offshore logistics Cost development onshore logistics Source: Barkawi Management Consultants 3 Barkawi Management Consultants 4 Windenergie soll Seehäfen pushen [Wind Energy to Push Seaports] – 5 Windenergie soll Seehäfen pushen [Wind Energy to Push Seaports] – WirtschaftsWoche, http://www.wiwo.de/unternehmen-maerkte/windenergie- WirtschaftsWoche, http://www.wiwo.de/unternehmen-maerkte/windenergie- soll-seehaefen-pushen-466792/, Christian Schlesiger, May 27, 2011 soll-seehaefen-pushen-466792/, Christian Schlesiger, May 27, 2011
  • 4. often forcing operators and installers to improvise time- projects, a project income return of 7.1% after tax would and cost-intensive actions. An additional expenditure is apply to an equity-financed model wind farm, taking the coordination of the employment of various floating the German Renewable Energy Act into consideration. cranes, some of which have to be brought in and In light of the technological and logistical challenges mobilized from different locations. What exacerbates and the even more meager experience in erecting the current situation even more is weather conditions and operating an offshore wind farm, this income that are worse than was forecast, which lead to even return does not seem sufficient to cover the specific, more unexpected costs and increased shortcomings higher risks of offshore wind projects.6 The projects in maritime technology. Because while the foundation therefore need to become more profitable. Since the can also be installed at medium swell and fairly strong turnover share of the profitability equation can only to winds, the nacelle and the rotor blades can only be set up a certain degree be influenced by higher commercial when the wind has died down – at a place, of all things, availability and larger facilities, the focus lies on the where wind is supposed to be the source of energy costs. Costs (CAPEX) per MW of offshore turbines have once the turbine is in operation. Moreover, installation hitherto amounted to between three and four million logistics is complicated by a lack of expertise, reflecting euros, depending on the project. That value must be insufficiently sophisticated standardization. lowered by 25% in order to create long-term investment security. Otherwise, the profitability of offshore projects Delays in the Logistics Chain Reduce Turnover threatens to become so unattractive that it will no and Increase Costs longer be possible to raise any outside capital. After Production, installation and service logistics all face a all, even today the calculated income return of German problem relating to surface and capacity. While Dutch offshore wind turbines is distinctly lagging behind other ports – due to their extensive experience in cooperating countries. The logistics service provider DB Schenker with the oil and gas industry for decades and due to the came to the same conclusion: a cost reduction potential construction of the first offshore wind farms such as Alpha of 20–40% is currently assumed in the areas production, Ventus – have sufficient expertise and handling space supply, assembly and transshipment, realized by means for large components, German ports are not prepared of integrated planning, controlling and supervising of for the offshore boom. Apart from large interim storage holistic logistics systems.7 areas for the enormous turbine components, heavy-duty access roads and harbor edges would have to be built But how can we achieve savings of up to one million to facilitate delivery to and loading of the ships. A 250- euros per installed MW? What do experts in this field MW offshore wind farm made up of fifty 5-MW turbines consider to be the essential factors for successfully would thus have the following dimensions per turbine: improving efficiency in the entire logistics process? weight (1,500-2,000 tons), rotor diameter (approx. 110 m) and tower height (approx. 90 m). These values mean that a total volume of around 100,000 tons needs to be transported. Handling and storage areas close to the shore are especially important with regard to supplying the wind farm with spare parts and staff at a later stage. The costs and delays which might otherwise incur from longer transport distances that are not systematically planned not only reduce the commercial availability of the farm, i.e. the turnover, but simultaneously increase the costs. Logistics is the Key to Increased Profitability of Offshore Wind Projects At the moment, offshore wind turbines are three to four times as expensive as a comparable coal power station. It is therefore paramount to get to grips with the costs incurred and to drastically reduce their current levels. Based on the data of current German offshore wind 6 Offshore wind farms in Europe, market study 2010, KPMG 7 Interview with Sebastian Peiler, DB Schenker, July 25, 2011
  • 5. Good Project Planning is the Key to Success Good project planning is of the essence when erecting Bremerhaven Production of foundations, offshore wind farms, as the effects of poor planning are nacelles, rotors and towers, shipment much more palpable than in onshore projects. Small delays can quickly lead to exceeding both schedule and Brunsbüttel Potential location for shipment, assembly and production of large budget. Most delays result from insufficient information components and decision-making processes, as well as when the individual sequential steps in the logistics process are Cuxhaven Production of foundations and towers, shipment inadequately dovetailed. To avoid delays it is necessary to involve all parties concerned more intensely and at Emden Production of nacelles and rotors, assembly and shipment an earlier stage for the duration of the entire logistics process. Logistics experts in particular are very keen Husum Potential support base for on being involved in the entire project planning maintenance and construction teams phase as early as possible, so that they can plan for the long term and be prepared to react adequately to Rendsburg- Potential location for shipment, Osterrönfeld assembly and production of large any unforeseen events. Hence, all parties concerned components should be involved as early as in the first process Büsum Potential support base for step of internal planning: the viability review phase. maintenance and construction This way, the effects of delays on costs and thus the teams profitability of the project can be determined at an early Lubmin Potential location for production, stage. Efficient voting, coordination and communication shipment and maintenance, grid processes must be established and adopted in order connection point for the Baltic Sea to guarantee a successful outcome. This helps to Rostock Production of nacelles, make sure that the internal project processes meet the rotors and towers as well as requirements of each and every player. After all, the shipment(onshore), potential planning of an offshore wind farm requires the same location for production (offshore), shipment, maintenance degree of integrated planning (sequential, parallel, and continuous) as a large-scale project to avoid delays at Sassnitz Potential location for production, shipment and maintenance the points of intersection to the greatest possible extent. If the coordination requirements are to be met, project Stade Production of rotors controlling must be carried out from a single source. Wilhelmshaven Production, platform, construction The factors for successful project planning are therefore fleet location, shipment based on those of classic large-scale project planning: Dagebüll Möglicher Stützpunkt für foresight, agreement, coordination, and communication. Wartungs- und Bauteams Helgoland Potential support base for Success of German Offshore Ports by Means of maintenance and construction Specialization and Cooperation teams The expansion of the North Sea and Baltic Sea ports has Source: Barkawi; dena Deutsche Energie-Agentur already begun. There is a clear trend towards an „all- round harbor“: a port which not only accommodates interim storage and the loading of large components, but also offers enough space for production venues and the storage of all the necessary erection units. Siemens, for instance, is planning a comprehensive, integrated production and logistics venue in Ireland. Experts, however, believe this trend is heading in the wrong direction. From an economic point of view, they are all in favor of a specialization of the ports which could be suitable for the offshore wind market.
  • 6. Expanding ports into all-round harbors would entail as harbors for assembling and manufacturing large not only uncovered investments but also further components, whereas the ports of Büsum, Dagebüll, delays of the infrastructure setup: time we do not have, Husum and Brunsbüttel serve as reaction service considering the objectives and the competition with ports. The logistics chain is completed by the ports of British and Dutch ports. In addition, competition for the Heligoland, Hörnum, List, and Wyk Auf Föhr, which are most promising port areas and facilities would cause responsible for supplies.9 This promising cooperation is yet a further increase in costs. Moreover, experts see a good example of an efficient port capacity structure a danger in setting up excess capacities for the long along German shores. The individual ports carry out all term, both in storage and handling areas and space coordination at an early stage, thus avoiding resource- allotted to installation units. Although expanding port consuming competition in the medium term and logistics is immensely important for the growth of the eliminating the danger of setting up excess capacities offshore wind market, doing things simply for the sake in the long term. of doing them in all ports, and in an uncoordinated fashion, would eventually lead to excess capacities. Irrespective of their specialization, German offshore ports are not only facing challenges pertaining to loading, Therefore experts in the field do not focus on competition but also new challenges in the fields of security and IT. between the ports but rather on cooperation as a After all, the targeted objective of 25 GW of installed factor for success. The aim of cooperating is to link output means that an additional 22.510 million tons of the locations and use the focal points of “production, goods will be handled by 2030 and must be included logistics and service ports for offshore wind parks” in 8 in and reflected by appropriate logistics, guidance and order to provide potential customers with a closely knit, simulation systems. specialized network of ports. The “Offshore Windpark Logistik” cooperation [Offshore Wind Farm Logistics], which consists of ports along the North Sea shore of Schleswig-Holstein in Germany, is an example of how tasks can be distributed successfully. The German ports at Brunsbüttel and Rendsburg-Osterrönfeld act 9 Gesamtverband Schleswig-Holsteinischer Häfen e.V. (General Association of Schleswig-Holstein Ports) 8 dena Deutsche Energie-Agentur 10 Barkawi Management Consultants (estimate) Overview of Offshore Port Trends, Needs and Technologies Trends Needs (for development) Technologies New IT requirements due to an • Port IT and logistics systems • Port information and increase in the flow of goods and • Simulation systems communication technology transshipment volumes • Process-oriented control systems • Terminal communication systems A growing logistics market, growing • Slot management • Transport and logistics systems network of German seaports, • Logistics platforms rising requirements regarding port • Computer-controlled data sharing hinterland connections • Feeder systems • RoRo/ConRo terminals Global rise in security requirements, • Security management • Security technology increasing requirements regarding • International security services maritime security Increase in seaport optimization and • Commercial vehicle loading facilities • Port and transshipment technology flexibility • Cross docking center integrated into terminal • Planning systems for transshipment equipment and carriers Increase in the number of • Hazardous goods management • Environmental technology environmental standards and • Sustainability strategy for Baltic Sea requirements in the port area ports • Energy management consulting and services Source: Maritime Technologien Schleswig-Holstein, MC Marketing Consulting, and dsn Projekte und Studien für Wirtschaft und Gesellschaft (Kiel) [dsn Projects and Studies for Economy and Society, Kiel, Germany]
  • 7. The Availability of Adequate Equipment must be commission third-party providers for implementation. Ensured Their intention is to create a competitive environment in Two approaches for overcoming erection unit shortages order to bring down the costs. Yet in the long run, they have proven to be successful, yet they could not be more would not rule out that they might purchase their own different: while RWE purchased two installation ships equipment, too. However, they would only employ such of its own11 in order to defy the shortages prevailing in an approach if the number of their projects was sufficient the competition, Vattenfall continues to pursue a pure to ensure a high degree of equipment utilization. At first, project controlling-based approach, meaning it relies this rather cautious and risk-minimizing strategy seems on commissioning logistics service providers. to argue for reluctant investments in new offshore projects or seems to be based on the assumption that RWE‘s installation ships are primarily used for the current shortages will wear off. erection of the offshore wind park “Nordsee Ost” [North Sea East]. From RWE‘s point of view, deploying a large No matter which strategy will turn out to be the preferred fleet of ships in order to attain better flexibility and avoid choice of major wind park operators, the impact on shortages is currently the key factor for success, and the peripheral industries affected will definitely be also the right strategy to pursue in the years to come. substantial. If the vertical model applied by RWE takes However, not all of the companies that are active in hold, plant manufacturers will have to face losses for the offshore wind power industry possess the funding services provided beyond the warranty periods and required for such an approach. The costs for a hotel ship various niche providers currently benefitting from with a four-year delivery period, for example, amount to equipment and staff shortages will be subject to 120 million euros, while installation ships such as those enormous pressure. However, such comprehensive recently commissioned by RWE still cost approximately structural changes take several years. 100 million each. Nonetheless, ensuring the availability of the equipment required is one of the key imperatives Independent of the chosen approach, the demand for for successfully implementing offshore projects. special-purpose vessels and complex constructions will rise, thus entailing a huge potential for German shipping Whether or not it pays off to purchase one‘s own companies. Provided that the political and financial equipment strongly depends on the strategy chosen development turns out to be favorable, forecasts project by the respective company. A strategic approach a market potential from „classic“ shipyard activities involving the purchase of its own equipment will give (vessel construction, reconstruction, maintenance) the company in question a good return if they intend amounting to up to 6.5 billion euros until 2020. Beyond to realize massive growth plans, as such investment these classic activities, a further potential sales volume decisions can be expected to give rise to enormous from offshore structures (jackets and platforms) of up to economies of scale, meaning they could provide a 11.5 billion euros can be derived. Simply by exploiting high degree of equipment utilization and thus present these potentials, 6,000 jobs on German shipyards could a good opportunity for achieving an adequate return be secured13 – a potential that especially the economically on investment (ROI). Moreover, the owners of the few battered Baltic Sea regions could benefit from. existing installation ships can rely on the so-called „multi-vendor principle“ and rent out their equipment to Realizing Significant Savings Potentials by third parties whenever they do not need these capacities Means of Standardization themselves. This increases the degree of utilization The logistics related to the installation of offshore wind and thereby enhances the return on their investment. power plants is not only to be regarded as one of the major Furthermore, this strategy provides companies with a cost drivers, but also falls into the project phase presenting rare and highly valuable opportunity in the offshore the most substantial challenges. The standardization of business: it allows them to gain experience which they both plant components and organizational processes can benefit from in their future projects. during the installation – which is almost non-existent at present – would significantly contribute to saving Some of the other UCs 12 however, have positioned time and costs. The degree of standardization in the themselves as pure project controlling firms and construction of foundations, for example, is virtually 13 KPMG; German Shipbuilding and Ocean Industries Association; Federal 11 RWE corporate website Ministry of Economics and Technology; German Shipowners‘ Association; 12 UC = utility company Offshore Wind Power Foundation
  • 8. zero. Currently, each and every „jacket foundation“ is plant industry or the aerospace industry are the examples a unique piece and hugely expensive. Standardized to turn to with regard to this aspect. The requirements foundations are expected to remedy that situation, as and challenges for logistics in these two industries they are supposed to reduce the scale of pre-foundation due to the sheer dimensions of the components, the planning and the amount of installation work required, distribution networks required and the safety and security thus presenting a considerable cost reduction. The regulations are substantial. The experience gained in the gravity foundation developed by the ZÜBLIN company field of aerospace logistics is highly valuable here, such is a prime example for such standardization. This type as the insight that transporting heavy loads on inland of foundation weighs up to 5,500 tons and sets the stage waterways instead of ground shipping has several major for a reduction of installation costs: it allows for series advantages. Load limits, for instance, are not as crucial production.14 A high degree of pre-assembly as well as in waterway transportation. The administrative effort production close to the quay are expected to further is considerably lower and fewer permits need to be reduce the challenges posed to logistics. Standardized obtained: planning and approving as well as carrying foundations also contribute to a reduction of installation out heavy-load transports on inland waterways is faster technology investments, since it is no longer necessary and more cost-efficient. to have different erection units matching the respective foundation types available. Standardizing foundations With regard to the maritime technology required to as well as all related services thus constitutes a major install offshore plants and the experience with and factor for reducing offshore installations costs, seeing handling of changing weather and tidal conditions at as these costs make up 25-30% of the total investment sea, the only other industry the offshore wind industry costs for each offshore wind power plant. can possibly be compared to is the oil and gas industry. Both the experience and the offshore technology Only Few Examples of Best Practice Available So from the oil and gas industry were drawn on for the Far construction of the offshore wind park „Alpha Ventus“, Modern, coordinated logistics concepts and models in for example. Nonetheless, Erik Pietsch, Project Manager the offshore wind market allow for cost reductions and for Logistics Planning at Vattenfall, points out that while thus influence the profitability of a planned offshore there is solid experience in certain areas of the oil and wind park. Although the automotive industry and the gas industry that can serve as inspiration, there are also wind power industry do not seem to have much in some fundamental differences compared to offshore common at first sight, the automotive industry‘s cutting- wind parks. So far, the erection of single structures edge logistics methods can serve as a role model for was often the main focus of activity, whereas offshore most companies in the wind power industry (and for wind power projects require the construction of large, all other industries as well). Just in time (JIT), Merge in contiguous offshore parks made up of wind turbines and transit (MIT) or Just in sequence (JIS), to name just a platforms. The supply chain for the construction and few, are logistics concepts that can also be applied in operation of such wind parks is far more complex, as other industries, as they allow for successful logistics both sequential and parallel – and considerably longer at low cost. In the case of the offshore wind industry, – logistics services have to be planned and controlled.15 for example, weak links in the supply chain can be eliminated by employing the JIT concept, and a stronger Aside from the industries mentioned earlier, it is involvement of suppliers in the overall process can worthwhile taking a look at further branches of industry: help to reduce both stocks and costs. Implementing let us not forget about the logistics of major construction the JIT concept would make it possible to synchronize sites, for example, where the scale of construction procurement and production, as well as to provide projects, construction site accessibility, the construction information and coordination across the entire value- technology employed and the usage of interim storage added chain and among all parties involved. facilities is just as relevant as in the case of the offshore wind power industry. As opposed to the situation in the wind power industry, the good handling properties of automotive components facilitate transport across longer distances. Hence best practices from industries such as the heavy duty and 14 Dr.-Ing. Udo Hartwig, Dipl.-Ing. Klaus Pöllath, ZÜBLIN AG 15 Interview with Erik Pietsch, Vattenfall, 08/09/2011
  • 9. Industries with Best Practice Examples in the Offshore Wind Business Process steps Grid connection Installation Foundation Logistics (transport & shipment, methodology) Automotive Oil & gas Heavy duty Civil Onshore Energy Aerospace & plant engineering wind industry Industries Industries with high degree of best practice transfer Industries with low degree of best practice transfer Source: Barkawi Management Consultants The Synchronization of Technology, Funding, issue presents another challenge. This is not only a Grid Connection and Logistics is the Key for question of costs incurred, but a more fundamental Overall Success issue concerning the availability and deployment of Germany‘s emerging offshore wind industry is at a resources and material throughout the entire service crossroads. While plant manufacturers are called upon process. Sooner or later, non-existent or unsophisticated to develop larger and less vulnerable plants in order to service concepts will aggravate issues relating to the defy the harsh weather conditions out at sea, it will be availability of staff and spare parts as well as disposal the duty of wind park operators and service providers and dismantling issues. in particular to create a stable and profitable value- added chain. In order to achieve that, project controlling If the challenges described here are not met in the short has to really live up to its potential and assume more run, Germany will be at a risk of failing to meet its goal responsibility. Stepping up coordination, consultation of achieving an installed capacity of 10 GW by 2020 and and communication between all stakeholders fail to keep up with the developments in the promising involved would help to ensure efficient planning and offshore market, thus losing its position as one of the implementation of logistics requirements while wasting trailblazers in the wind power sector. In the industry, the as little time and as few resources as possible, seeing as German North Sea is seen as the offshore pilot project efficient logistics and the prevention of shortages are not par excellence: if technology, logistics, grid connection only key levers for the profitability of offshore projects, and funding work here, offshore wind power will also but also a fundamental prerequisite for ensuring success work anywhere else in the world, because framework and a positive outcome. conditions at almost all of the other locations are far more favorable than in the North Sea. Both in terms of its However, it should not be neglected that the offshore reputation and its leading role in the technological field, wind market faces numerous other challenges aside it would be a serious setback for Germany as a business from the logistics challenges at hand. The challenges location if the economic and ecological potential of regarding technological progress, grid connection and offshore wind power were to remain unused. funding are interrelated and interdependent and thus have to be overcome almost simultaneously. All in all, even the most efficient logistics process can only make a minor contribution to the profitability of such projects if grid connection cannot be set up in due time and if the technology employed is insufficient. And the service
  • 10. Acknowledgements to the following companies REpower Systems SE RWE Innogy GmbH DB Schenker Vattenfall Europe AG EnBW Erneuerbare Energien GmbH GE Energy Deutschland Hellmann Worldwide Logistics GmbH & Co. KG NOW Nordsee-Offshore-Wind GmbH/Northern Energy Unternehmensgruppe Authors Frank Reichert is heading Barkawi’s After Market Services Practice as a Vice President. After graduating as a Diplom-Kaufmann at Munich’s LMU, including stopovers in Boston and London, Frank started his career as a consultant at Siemens Management Consulting. Followed by engagements at BayTech Venture Capital, Diebold and Detecon, he joined Barkawi Management Consultants in 2006, where he became responsible for the Aftermarket practice after a short period of time. Frank’s core consulting topics include innovative service concepts, business and market strategies as well as operational excellence projects. Robert Kunze is a Consultant in the After Market Services Practice at Barkawi Management Consultants. He is focusing on renewable energies, e-mobility and telecommunications. Within these industries he is specialized on designing and implementing complex Service and Operations Planning Processes. Saman Kitvarametha is a Consultant in the After Market Services Practice at Barkawi Management Consultants. Amongst other topics he is focusing on the optimization of Maintenance and Repair Processes in companies out of the renewable energies sector.
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