Offshore Wind Project Know-How: Project Development a 7-10 Years Long Affair
Developing an off-shore wind power plant even for European countries involves unprecedented engineering and relentless co-ordination among various value chain players which usually extends for a span of 7-10 years. Hence, for country like India which is into a very nascent stage but indeed offers huge potential with nearly 7, 200 km coastal line, it will be even tough to establish these highly engineering exhaustive power plants. The entire Offshore wind plant (OSW) life cycle can be split in three major phases:
- CAPEX Phase I
- OPEX Phase
- CAPEX Phase II
These phases are derived typically basis the expenditures planned to be incurred on the development of an OSW plant.
These phases are derived typically basis the expenditures planned to be incurred on the development of an OSW plant. To develop an easy understanding, we have assumed a generic OSW project of 500 MW to be developed. The three phases highlighted above would entail the following details:
- Capex Phase I: Initial capital investment encompassing planning and development, wind turbine procurement, balance of plant procurement and installation
- OPEX Phase: Operations and maintenance throughout the design life of the offshore wind farm. There are also recurring costs in relation to grid maintenance and lease.
- CAPEX Phase II: Decommissioning activities.
As per the different phases highlighted in the previous section, there exists significant opportunity for all likely participants in the OSW project life cycle. To develop the opportunity size for the associated value chain players, typical cost bifurcation is shown in Exhibit 02. The value chain players for which the opportunity mapping shall be done are:
- Project Developers
- OEM Supplier
- Electrical Infra Provider
- EPC Companies
- Power Distribution Companies
- Transmission Infra Provider
- Port & Marine Authorities
- Logistics Provider
Opportunity Screening Criteria
The opportunity scale and relative matrix for OSW value chain participants as highlighted in the previous section can be screened basis few selected criterion which would be applicable in Indian context. There would be multitude of opportunities existent for the value chain participants to either use their direct capabilities or adapt the capabilities as per the applications as desired in the development of OSW plant and its life cycle. The criterion selected for mapping the opportunity tune are listed as below:-
- OSW Project Market Value
- OSW Sector Expertise
- Potential to Reduce Cost of Energy
- Barriers to Entry
All the value chain players would be screened basis the set of listed criterion and a cumulative result of this screening shall be utilised to derive tune of opportunities for each participant. The screening criterion are elaborated as below:
OSW Project Market Value: In India, the potential to develop the OSW projects is recognized as 100 GW. However, it will be safe to assume that in near future the country will not experience any magnanimous capacity additions and is likely to add capacities on pilot basis. Although for recognising the tune of opportunities, we have considered an OSW plant of 500 MW capacity. Basis the expenditure on the project the opportunity size is determined.
The figures utilised here in are absolute values and is liable to vary as per the core competencies of the market participants. Therefore, it is recommended that each market participant apply their own judgement before assessing the relative market value.
OSW Sector Expertise: This criteria represents an assessment of the degree of overlap between the requirement of OSW plant which can be seen as opportunity area w.r.t the expertise in terms of participating in the development of the plant
Potential to Reduce Cost of Energy: The potential to reduce CAPEX and OPEX through utilisation of OSW development expertise will also have an associated opportunity galore, since the associated cost of OSW development will be very high in India.
Barriers to Entry: This criterion determines the level of competition and level of investments. For the value chain players if the barriers to entry is less then the opportunity associated will be high.
For recognising the allied tune of opportunity, we have followed a three-tier colour code mechanism which indicates the scale of opportunity.
For developing this section we have considered two phases namely :-
CAPEX Phase:- This would comprise of Project Developers, EPC Companies, OEM Providers, Electrical Infra Providers, Transmission Infra Companies, DISCOMS and Port & Marine Authorities.
OPEX Phase:- This would comprise of DISCOMS, Port & Marine Authorities, O&M Service Providers and Logistics Providers.
The level of opportunity associated with scorecard as per the screening criteria is depicted in following section for each stake holder.
P1. Project Developers:- The level of opportunity associated as per the listed services and products by projects developers is shown in Exhibit 04 and the final scorecard in Exhibit 05.