A new report, launched by wind consultancy K2 Management and specialist insurance broker JLT Specialty Ltd., has identified key challenges and trends that are expected to shape the future of onshore and offshore wind projects over the next 12 months.
Unveiled at the Offshore Wind Conference 2017 in London today, the report – “Reducing The Levelised Cost of Energy: Challenges, trends and opportunities in today’s wind projects for tomorrow’s business cases” – reviewed data from 60 onshore and offshore projects throughout Europe and Latin America. Clients included independent developers, state-owned utilities and private investors.
According to the findings, a quarter of those surveyed were looking to extend the life of their project, potentially by a further five years. Currently, 25 years is considered to be an achievable lifespan for an offshore project, but 30 years may actually be an achievable target, says the report, adding that this news would be welcomed by developers and investors who are increasingly looking to optimize their return on investment.
In addition, developers are taking action to reduce their risk exposure: In total, 60% of pre-construction offshore projects are adopting five or fewer engineering, procurement, construction and installation contracts. Limiting these contracts could potentially reduce the costs of projects overrunning and the likelihood of a knock-on effect on other contractors as a result, according to the report.
Further, according to the findings, a quarter of clients had underestimated the costs of operational expenditure, leading to concerns that it could have huge implications on performance and valuation of the project further down the line. Many of the projects that were surveyed had not yet reached the 20-year lifetime; in turn, much of the project budgeting was based on educated assumptions, but there was real concern that these underestimations could up the costs of projects by millions, the report says.
“This report gives an opportunity for the industry to gain an insight into real wind projects in the bigger picture, and our experts have used this data to deliver insight into how these trends will reflect on the projects of the future,” comments Simon Luby, global head of due diligence at K2 Management.
Duncan Gordon from JLT Specialty’s renewable energy team adds, “This insight we’ve jointly provided on a number of common trends materializing in the wind sector will be of familiarity and interest to all in the industry.”
More on the report can be found here.