Benchmarking of wind projects from different parts of the globe, we can see the unfolding of Wright's Law of scale of production through the Global Wind Energy System. To benchmark wind projects, we can look at their cost per capacity basis for similar kinds of projects, constructed within a similar time period. This can help us understand the trend in the price of wind energy generation, and how it can help make the difference for a utility looking to transition to lower carbon energy generation. We will also look at commercial data services which offer such wind asset analysis and operations optimisation.
Wind turbines in the Southern North Sea
Considerations in Benchmarking
Wind Power Capacity by Country - 2020 stats. Credit: Wikipedia. Note: from a labor cost perspective - Many of these countries are not directly comparable. i.e. China and US, or Brazil and Italy. See below for 2021 average labor rates for these countries
Offshore wind capacity by Country, by Year 2016 - 2020. Credit: Wikipedia - Global Wind Report 2021, Offshore Wind in Europe - Key trends and Statistics
Stepwise calculations for LCOE - Credit UK Govt. (Department for Business, Energy and Industrial Strategy
Benchmarking itself is a considerable topic, worth a discussion in its own right. However, here is a brief discussion about the levers which can be considered when comparing two or more projects. Remember - to get a valid comparison with useful insights, the projects should be comparable as apples-to-apples as possible. In this review - we will cover benchmarking of countries with significant wind capacity because these will give an opportunity for representative projects and representative cost / GW capacity.
Construction Benchmarking Levers
When we consider benchmarking, try to break down the cost into the contributing categories. The University of Strathclyde did an excellent study showing just this. I covered some of the same in my previous Wind article.
One such factor is the cost of construction of an asset - To benchmark these costs, we can consider three levers: Scope, Specification and Procurement Factor.
There is Benchmarking within a region, within a class of project, within a capacity band, or between countries.
Scope - how much, how big, how many
Specification - How 'good' are they, what features does it have, etc
Sourcing - How well was the tender conducted, how competitive was the price of the services, the equipment, the labor costs. In here we can also consider FOREX costs and inflation.
Labour Benchmarking
When we want to benchmark the cost of human labor incurred when constructing a wind farm between countries, we must consider the impact of relative labor cost in addition to FOREX rates. Labor cost is not the same in all countries owing to local labor market. As a result, it isn't enough to simply convert cost from local to US Dollars and expect comparable labor cost.
There is some debate around the causes for this, but the answer that came up more readily was related to productivity. The countries with more productive workforces caused wages to rise.
Wikipedia has a page for average salary by country. In the past, I have used an open source database, Numbeo.com. Not only does this source show the cost of a great range of every day items, from a medium-fancy meal, to a litre of milk, it also shows an "Average monthly Wage" indicator per country toward the bottom of each country page. This average, Numbeo collates from contributors, pretty much anyone, to submit their details and observations as citizens, or people living in those countries.
In this way, the labor index in these listings is not specific for wind industry employees, not even for technical or construction industry workers. However, because it is an average wage, generated in the same way in each country listed, it makes a 'fair' way to compare the relative labor costs between nations.
At the time of writing, most of the markets which have significant wind, or significant and credible plans for large scale wind are as follows:
2021 Average Monthly Salary (after tax) (Credit Numbeo.com) (in Local /USD FOREX Rates Credit: Board of Governors of the US Federal Reserve )
| Local Currency Salary 2021 | USD Salary 2021 | FOREX Rate Apr 2021 | |
| China | 6717.33 | 1030.49 | 6.52 |
| US | 3547.18 | 3547.18 | 1.00 |
| Germany | 2436.84 | 2915.68 | 1.20 |
| India | 32544.81 | 436.73 | 74.52 |
| Spain | 1323.52 | 1583.59 | 1.20 |
| UK | 1942.8 | 2689.81 | 1.38 |
| France | 2188.84 | 2618.95 | 1.20 |
| Brazil | 1862.31 | 334.43 | 5.57 |
| Canada | 3332.91 | 2667.61 | 1.25 |
| Italy | 1430.69 | 1711.82 | 1.20 |
From the above - we can band countries together with similar labor cost indices in order to compare them.
For instance:
Spain, Italy, possibly China can go together.
Germany, UK, France, Canada and US can go together.
India and Brazil can be compared together.
Now we have some groups of countries we can compare on their cost of wind projects.
Of the above, we must consider which countries have significant Offshore Wind Capacity.
Reviewing the list again with this filter, we see that:
The UK, Germany and Netherlands are leaders in offshore wind, with each having projects online right now, with a minimum capacity of 500 MW.
labor cost isn't typically a huge component of the wind projects - purely because most of the equipment is manufactured in large sections by machines. It isn't like the old 'stick-build' refineries or offshore platforms which had significant hot works carried out onboard. Skilled human labor is required to pilot the installation vessels and support vessels needed to build out and commission an offshore wind farm.
As a result, any significant differences in the cost of these projects, are typically related to the cost of the equipment, and the seabed lease.
A non-movable factor here is the requirement to buy leases from the local authority.
For the UK, it is the shadowy Crown Estate - not related to the British Royal Family at all.
Danish leases are issued by the Danish Energy Agency
Netherlands leases are tendered by the Netherlands National Government
As illustrated by the example in my previous article - the tender organisation of a wind farm licence bid can attract out-size bids in an effort to secure that acreage. This is a large variable which is becoming more apparent and commented on by others as inflationary, prices escalating as players scramble to secure the choicey spots for wind energy generation.
Remember, with wind, the nearer to shore, the lower the wind energy. However, the further out, the more difficult it can be to access the asset for maintenance and repair in the event of damage.
How Other Companies Benchmark Wind Projects?
A key component of benchmarking is the use of LCOE - Levelised Cost Of Energy. The UK government also uses LCOE in its "Electricity Generation Costs Report 2020". LCOE is the discounted lifetime cost of energy generation. This is displayed as a cost per unit energy generated. In the UK, expressed as £ / MWh. In there, the scope of predevelopment, capital costs, operating costs, fuel and financing costs.
There are some excellent stepwise calculations for how to calculate from raw data. See screenshot from the report below:
Stepwise calculations for LCOE - Credit UK Govt. (Department for Business, Energy and Industrial Strategy
Most of the assumptions section of the report detailed tables of updated data, relative to the previous report. The nature of the changes reflected - for example in Offshore Wind:
The capital cost of turbines and the operating cost were reviewed and updated to drop with the increasing scale and size of turbines.
The learning rate and plant lifetimes assumptions were updated too. This is likely owed to the application of machine learning, and because the assets - wind turbines - are smaller and cheaper than a whole gas/ coal / nuclear plant - it is easier to deploy, gather data, and reinvest this information and learning back into the design.
Another critical parameter regarding wind turbines is load factor. The updated report incorporated load factors which scale with the size of the wind turbine. This is an outcome from fluid dynamics. At ground level, a 'boundary layer' of air is 'touching' the ground and does not move much - is relatively 'stable'. At higher elevations, further away from the ground, the air is subject to greater 'atmospheric disturbance' and further into the main flow of air around the planet. As a result, the air here moves faster and can be counted on to have a higher level of disturbance. This disturbance is targeted by the deployment of wind turbines. As a result, those turbines deployed within this stream of disturbed air will have a higher load factor than those closer to the ground.
The punch line is: For offshore wind - Bigger is Better.
DNV - a recognised leader in the energy industry for many reasons - They are one of the original leaders in assurance and risk management. Some time ago, when seafaring and steam/ sailing vessels were critical to supplying trade to Europe from the West Indies colonies, the likes of DNV and Lloyds of London were the go-to insurers to protect your cargoes from unforeseen jeopardy.
The business built on those roots and expanded into the energy industry, becoming a leader in risk and hazard studies. More recently, they also look at failure modes for new energy generation assets.
DNV has a benchmarking platform available for an energy player. They leverage cloud data platforms to gather operation parameters from wind energy assets. The DNV experts then review the data and documents associated with the wind farm, particularly:
pre-construction assessments
Operational assessments
Monitoring and
EPAs (Energy Purchase Agreements)
These documents help the DNV team to understand the context of the wind farm design, the asset selection and the 'should-be' performance expected. The EPAs clearly outline the hard minimum operational performance level. Delivering less than expected could incur some significant legal and commercial impact for breach of contract.
On a more positive note, this document can offer long term stage-gates and a time horizon for significant investment and refurbishment of the asset. The operations data that is gathered alongside this 'digital twin' suite of documents can help the team understand the operations glide path toward these stage-gates and how close to the 'reinvestment window' the asset is.
Harking back to their risk analysis roots - DNV can advise the operator about the risk to their operations, and the likelihood of performance outcomes being reached at specific intervals into the future.
You can reach me on Twitter @Ronnie_Writes
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