Cost of Electricity (CoE)

Transcription

1 Cost of Electricity (CoE) Cost reduction Road to 40% reduction in CoE 2 June 2014 Christian Juul For External usage

2 Reduction in cost is essential to make offshore wind competitive and reduce dependency on subsidies Cost of offshore wind vs. competing technologies, UK example industry assessment Commissioning, 2013 EUR/MWh Commissioning, 2023 (estimates) EUR/MWh Wholesale price level (55) 100 1) Wholesale price level (66) 95 Wind Offshore Wind Onshore Solar PV Biomass Gas Conversion CCGT Nuclear Wind Offshore Wind Onshore Solar PV Bio-mass Conversion Gas CCGT Nuclear -28% -13% -39% 0% 8% - 1) DONG Energy target based on project FID'ed in % WACC (real) applied. CoE per technology is an average of sample size Source: Internal analysis, BNEF 2013 x% Reduction of average vs

3 CoE Impact Among 7 levers, CAPEX reduction is most essential to reduce CoE Impact of CoE levers and opportunities to influence Change by Impact CoE with... Where to focus CAPEX reduction 1) - 10% 8% OPEX reduction - 10% 2% High Lifetime extension CAPEX Yield increase Lifetime extension Faster construction +1% (abs) 5 years - 3 months. 1% 1% 5% Low Yield Faster construction Cost of Capital OPEX Cost of capital -0,5% (abs) 3% DEVEX DEVEX reduction - 10% 0,5% Low High Potential to influence 1) Including contingency for project risks 3

4 Industrial experience shows that all relevant levers can be addressed through standardisation and modularisation Examples: Industrial track records Oil & Gas 20-30% improvement in value through 10-15% in direct cost savings on platform (e.g., procurement, engineering) 5-10% in overrun reduction on projects 5-10% via early delivery due to reduction in cycle time Combined Cycle Gas Power Plant start of the standardization Platform concept developed - 75% commonality between models on same platform Average 5% cost reduction every year Automotive Standardised, repeatable plant concept introduced in 1990's Cost of electricity reduced by 25-35% Throughput for commissioning of plant reduced to 28 months from 40 months 4

5 Standardisation also works for offshore wind Standardised modules Applied over several projects Main benefits Example: Offshore substation standardised at 330 MW Project Burbo Bank ext. Installation 2016 # topsides 1. Majority of design work performed only once 2. Systematic design for cost approach pays-off Race Bank Convoy procurement (scale, competition) Walney Ext Earlier certification, reduced throughput time etc. 5

6 Pre-condition for standardisation is to gain control over design and procurement in a centralised process Driving unit Old business model New business model Asset project A CoE Asset project A Design Procure Asset project B Design Procure Design & Procure Asset project B Asset project C Asset project C Design Procure Driven by Asset project management Design optimised for each asset project Design and procurement delivered by product line Optimised from a portfolio point of view 6

7 Product and sourcing board to govern standardisation and commercial opportunities Old business model New business model Asset Project Steer.co Asset project A Design Procure Asset project B Design Procure Product & Sourcing board Product Board govern module development Sourcing Board govern supplier strategy & selection Design & Procure Asset Project Steer.co Asset project A Asset project B Asset project C Asset project C Design Procure Driven by Asset project management Design optimised for each asset project Design and procurement delivered by product line Optimised from a portfolio point of view 7

8 All cost effects are measured against a defined standard wind farm Standard wind farm Reference site Country UK Lifetime 24 years Size 660 MW Water depth m Export cables Offshore substation incl. SCADA Array cables Onshore substation Foundation WTG Distance to shore Wind speed 30 km 9,7 m/s 220 kv 330 MW 33 kv Monopile 114 m hub height 6MW The Standard Wind Farm is optimised on a continuous basis using the same reference site 8

9 A standard wind farm is structured into product lines and modules Decomposing the reference plant Platform Product Lines (4) Module groups (20) Modules (pipeline dependent) Components WTG 6MW Standard Wind farm Foundation Electrical Array cable Export cable SCADA Standard 33 kv Standard 66 kv Component x Component y MV/HV components Substations 8MW 9

10 CoE of a project is equal to the cost of the standard wind farm corrected for the project specific deviations Difference between standard windfarm and actual CoE for a German site CoE (EUR/MWh, real 2013) Transmission assets are not part of DONG Energy's scope in Germany Standard wind farm Capacity (MW) Positions German Park, FID Cable length (km) Distance to harbour (km) 64/ Depth, Avg. (m) standard wind farm Production OPEX WTG, Foundation, Electrical Transm. assets Reserves Other (Milestone payment) German Park, FID Wind, Avg. (m/s) CAPEX Decrease Increase Base 10

11 Variety is controlled by applying and adapting the pipeline of asset projects to the standardised modules EXAMPLES Asset project pipeline Product Line Module Groups Module (examples) UK DK UK UK UK DE DE FID 2014 FID TBD FID 2015 FID 2015 FID TBD FID TBD FID TBD Turbine Manufacturer option 1 Turbines WTG Turbine Manufacturer option 2 Turbine Manufacturer option 3 Turbine Manufacturer option 4 Monopile/Transition piece (6-7 MW turbine) New turbine to drive need for additional foundation module Foundations Foundation Monopile/Transition piece (8 MW turbine) Substations Onshore substation Offshore substation Jacket foundation on piles/suction buckets Standard onshore substation 330 MW block size UK 400 MW block size DE Several projects to use same module New module to be developed O&M facilities Standard O&M facilities Array cable Standard 33 kv Electrical systems Export cable MV/HV components Standard 220 kv Transformer & HV/MV offshore MW Expected use of modules 11

12 Clear targets per product line defined to reach 100 /MWh by 2020 Cost of Electricity roadmap towards 2020, /MWh Targets defined per product line 160 ~35% 100 Standard wind Farm 2012 WTG Foundation Electrical Substation O&M UK CoE FID

13 Each product line has a long term plan for reducing CoE Cost EUR/MWh 160 WTG 3.6 MW MW 8 MW 8-10 MW Larger WTGs with improved yield and reliability Ensure earlier production through faster installation and commissioning Foundations Drive down costs through industrialization and reduced installation costs DP Floating vessel Electrical Systems Higher voltage 33kV 66kV Use of aluminium cables Long distance HVAC Industrialisation & cost out of submarine cable installation Compact HVDC Reduce losses, improve redundancy and reliability Reduce transmission costs Reduce installation costs 100 Substation AC One-off offshore substations and jacket concepts AC 330 MW standard offshore substations with standard 4 legged jacket AC Distributed offshore substations with WTG jacket Reduce complexity, fabrication and installation costs Re-use jacket used for WTG Reduce transmission costs

14 Opportunities are identified to reduce CoE to 100 / MWh however maturity and no. of opportunities will be improved continuously Identified CoE reduction initiatives incl. risk adjusted forecast, /MWh Type of initiatives (share of total) 30% Commercial Technical % xx Initiatives 2014 Initiatives 2015 Initiatives 2016 Initiatives 2017 Initatives 2018 Initiatives 2019 Initaitives 2020 Certainty of initiative 1. New idea 2. First level of analysis 3. Supplier input 4. Offer 5. Contract Adjusted for maturity 14

15 Early involvement of the supply base and use of system suppliers is key to increase and improve cost out opportunities Conceptual design Detailed design Supply / Manufacturing Traditional model DONG Energy Supplier New Model DONG Energy In few cases DONG Energy Supplier 15

16 Broadening the supply base to allow for greater competition EXAMPLES Product lines Module groups Suppliers used today Potential no. of tier 1 suppliers UK Low cost country 1. WTG WTG 2. WTG installation 3. Foundation Foundation 4. Foundation installation 3 11 Substations Electrical 5. Onshore substation civil 6. Offshore substation 7. Offshore substation installation 8. Crew transport 9. Site office 10. O&M facilities 11. Array cable 12. Array cable installation 13. Cable protection system 14. Onshore export cable 15. Onshore export cable installation 16. Offshore export cable 17. Offshore export cable installation 18. Onshore electrical MV/HV components 19. Offshore electrical MV/HV components 20. SCADA Current tender: 29 suppliers identified 20 shown interest 9 to be selected for bidding tender deadline in June 2014 Contract to be awarded Nov Options for UK content while achieving scale effect across projects 16

17 Summary: Standardisation is the way forward to lower CoE and ensure that Wind Power meets the 100 /MWh 2020 target Examples: Industrial track records Old business model New business model Oil & Gas 20-30% improvement in value through Combined Cycle Gas Power Plant 10-15% in direct cost savings on platform (e.g., procurement, engineering) Asset project A Asset project A 5-10% in overrun reduction on projects Design Procure 5-10% via early delivery due to reduction in cycle time Asset project B Asset project B Design Standardised, repeatable plant Design Procure & concept introduced in 1990'sCost Procure of electricity reduced by start of the standardization Platform concept developed - 75% commonality between models on Automotive 35%Throughput for commissioning of plant reduced to 28 months from 40 months Asset project C Asset project C same platform Design Procure Average 5% cost reduction every year Driven by Asset project management Design optimised for each asset project Design and procurement delivered by product line Optimised from a portfolio point of view Standardisation has worked in other CAPEX intensive industries Key to Standardisation is to centralise design and procurement of Wind Parks Standard wind farm Reference site Country UK Lifetime 24 years Size 660 MW Water depth m Distance to shore 30 km Wind speed 9,7 m/s Export cables Offshore substation incl. SCADA Array cables Onshor e substation Foundation WTG 220 kv 330 MW 33 kv Monopile Siemens 114 m hub height 6MW-154 The Standard Wind Farm is optimised on a continuous basis using the same reference site A clear methodology is in place to measure CoE reductions on a standard wind farm Target distributed top-down progress measured bottom-up 17