Offshore wind sector urged to ‘apply the brakes’ in race for bigger turbines

The offshore wind industry has been urged to “apply the brakes” in the race for bigger turbines to address a “rising tide” of mechanical breakdowns, component failures and serial defects.

GCube, a specialist insurer for the sector, said issues resulting from the rapid commercialisation of “prototypical” turbines are swallowing up the profits of manufacturers, putting pressure on the supply chain and leading to mounting project delays.

The size of the largest wind turbines has surged rapidly over the last half a decade, mostly recently with MingYang Smart Energy unveiling its MySE 18.X-28.X in January.

The firm said the gargantuan turbine, with 140-metre-long blades, would match and then “move beyond” the 18MW record staked out by fellow Chinese manufacturer CSSC Haizhuang just days earlier.

GCube said the leap from 8MW to 18MW has occurred in “a fraction of the time” it took to go from 3MW to 8MW. The trend has been driven by the cost and power efficiencies of larger turbines but in a new report, the company said cracks are now starting to emerge in the industry’s mantra of ‘bigger is better’.

“In years gone by, no profit was made by the top manufacturers, but that was attributed to development costs: they were investing in the future,” the underwriter explained.

“Now, several years later, when the reward for that investment should be materialising, extensive multi-billion-dollar losses have been reported due to increasing warranty, repair and maintenance costs on larger machines.”

The report continued: “At the heart of the issue for manufacturers is the focus on continually increasing MW output, which perpetually keeps new technologies within their prototypical phase. Consequently, the sector lacks true industrial standardisation, despite being rooted in serial production and repetitive tasks.

“Many turbines installed in recent years have already become obsolete just a few years into their 25- to 30-year projected lifetime. Spare parts and replacements are, in some cases, simply not available – even for recent models.

“Ultimately, the size of turbines and their components making maintenance and repairs extremely difficult, costly and time-consuming seem not to be considered as economic factors when determining the optimal model for offshore wind.”

GCube said insurance claims for offshore wind projects are rising in both frequency and severity. It said component failures for turbines of 8MW or more have on average occurred within two years of the turbines entering service, compared to more than five years for 4-8MW turbines and more than four years for 0-4MW turbines.

The company acknowledged that the figure for larger turbines is skewed by their relatively limited time in operation and is likely to grow longer over time. However, GCube said 8MW+ turbines also accounted for 55% of insurance claims during construction between 2009 and 2021, compared to 39% for turbines between 4MW and 8MW and 6% for turbines between 0.75MW and 4MW.

It said the average size of insurance claims for a 8MW+ turbine is almost £4 million, compared to just over £2.5 million for 4-8MW turbines and around £2.3 million for 0-4MW turbines.

“Claims from today’s larger turbines are yet to fully manifest,” the report warned. “But the trajectory highlighted by this analysis points to an urgent need for the market to adequately prepare for larger, more costly losses.”

Nevertheless, GCube said there has been no immediate reduction in appetite to underwrite projects from insurers, many of which are keen to “escape the bad PR” of involvement with the oil and gas sector: “This naivety looks set to continue for the foreseeable future with new insurers from the conventional energy sector.”

The report also highlighted issues over the availability of sufficiently large ports and vessels for installation. It said there are currently only three vessels in the world capable of installing 15MW turbines. They are normally booked years in advance and have charter rates of up to $2 million per day. The number is only expected to rise to between five and 10 by 2026.

“Being incredibly resilient and innovative, the offshore wind industry will find ways to build and install the biggest turbines and wind farms,” the report concludes. “However, the real test is not how big we can make turbines, but how long we can make big turbines last.

“In light of this, bigger might not always be better, and it might be time to tap the brakes on the introduction of new designs to refocus the sector’s priorities firmly on increasing the reliability and quality of larger machines – something that it has lacked for some time now.”

GCube chief executive Fraser McLachlan said the scaling up of wind turbines is an essential part of the energy transition but is now creating financial risks that pose a “fundamental threat” to the sector: “We advise manufacturers to focus on improving the quality and reliability of a reduced number of products to put themselves back on a sustainable path of development.”

He said developers must also support manufacturers by sharing the risks of larger turbines more equitably, and open their lending books to supply chain companies: “Vessels are going to be one of the biggest bottlenecks in building offshore projects, and developers are in a powerful position to invest in supply chain companies at the benefit of the entire sector.”