First generation offshore wind farms are reaching the end of their life cycles. What are the risks for operators planning the decommissioning process?
Decommissioning offshore power plants is an invasive process that can have a profound effect on the environment. Fossil fuel companies have suffered reputational damage for their management of the process.
How does a green energy provider decommission an offshore power plant that has become an established part of the ecosystem?
It’s a question that all offshore energy stakeholders – investors, developers, operators and insurers - are taking seriously.
Decommissioning green energy plants: the background
In the UK, decommissioning is a crucial element of the planning process, and has been since the Energy Act of 2004, when a scheme for offshore and marine energy installations was introduced.
The scheme included arrangements that developers would have to prepare in terms of decommissioning scope, removal plans, financial security and residual liability.
For long-established projects, however, the situation is less clear. As first-generation offshore plants reach their end-of-life stage, decommissioning – and the risks surrounding the process - have become hot topics in the renewable energy industry.
In Europe, the ‘cradle’ of green offshore power, several ageing wind farms have been in the spotlight. Denmark’s Vindeby, commissioned in 1991, was dismantled early in 2017. When the wind turbines were installed in 1991 they were lifted into place in one piece. The decommissioning process involved the blades, nacelles and towers being dismantled individually by a mobile crane on board a jack-up vessel.
Sweden’s Bockstigen Offshore, constructed in 1998, is an OAP in ‘wind farm years’. Projects such as Blyth Offshore in the UK and Horns Rev 1 and Middelgrunden in Denmark have been operating for 15 or so years, and decisions will need to be taken soon on when and how they are decommissioned.
The majority of offshore wind farms that are due to be decommissioned in the next few years are in shallow waters with smaller sized turbines and monopole foundations. However, modern day wind farms are being built with bigger turbines placed further out to sea. This further complicates the uncertainty surrounding the decommissioning process.
There is a “critical need for early planning in an industry that still lacks decommissioning know how,” notes NewEnergyUpdate.com, a renewable energy analysis site.
Positives to the decommissioning process include less consideration having to be given to damage to components.
Generally, the dismantling time is between half to two thirds of that taken for installation, which is helpful for a process that can take place during favourable weather conditions only.
Risk considerations for existing wind farms and sea walls
Each project is unique with its own specific set of challenges and variables therefore it is crucial that developers ensure their contractors have the relevant skills, experience and equipment. However, general considerations include the following:
Funding: “Fund allocation represents the biggest issue when it comes to decommissioning offshore wind farms,” says NewEnergyUpdate.com.
New projects have funds set aside for the decommissioning process. Typically, this amount is between 2% and 3% of the capital cost, according to ScienceDirect.com.
However, it is thought that the duration and the costs of the process are not being adequately captured in decommissioning plans – how do you adequately calculate the cost of an uncertain process 20 to 25 years before it needs to be performed?
“Financing could be a major challenge for some of the first-build projects, where you don’t necessarily have an earmarked fund to cover decommissioning,” commented Ole Nielsen, Offshore Project Execution Director for BU Renewables, in Wind Energy Update.
A study by the UK Department of Trade and Industry adds that challenges may arise from unexpected increases in costs.
Technical limitations of vessels: The choice of vessel chartered to carry out the decommissioning process will depend on the number of turbines and foundations to remove, the crane capability to handle their weight, the site’s water depth and seabed type and, most importantly, the market availability.
Lack of specific regulations: There are currently no specific requirements within the regulations concerning the decommissioning of wind farm sites.
Sea depth: Green energy plants are situated in shallower water than oil rigs, and this will have implications surrounding the vessels that are used for decommissioning. Consideration must be given to the fact that specific vessels will have to be used (or even built) for de-installation.
Weather: Although decommissioning takes place during the summer season, weather conditions – tides, winds - will always be a major risk factor. This is due to the fact the plants, by necessity, are installed in areas with strong weather conditions in order to generate energy.
Marine life: It can be less costly – both financially, and for the marine environment - to leave foundations and struts in place, rather than remove them with the rest of the structure. Marine habitats will have formed around the struts. However, developers will need to assess the navigational implications for sea traffic in the area, if any of the structure is allowed to remain.
Pollution: If struts are removed, the sea bed will need to be inspected, and debris cleared. “It is important to asses any potential hazard or pollutants that could appear during the operation, as well as mitigation procedures, to allow their elimination,” comments ScienceDirect.com.
With decommissioning gaining momentum, specialist companies are being formed to undertake the process.
Considerations for projects in the planning stage
As technology improves, turbines, and their components, are scaling up. This will make them cumbersome to transport and manoeuvre.
While newer projects benefit from more detailed financial planning, installation and decommissioning will be more difficult.
Developers will have to ensure that technology, transport and infrastructure will be in place when the facility reaches the end of its life cycle.
Talk to a specialist renewable energy broker
The key consideration for all developers and stakeholders is that each project is unique and will involve designing specific tailored optimal solutions for each individual project.
Developers should talk to a specialist renewable energy broker at all stages of the process, whether it’s planning or decommissioning.
With their technical and market expertise they can advise on managing risk, and negotiate a bespoke insurance solution that provides the most effective cover
For more information, please contact Jonny Martin, Renewable Energy Account Handler on +44 (0)20 7558 3905 or email firstname.lastname@example.org
This blog is compiled for the benefit of clients and prospective clients of companies of the JLT group of companies (“JLT”). It is not legal advice and is intended only to highlight general issues relating to its subject matter; it does not necessarily deal with every aspect of the topic. Views and opinions expressed in this document are those of JLT unless specifically stated otherwise. Whilst every effort has been made to ensure the accuracy of the content of this document, no JLT entity accepts any responsibility for any error, or omission or deficiency. If you intend to take any action or make any decision on the basis of the content of this document, you should first seek specific professional advice. The information contained within this document may not be reproduced and nothing herein shall be construed as conferring to you by implication or otherwise any licence or right to use any JLT intellectual property. If insurance and/or risk management advice is provided, it will be provided by one or more of JLT’s regulated companies depending on the territories requiring insurance and/ or risk management advice. www.jlt.com