American Shipper

No logistics breeze

No logistics breeze

U.S. will enter offshore wind market, but faces critical port and vessel issues.

By Chris Gillis

      Offshore wind energy may be one of the most promising sources of clean electric power generation for North America in the next five to 10 years, but enabling construction of these major projects to begin is no easy feat.

      Port infrastructure and vessel equipment need to be quickly built that specifically cater to efficiently handling these large-scale offshore projects.

      'I don't think this side of offshore wind farm development has been well thought out yet,' said Paul Madden, president of Offshore Wind Logistics, a Florida-based company seeking to build and operate a fleet of wind turbine installation vessels for U.S. waters. 'Quite honestly, these issues should have been assessed starting three to five years ago.'


      Unlike the Europeans who have had more than 20 years to gradually ramp up their offshore wind energy programs, state governors throughout the U.S. East and Gulf coasts and Great Lakes aim to start planting wind turbines by the hundreds in their waters in the next several years.

      For two decades, European wind farm developers have benefited from government backing and an energy consumer base generally willing to pay a little extra for wind-generated electricity. The acceptance of these types of measures in the United States remains to be tested.

      A few offshore wind ventures, particularly along the U.S. Northeast and East Texas coasts, have been under consideration for the past five to eight years. The proposed projects have been repeatedly dogged by lack of clear government approval procedures, occasional public opposition and insufficient access to financing due to the recent economic downturn.

      Only since the Obama administration took office in early 2009 with the goal to create thousands of 'green' jobs and the approaching mandates for many states to generate a certain percentage of their power from renewable energy sources have U.S. offshore wind projects finally received a lift in their sails.

Purpose-Built. Vessel operators and shipyards that have been engaged for more than 30 years in the U.S. offshore oil and gas sector are keeping a close eye on the prospects of contributing to the construction and maintenance of future offshore wind farms.


      'We've been watching this development for the past three years and have visited with each of the major U.S. wind farm developers,' said Todd Busch, senior vice president of Crowley Maritime Corp.'s Technical Services Group, and an active player in the Gulf oil patch. 'We believe the U.S. will enter the offshore wind industry like Europe has, but we're certainly behind the curve in regards to technology.'

      'Several of the offshore wind developers are actively looking for installation solutions,' Madden said. 'They're anxious for equipment to be offered to them and they're scared of the numbers coming out of Europe.'

      Wind turbine installation vessels under charter in Europe's North and Baltic seas easily fetch in the range of $250,000 a day from developers. In addition, vessel operators must have the proper onboard equipment, such as jack-up legs for deck stability, heavy-lift cranes, and personnel with the expertise to satisfy the rigorous installation requirements of the turbine manufacturers, whose offshore units' installed cost is now approaching $5 million apiece.


      'Our vessel strategy is crucial to making us successful,' said Paul Rich, chief development officer for offshore wind farm developer Deepwater Wind. 'Right now it's our weakest link.'

      In the United States, offshore wind farm developers must comply with U.S.-flag requirements of the Jones Act, which may further add to their installation vessel costs.

      Madden believes there are sufficient U.S.-flag jack-up barges to at least get the first offshore test wind turbines installed, but new vessels will be needed to handle full-scale wind farm construction. 'Very aggressive installation schedules and hostile work environments will require efficient, purpose-built vessels,' he said.

      With the proper equipment, Europe's offshore turbine installers can generally erect a turbine upon a pre-established base secured to the seabed in 36 hours. 'It's got to be a repetitive process. You can't do that using equipment that only allows you to erect a turbine every five to six days,' Madden said.

Starting Line. Although cautious whether the U.S. offshore wind energy business will get off the ground, Jones Act vessel operators in the oil and gas sector are confident they can respond to the logistics needs.

      'The offshore industry has not been marked by incremental change, rather it's punctuated by spectacular leaps forward in technology,' said Ken Wells, president of the Offshore Marine Service Association (OMSA), based in Harahan, La. 'We excel at project management ' how to get it done correctly and safely.'

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      OMSA recently commissioned a study that found offshore vessels and shipyards that build them are responsible for about $18 billion in annual spending and more than 100,000 jobs, paying about $4.6 billion in wages.

      'This study confirms our belief that offshore energy activity, whether it is oil, gas, wind or hydro-power, has critically important national benefits, not only for our coastal areas but for the entire U.S. economy overall. This is perhaps more important than ever before,' said Otto Candies III, OMSA chairman and treasurer of marine transportation company Otto Candies LLC.

      'The Jones Act operators are capable of building and operating those vessels needed for offshore wind farm work and the shipyards are there to do it,' Busch said.

      'The timing is as good as it's ever been,' he added. 'Most shipyards are nearing the end of their current building programs.'

      In addition to installation vessels, offshore wind farm operators will require fleets of maintenance vessels to transport parts and personnel safely and efficiently to the turbines.

      'You can't mix oil platform support ships with wind turbine support activity,' Harry Vordokas, business development manager for Germanischer Lloyd's Americas Division, told attendees at a Marine Log conference in Washington in early March. 'Wind turbines have special needs.'

      But the price tag for building installation and maintenance support ships specific to offshore wind farms will not be cheap. Purpose-build wind installation vessels may cost from $150 million to $350 million each to construct in a U.S. shipyard, while maintenance vessels may range from $3 million to $5 million apiece, said H. Clayton Cook Jr., an attorney with law firm Seward & Kissel, and a legal specialist in financing U.S.-flag vessels.

      Without firm charter commitments to participate in building offshore wind farms, vessel operators are hesitant to begin investing in new equipment. 'It's difficult for any Jones Act carrier to build vessels on a leap of faith,' Busch said.

      Some maritime equipment developers, such as Keppel AmFELs, W'rtsil' North America, and Derecktor, have presented designs to the market that specifically cater to wind turbine installation and support activities.

      Installation ships operating in U.S. waters will have to handle turbines of 3.6 megawatts and larger, and in numbers exceeding 100 units per location at the biggest planned offshore wind farms. The United States aims to receive 20 percent of its electric power from the wind (246 gigawatts on land and 54 gigawatts offshore) by 2030.

      In July 2009, the Texas General Land Office granted two concessions to Baryonyx Corp. to develop wind farms off the coasts of Mustang and South Padre islands with a total proposed output of up to 3,000 megawatts. 'It blows the Europeans out of the water when they see them on the charts,' said Hugh Rynn, project manager for Keppel AmFELS in Brownsville, Texas.

      Keppel AmFELS' KATI installation vehicle, a joint design with Glosten Associates, is capable of transporting up to three pre-constructed 6 megawatt turbines to offshore sites where they are essentially lowered onto preset monopiles and other deeper water platforms, eliminating the need for a costly onboard crane. A typical onboard crane costs more than $45 million.

      Rynn explained that personnel and product safety are enhanced by pre-assembling turbines quayside, instead of performing the work at sea, which is the common method today. Turbines weigh hundreds of tons and stand 80 to 100 meters tall.

      While niche transportation services providers may participate in U.S. offshore wind farm construction, Rynn believes it will ultimately take a handful of major construction companies, such as Fluor and Bechtel, to take on the prime contractor role and the installation process. 'In this world of huge risk and mega-cost, you need someone with the muscle and ability to handle it,' he said.

Hub Ports. Industry analysts note that to efficiently manage turbine components and the vessels that transport them will require the development of coastal hub ports to serve regional clusters of offshore wind farms. Several ports in the U.S. Northeast are already vying for this opportunity.


      'Having land is key,' said Steven King, managing director of Quonset Development Corp., which oversees Rhode Island's Ouonset Point and Port of Davisville. 'The size of these components is stunning when you see how large they actually are. We're lucky we're land rich here.'

      Rhode Island may become the first state to realize the construction of the country's first offshore wind turbines. Deepwater Wind plans to erect five to eight off the coast of Block Island by 2012, soon followed by a wind farm of more than 100 turbines, for an eventual output of 1.3 million megawatt hours per year or 15 percent of the electricity used in the state.

      In mid-February, Quonset Development received a $22.3 million Transportation Investment Generating Economic Recovery (TIGER) grant from the U.S. Transportation Department, which will go toward helping reinforce the pier, purchasing a mobile crane capable of lifting up to 200 tons, and widening some roads between the port and two Deepwater production and staging properties each about a half-mile away.

      The port is about 20 miles by vessel from Deepwater's Block Island offshore wind farm site. However, it's possible for the port to serve wind farm interests as far north as Maine and as far south as New Jersey, Deepwater's Rich said.

      In addition to Rhode Island, Deepwater, with PSEG Renewables, has formed Garden State Offshore Energy to develop offshore wind projects serving New Jersey. The first project, 20 miles due east of Avalon, N.J., will bring up to 345 megawatts of wind power to Ocean City, N.J. The company is also evaluating sites off the coasts of Maryland, Delaware, New York and Maine.

      Other ports may take on parts of the business. Cape Wind, a 130-turbine offshore wind farm planned off Nantucket Sound, has proposed using Massachusetts' historic whaling port of New Bedford or Port of Providence, R.I., to stage its turbine components. Other developers planning offshore wind farms in the Northeast are Bluewater Wind, Fishermen's Energy, Long Island Power and Con Edison.

      In mid-January, the Virginia Beach mayor's office formed an organization to encourage offshore wind energy in the state. The Virginia Offshore Wind Coalition includes developers, manufacturers, utilities and environmental groups.

      One of the coalition's goals is to promote Hampton Roads as a hub for manufacturing and supply for offshore wind farms in the region. 'We want to be the Silicon Valley of wind energy on the East Coast,' said Bob Matthias, assistant to the Virginia Beach City manager, at the Marine Log conference.

      These hubs are expected to serve multiple wind farm developers to make the investment in supporting such an infrastructure worth it over the long term investment.

      'It's going to take more than just one developer on its own to create this industry,' Rich said. 'A lot of people will have to work together.'

The FREIGHTWAVES TOP 500 For-Hire Carriers list includes Crowley (No. 204).