BioTherm Energy pioneer’s avifauna zero-loss programme
Working in collaboration with conservation organisations, BioTherm Energy’s Excelsior Wind Energy Facility, in the Western Cape, is pioneering the wind industry’s approach to conserving avifauna. The programmes that are being implemented go beyond looking at the potential impact of their wind farm on birds through mitigation, but are also aimed at a net gain in priority species, including Cape Vulture, Black Harrier, Verreaux’s Eagle and Martial Eagle.
The on-site mitigation programme to avoid losses includes an industry-first implementation of an observer-led ‘Shut Down on Demand’ (SDOD) system for priority species.
The SDOD system is implemented through notification by a team of bird monitors to the wind farm’s on-site operations room, where individual wind turbines are switched off when the priority species are in the vicinity and switched on again once the bird has passed by.
This SDOD system, which was piloted in August 2020 before being fully implemented, has to date resulted in no less than sixty SDODs being successfully called for.
“This direct mitigation through shutdowns has resulted in zero loss of priority species to date, meaning that we can proudly say that there have been no turbine collision fatalities so far, and we expect the same into the future.”
Libby Hirshon, BioTherm Energy’s Sustainability Director
Additionally, the programme provides local job creation. The eight biodiversity monitors, who are predominately female, in addition to their supervisor, have been recruited from the surrounding communities. The team of monitors is sited at three vantage points, seven days a week, and is responsible for the implementation of this rigorous programme through active communication with the operators.
BioTherm Energy also recognises that in the Overberg region, where the Excelsior Wind Energy Facility is situated, many bird species are also susceptible to powerline collisions, which has been well documented by the Endangered Wildlife Trust (EWT). This poses a significantly greater threat to certain species than wind turbines, including South Africa’s national bird, the Blue Crane.
“We approached the EWT to discuss potential conservation initiatives, and the result was the rollout of over four thousand bird flight diverters to mitigate avifauna fatalities along high-risk powerlines near, but not directly associated with, our project. We believe that this initiative will prevent needless collisions by Blue Cranes, Cape Vultures, and a host of other raptors. We have no doubt that, through this kind of collaboration, we can create innovative solutions where both conservation and renewable energy can coexist and even enhance each other,” commented Hirshon.
The EWT’s Wildlife and Energy Programme Programme Manager, Lourens Leeuwner, was recently reported in the media saying, “It is extremely encouraging to see an IPP actively seeking opportunities to conserve priority bird species in the regions surrounding their facilities. BioTherm Energy is actively engaging with project partners and looking to bolster conservation initiatives around their wind energy facilities”.
The wind farm’s off-site conservation activities also include work with the Overberg Renosterveld Conservation Trust (ORCT) to provide funding for the securing of easements for the protection of the Renosterveld (a critical habitat for the Black Harrier).
A variety of factors are making the offshore wind industry a strong candidate for growth, but market dynamics are creating uncertainty. While traditional players are pursuing aggressive growth strategies, new entrants are reshaping the landscape.
The offshore wind industry is gaining momentum thanks to ambitious environmental targets, competitive costs, and huge market potential. This renewable source of energy provides an optimal load factor, minimising the need for electricity storage or complementary dispatchable sources of energy. The public sector has been rushing the field with new players, including oil and gas companies, creating a strong push for investments in the wake of the Covid-19 crisis.
Ambitious national targets
Since the 2015 United Nations Climate Change Conference, most governments have launched energy transition strategies and are adopting a variety of approaches to decarbonize.1 Historically, offshore wind development mostly took place in Europe in the North Sea, and China has set ambitious targets for offshore wind. But so far, the United States has been less ambitious. The European Union (EU) is aiming to install between 230 and 450 GW of capacity by 2050, and China announced 175 GW over the same horizon. Meanwhile, the United States is aiming for only about 85 GW. Although there is less visibility on China’s road map, offshore wind could help accelerate the end of coal power—improving air quality and ensuring energy security along the way.
The economics of offshore wind are improving as the costs come down and the energy source becomes more competitive with not only fossil fuels but also other renewable technologies, including solar photovoltaics (PV) and onshore wind.2 As wind turbines grow (up to 12 MW and already announced 15 MW), the load factor could reach new records— above 60 percent—making offshore wind technology even more cost-competitive in the future.
The International Energy Agency (IEA) predicts a sharp decline of offshore wind’s levelised cost of electricity (LCOE) until 2040, down from about €150 per MWh to €25 to €45 MWh depending on the geographic setting.3 This has enabled a key change with the emergence of subsidy-free bids (see figure 1).4
Huge energy potential
Despite significant growth over the past several years, mostly in Europe, offshore wind is still a very small share of world power production (68 GWh in 2018, or about 0.3 percent) and installed capacity (28 GW in 2018, or about 0.4 percent).5 Technical sources offer a power potential of more than 25,000 GW globally, with the United States having the largest offshore wind technical potential both for near-shore and far-from-shore zones (more than 10,000 GW).
Offshore wind capacity is expected to grow by about 25 GW per year over the next two decades, activating a limited share of technical potential.6 Furthermore, offshore wind is displaying strong resilience amid the Covid-19 pandemic with annual capex expected to equal offshore oil and gas capex both in Europe by 2021 and in the United States over the next decade. 7
Market dynamics are creating new tensions in the offshore wind industry
Attractive growth prospects are creating complexities and challenges in four areas:
Regional specificities with uneven strategies
The development of offshore wind is influenced by local market factors, and countries are adopting a variety of approaches to foster renewables growth:8
Energy security. This is a key incentive for the EU, but the United States is less concerned despite benefiting from the world’s largest source of offshore wind. The EU has defined a clear ambition with a strong commitment from countries and structured supporting policies, including the Green Deal, potentially boosted by the Next Generation EU recovery plan.
Wind turbine manufacturing capacity. This is well-established in the EU, with leading capacities already deployed in the North Sea. In the United States, offshore wind is still an emerging market, with only 30 MW of installed capacity in the first half of 2020. In the United States, despite strong fundamentals such as the technical potential and support mechanisms, full development of the offshore wind value chain is far from achieved and will require structured support. In China, offshore wind should benefit from a centralized administration, adequate infrastructures, potentially huge wind turbine manufacturing capacities, and logistics capabilities. This implies short contracting procedures, government support, and no public acceptance issues.
Power grid flexibility and regulation. These areas could provide additional complexity and embed various integration capacities, such as grid connection technologies, bidding processes and contracts, merit order, and support mechanisms for connection costs. Even if some countries have already reached their integration capacity, the European network is very well integrated, providing additional capacity for offshore wind integration. The US power grid is fragmented and has a limited capacity to deal with a large share of intermittent electricity. China’s power grid is integrated, which would favor the integration of wind power. Finally, large hydro-storage capacities provide the ideal combination with wind offshore.
Larger and more complex scope
This year marked a step-change in the size of wind farms, with the largest wind farm size doubled compared with past years (see figure 2). In addition, hybridisation with other technologies will be crucial for economic and environmental viability. Recent bids show a combination of offshore wind with green H2 (electrolysis). For example, in July, Shell and Eneco were awarded a tender to create a wind farm-powered green hydrogen hub.9
On the technology side, floating solutions can unlock additional upsides. They address the largest technical potential of offshore wind (72 percent of offshore wind’s technical potential is in deepwater) and higher load factors, driven by better wind conditions. In addition, floating solutions enjoy better acceptability and reduce usage conflicts with other sea activities, such as fishing, coastal navigation, and recreation. However, several challenges are yet to be addressed, including the high upfront cost and long project timeline, the infrastructure needed to assemble turbines, and full-scale testing and demonstration (coping with pitching and rolling, resisting harsher weather conditions, and handling cable complexity). The design of floating solutions is also still at an early stage of development.
Increasing competition and key players’ strategic moves
The offshore wind landscape is becoming more crowded with several new entrants along the value chain. While traditional players are pursuing aggressive growth to stay ahead of the game, solid new entrants are reshaping the offshore wind landscape.10 The net-zero boom hit the oil and gas majors in 2020, with Equinor followed shortly by most peers. To support their net-zero targets, oil and gas operators are walking the talk with several offshore wind initiatives launched over the past year (see figure 3).
On the project development side, traditional oilfield services and engineering, procurement, and construction (EPC) players are capitalizing on their offshore capabilities and diversifying into offshore wind (see figure 4). Traditionally, oil and gas EPC had been marginally involved in offshore wind projects as subcontractors for specific activities with limited scope, such as installing foundations for pilots or small wind farms. Now, they are repositioning in the value chain to deliver larger, more complex project scope—from subcontracting for large wind farms to taking on engineering, procurement, construction, and installation (EPCI) roles for a defined project scope. In the future, the role of EPC players may evolve to deliver turnkey projects for a full wind farm, with examples so far only seen in Asia.
Potential supply chain bottlenecks
Delivering the potential will most likely stretch the value chain, with bottlenecks for turbine production and logistics. The first question will be about whether original equipment manufacturers (OEMs) have the capacity to expand production to meet demand. Over the past several years, OEMs delivered an annual installed capacity of about 7 MW, but demand will grow to about 20 to 30 MW per year until 2030 (see figure 5). This gap could be even wider depending on OEMs’ financial situation. In parallel, high demand in marine logistics (offshore vessels) could create scarcity and tension on prices.
How to win the new gold rush
As discussed, offshore wind energy is a strong candidate for massive growth in some regions. However, an array of market dynamics are creating tensions that are impacting the value chain and creating potential bottlenecks that could impact the overall outcome of projects. Winning the new gold rush will require taking a systematic and collaborative approach.
Choose your battles
The first priority is to identify the sites that have the highest strategic value for your objectives, including growth targets, the portfolio, and the footprint. It will also have implications for local factors, such as grid connection technologies, bidding processes and contracts, merit order, support mechanism, and time to operations, as well as for regulations, such as the Urban Planning Code authorisation for building turbines of more than 12 MW.
Bidders will need to master the contracting process across countries and regions, including understating the prerequisites and differentiating elements to win the bid. The competition is getting tougher. For example, in the Dunkirk wind-farm award, the top five bidders all scored very closely in the tender criteria, with a slightly bigger difference in the bid price: €44 per MWh for the winning and between €47.5 and €51 per MWh for the others.11
Streamline the wind-farm delivery model
Delivering much larger and more complex wind farms requires moving away from the traditional master–servants project development approach with its many siloed interfaces. Collaborative design optimisation could significantly reduce costs and fast-track the time to market. Offshore could unlock significant value by taking advantage of lessons learned from other industries, such as automotive, aerospace and defense, and electronics. While the oil and gas industry has traditionally struggled to do so, offshore wind has the features needed to be successful, with strong standardisation potential and flexibility for lean design (lacking heavy legacy specifications).
A new delivery approach also requires new business models and new ways of working. Strategic alliances are a win–win for operators, OEMs, and EPC to tackle the following elements:
Improve the project economics by working together to address large cost areas, taking on the full envelope of costs and seeking to bring it down as opposed to traditional sourcing requests for proposals (RFPs) that are focused on price and likely to increase with change orders.
Reduce cycle time by accelerating execution and avoiding RFP and tender processes.
Develop technological synergies with contractors by engaging them in advance to elaborate on designing an optimal solution.
In a capacity-constrained environment, strategic alliances also offer opportunities to secure material and services while giving suppliers certainty about revenues. Oil and gas players (operators and EPC) can also capitalise on their strong offshore experience.
Repurposing assets and reskilling the workforce requires a new cross-business portfolio view and management, such as multipurpose vessels serving oil and gas platforms and wind farms, and talent management, such as sharing resources across oil and gas and wind projects.
Achieve operational excellence
Operators will need to assess and extract the wind farm’s true potential. With more pressure to reduce costs and with subsidy-free bids becoming the new norm, operational excellence is paramount to maximising profitability.
Smart operations are a must to optimise both the top and bottom line by considering a broad set of parameters, such as revenues, cost of spare parts, market dynamics, regulations, turbine downtime, weather forecast, and operations and maintenance costs.
Advanced analytics could allow for precisely predicting the impact on costs and revenues to inform decision-making and optimise profitability.
Predictive maintenance enables striking the right balance between corrective and preventive costs, including the costs of failure, reducing total expenditures, and increasing availability and reliability.
Digital twins can extend the life of assets by combining operational and physical inputs, such as inspection information and mechanical characteristics, with advanced simulation, such as fatigue analysis, inspection plan, and predictive maintenance. In addition, using digital twins in the engineering phase could optimise design and reduce material and installation costs.
Squeeze financial value
Finally, operators will need an integrated approach to optimise their financial value.
Value pools. The boundaries between sourcing, trading, and production are blurring, driven by demand response, batteries, and decentralised generation. New value pools are emerging from all parts of the chain.
Contractual and physical flexibility to match supply and demand and balance the grid, such as capacity contracts, virtual storage, and options and derivatives, drives portfolio optimisation and provides growth opportunities.
The operating model needs to adapt to allow an integrated steering of power assets, such as renewable, storage, and combined cycle gas turbines, and consumption, such as internal and external, by location, minimum and maximum load, and steerable load.
Decision-making. With renewable energy growth, the power market is becoming more weather-driven, and demand for flexibility is moving toward the short term. Consequently, the speed and quality of decisions are paramount to ensure smooth alignment between power assets and consumers, such as scheduling and re-dispatching processes with assets and consumers to avoid imbalance costs and capture market opportunities as well as increased frequency balance to manage renewables generation unpredictability. To support quality and efficient decision-making, information system infrastructure and data management are crucial to achieve the following:
Combine massive amounts of data in real-time.
Develop robust data analytics for optimization (analytical models with accurate signals, confidence estimation, and visualisation).
Define the trade-offs for result accuracy versus computation speed.
Ensure seamless interactions between independent information systems and functionalities.
Define the trade-offs between multiple performance models versus a full integrated model, such as individual turbines, wind farms, and country-level portfolios.
Facilitate internal and external data exchanges.
Get set for the race
Think big and act fast
The economies of scale for large wind farms (more than 1 GW) is the new norm for cost-competitiveness. All players are moving.
To leapfrog the competition and not get left behind, it is imperative to quickly screen and target opportunities. Where to start will depend on players’ maturity. In any case, it is important to accelerate the learning curve. For new entrants, this may mean starting with smaller roles or a smaller scope and quickly transitioning to larger, more complex ones.
Choose your partners, and nurture the collaboration
Winners will play a team game with strategic alliances and collaboration across the value chain. This will ensure delivery capacity, such as turbine production, installation, and footprint as well as best-of-breed skills, such as technology and knowledge while accelerating innovation. A cultural fit and collaboration framework will be essential to success.
1 European Commission Climate Action Tracker
2 Intergovernmental Panel on Climate Change 2018 special report, International Energy Agency, International Renewable Energy Agency
3 International Energy Agency World Energy Outlook 2019
4 Aurora Energy Research, offshoreWIND.biz, European Commission electricity market reports, Kearney Energy Transition Institute
5 International Energy Agency World Energy Outlook 2019; “Wind energy,” International Renewable Energy Agency
6 International Renewable Energy Agency, Global Wind Energy Council, International Energy Agency
7 “Covid-19 monthly update: 2020’s oil demand recovery slows down, road fuels upgraded for 2021,” Rystad, 12 June 2020; “US offshore wind power spending has oil in its sights,” Financial Times, 7 July 2020
8 International Energy Agency
9 Shell media release, 29 July 2020
10 Company websites, press review
11 Commission de Regulation de l’Energie, Deliberation N. 2019-124
100MW Kipeto wind power project joins national grid
25 January 2021 – Kipeto Energy Plc (“KEP”) has announced it has connected Kipeto wind farm to the national grid and will start generating power in the next week.
KEP has connected a 17km (220KV) high voltage transmission line, linking the facility to the national grid at the Isinya Substation, and signaling the start of the go-live process. The project’s 60 GE 1.7-103 wind turbines, each capable of producing 1.7MW, will be switched on in stages as part of a gradual ramp-up process, with all commercial tests due to be concluded within the next few months.
Located in Kajiado county, Kipeto is Kenya’s second-largest wind power project. It has a 20-year Power Purchase Agreement with KPLC, and once it is at full capacity, Kipeto will generate 100MW of clean wind energy for the Kenyan people, providing power to the equivalent of approximately 250 000 households. This will be a significant contribution to Kenya’s Vision 2030 and Big Four Agenda.
Dr. Kenneth Namunje, Chairman and Director of Kipeto Energy Plc and Director of Craftskills Ltd commented: “First and foremost I would like to thank the local community for their ongoing support of this project, which has been paramount from day one. Now, with the assistance of KPLC and Ketraco, we’re delighted that this final connection and energization sees the transmission line and associated equipment being handed over this week to KPLC for future care and operation.”
Robert Skjodt, CEO of BioTherm Energy commented: “We are proud to have completed the construction of the Kipeto wind project to the highest standards with strong support from our engineering and construction partners from Worley, China Machinery and Engineering Company, and GE, as well as the local community, to maintain strict safety protocols throughout construction. We are excited to be contributing to Kenya’s Vision 2030 goals and Big Four Agenda and demonstrating that solar and wind are cheaper sources of electricity than traditional fossil fuel-based power plants with a significant positive impact in the local communities.”
The Kipeto project reached financial close in December of 2018, marking the beginning of its two-year construction phase. The project is funded by equity from Actis-backed BioTherm Energy (88%) and Kenyan company Craftskills Ltd (12%) alongside senior debt from the U.S. International Development Finance Corporation (“DFC”), the US Government’s development finance institution.
KEP leased and secured more than 60 plots within the project area for the wind turbine footprint and the transmission line through voluntary participation of landowners, and has undertaken a number of local initiatives, including constructing new housing for local families outside the project’s 500m buffer zone, supporting schools with PPE and sanitization equipment as protection against the pandemic, drilling community water borings, and establishing a youth vocational skills training programme to increase employment from within the local community. More than 800 jobs were created during the construction phase of the project and an additional 60 permanent jobs are anticipated during the operational phase.
To ensure international environmental standards were followed, KEP worked with specialist consultants during both the planning and development stages of the project to undertake a series of environmental assessments and impact studies. With support from USAID Power Africa, Kipeto developed and initiated a Biodiversity Action Plan, which is designed around the international best practice outlined in the IFC Environmental and Social Performance standards.