Offshore Wind Installation Vessels - Issue 3
14 Jun 2021 - Upstream Costs and Technology | Scheduled Update
Genevieve Wheeler MelvinGenevieve Wheeler Melvin

Executive summary

Key insights

  • The North American market has opened with a new Biden administration target of 30 GW by 2030 and consent awarded to the first commercial US offshore wind farm: Vineyard Wind 1. This has triggered further newbuild construction activity to comply with the strict local content rules of the Jones Act.
  • April 2021: DEME Group (DEME) and US maritime contractor Foss Maritime will install Vestas V164-9.5 MW wind turbines at Vineyard Wind 1. DEME plans to use its jackup Innovation. To work around the Jones Act, FOSS will supply feeder vessels to transport turbine components between the Port of New Bedford and the wind farm site.
  • Wind turbine dimensions will soon exceed most of the fleet’s capabilities. In the short term, however, contractors will first have to survive an oversupplied crane vessel market. New entrants to the fleet in 2022 could pull down utilization to 23%.
  • Revived oil and gas demand in 2024–25 will compete with the wind sector for the higher-end heavy-lift fleet (jackup and floating). Forecast utilization for the sample wind-market fleet is still far lower than a balanced market, but buyers should expect day rates for vessels with extensive oil and gas track records to rise by the end of the forecast period, and for negotiating power to shift slightly more toward these vessel suppliers, especially HL3 and experienced HL2 contractors.
  • Supplier track records for wind turbine generator (WTG), foundation, and substation installations are highly concentrated to a few key players each. Substation installers are particularly limited, and vessel availability may begin to challenge developers in 2021–25 as platforms increase in size and require more HL3 capabilities.

Key demand trends

From January to December 2021, we expect the offshore wind industry to generate approximately 10,000 total vessel days demand for the derrick, derrick pipelay, and offshore heavy-lift fleet, including vessels designed for offshore wind farm construction and crane vessels with a track record in oil and gas. Following that, forecast demand will be on a downward trend, decreasing to approximately 4,000 vessel days in 2022, as cautious COVID-19-era capex decisions catch up with the installation sector. We anticipate that demand will rebound starting in 2023, with a forecast of approximately 8,320 vessel days. By 2025, we expect total crane vessel demand to exceed 2021 levels.

Key supply trends

We expect the wind-market crane vessel fleet to expand to 79 units by 2023. Growth will be greatest in the HL2 subsegment, with six units scheduled to enter the market over the next two-and-a-half years. This is followed by the HL1 subsegment, with three newbuilds due for delivery during the forecast period. Local content rules and newbuild construction delays are increasing supply risks.

Supply chain implications

The addition of several mainland Chinese wind-market vessels and their track records to our sample fleet has altered our supply and utilization outlook. Utilization could plummet to 23% in 2022 as new market entrants drive up fleet availability, and contractors run into lower installation demand outlooks in Europe and Asia Pacific. Oil and gas assignments combined with wind farm contracts could potentially pull the sampled fleet’s utilization rate to 51% by 2025. Availability challenges will be contingent on a vessel’s specifications meeting the structural requirements of emerging wind farm technologies. Similar to oil and gas contractors, traditional wind market suppliers may have to market their vessels to other sectors—such as oil and gas platform installations, accommodation services, decommissioning, or salvage—until wind market demand picks back up again.

Contract and cost trends

Day rates are at unsustainably low levels and slipped further with the COVID-19 pandemic generating setbacks. They are likely to rise starting in 2023 despite an oversupplied market. Demand from both offshore wind and the hydrocarbons sector is anticipated to increase by then, alongside suppliers’ internal costs. In terms of the total fleet, we do not expect to see a return to 2014 day-rate levels until at least 2026–27. Some HL3 vessel rates may prove to be an exception to this trend, dependent on specific project requirements

Related links

Industry macro trends

Glossary and financial terminology

Regional definitions

Market segment definitions

Cost model methodology

Cost model

Attachments
to access the complete analysis:
MSA_OWIV_V3
MSA_OWIV_V3