Stepping stones for floating foundations r02

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Stepping Stone Markets for Floating Foundations

Lessons in technology commercialization Presentation by Charles Nordstrom, PE

AWEA Offshore WINDPOWER 2015

30 September 2015

Baltimore, MD

2/9

Technology and Commercial Readiness

Relationship between technology development and commercial launch

© BVG Associates 2015

Floating

foundations state

of the art

3/9

Technology and commercial readiness

Demonstration projects are commercial projects


CRI 1: Hypothetical commercial proposition: Technically ready;

commercially untested and unproven.

CRI 2: Commercial trial: Small scale, first of a kind project funded

by equity and government project support.

CRI 3: Commercial scale up occurring driven by specific policy and

emerging debt finance.

1 unit @ 7 MW

1 unit @ 2 MW

1 unit @ 2.3 MW

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Product-Market Fit


Product features

The product comes in several sizes

Is the product solving a burning need, or is it a ‘nice-to-have’?

Minimum viable product

Smallest/cheapest product that delivers evidence

of:

• Technically viability

• Commercially viable

2 to 7 MW single unit demonstrator with a power

purchase agreement

Commercial trial

Pilot projects with multiple units

(e.g., Hywind Scotland, WindFloat Oregon)

Commercial scale-up

10 to 20 units (50 to 100 MW)

Multiple commercial applications

Several projects at hundreds of MW each

Ideal value proposition:

“Floating wind turbines are a critical enabling

technology for generating

affordable, secure, clean, and reliable energy in

regions with deep-water coastlines.”

Secure

Clean

? Affordable

? Reliable

• Cost profile is dramatically different across the

product line

• Reliability is proven through incremental track

record

5/9

Product-Market Fit

Cost profile during scale-up


$0

$100

$200

$300

$400

$500

$600

Commercial

readiness

index

Turbine

rating

(MW)

Number

of

turbines

Project

rating

(MW)

CAPEX per

MW

Annual

OPEX

per MW

Capacity

factor WACC

LCOE

low

($/MWh)

LCOE

high

($/MWh)

Minimum viable

product

2 to 7 1 2 to 7 $9 million

to $11 million

$250,000 35% 12% $ 423 $ 500

Commercial

trial

5 to 8 5 to 10 25 to 80 $7 million

to $9 million

$175,000 42% 12% $ 269 $ 333

Commercial

scale-up

5 to 8 10 to 20 50 to 160 $5.5 million

to $8 million

$125,000 48% 10% $ 157 $ 215

Multiple

commercial

applications

5 to 8 25 to 50 125 to

400

$3.5 million

to $6 million

$90,000 50% 8% $ 82 $ 127

LCOE [US$/MWh]

Progression through commercial readiness index

6/9

Product-Market Fit

Electricity market profiles


Markets buy large

quantities of

inexpensive power

Markets buy small

quantities of

expensive power

Region

Evidence of support for floating

turbine development 'Hurdle price'

Total installed

generation

France4 test zones and significant R&D

expenditures

$110/MWh 120,000 MW

Maine (USA)Offshore test zone and special

offtake subsidy

$80/MWh 3,000 MW

JapanTest sites and significant R&D

expenditures

$150/MWh 245,000 MW

Scotland

Test site and offtake subsidy $100/MWh 13,000 MW

Region Evidence of support for renewables 'Hurdle price'

Total installed

generation

US Virgin IslandsGoal: 30% renewable by 2030 $375/MWh 216 MW

Antigua and Barbuda

Goal: 15% renewables by 2030 $300/MWh 118 MW

BahamasGoal: 30% renewable by 2030 $250/MWh 536 MW

HawaiiMandate: 100% renewables by 2045 $300/MWh 3,000 MW

7/9

$0

$100

$200

$300

$400

$500

$600LCOE range [US$/MWh]

MVP

(<10 MW)

commercial trial

(25 to 80 MW) commercial

scale-up

(50 to 160 MW)

multiple

commercial

(hundreds of MW

Product-Market Fit

The right product for the right market


Total project up-charge in France: $100 million (6 MW)

Total project up-charge in Scotland: $400 million (30 MW)

Total project up-charge in Maine: $890 million (100 MW)

Commercially attractive in a wide range of

electricity markets (200+ MW)

Total project up-charge in US Virgin Islands: $20 million (6 MW)

Total project discount in US Virgin Islands: $160 million (30 MW)

Total project discount in Hawaii: $960 million (100 MW)

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Conclusions


For technology developers…

• Embrace the commercial nature of demonstration projects

• Develop a value proposition for each stage of your journey, not just the end game

• “A great technology does not a business make”

For established firms…

• The classic venture capital model does not work for energy hardware

• Your strategic investment is critical

For governments and policy makers…

• Support foreign demonstration projects to gain domestic benefits

For enablers…..

• Take a mission-based approach, rather than a regional approach

Creating the right ecosystem within the offshore wind industry

9/9

Thank you BVG Associates Ltd

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Purton Road

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SN6 6HY UK

tel +44(0)1793 752 308

[email protected]

@bvgassociates

www.bvgassociates.co.uk

BVG Associates Ltd

The Boathouse

Silversands

Aberdour, Fife

KY3 0TZ UK

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BVG Associates LLC

Green Garage

Second Avenue

Detroit, MI

48201 USA

tel +1 (313) 462 0673

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Engineering

Stepping stones for floating foundations r02