Offshore windpower

The Monopile Monopoly

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Monopiles are the hidden key to offshore wind power turbines.
  • Why it matters

    Why it matters

    Consolidation in the monopile sector is pushing up prices for windpower operators and causing production and installation delays.

  • Facts

    Facts

    • Monopiles are usually large steel tubes that are embedded into the ocean floor to provide platforms for offshore wind turbines
    • Three companies dominate the monopile market: German EEW, Danish Bladt Industries and the Dutch Sif Group.
    • Smaller firms have found it impossible to compete, while foreign firms have lacked quality.
  • Audio

    Audio

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Wolfgang Zillekens is surrounded by an army of steel pipes, rollers and welders spraying showers of sparks. He is flanked by two rust-brown giants, each of them 10 meters (33 feet) in diameter, 80 meters long and weighing 1.5 tons.

“All they need is paint, and then the tubes will be ready to go,” says Mr. Zillekens, a civil engineer and project manager. Above him, cranes are constantly hoisting heavy sheets of metal through the factory buildings of EEW Special Pipe Construction in Rostock, a port city in northern Germany. The sheet metal will later be shaped into pipes, which are buried in the sea floor to form foundations for offshore wind turbines.

After a rough start, the expansion of offshore wind energy in Europe is finally getting underway. In 2015, 13 offshore wind farms were connected to the grid in Germany alone. More than 780 turbines, with a total capacity of 3,300 megawatts, are now in service in the North and Baltic Seas.

EEW is one of the greatest beneficiaries of this development. The only problem is that the company’s success is becoming a threat to the rest of the heavily subsidized offshore industry.

The medium-sized company has always manufactured pipes, primarily for the oil and gas industry. But in 2008 a new line of business opened up: wind turbine platforms. The steel posts, which are up to 80 meters long, are driven through water, sand and rock into the ocean floor providing invisible foundations for the turbine towers, which can rise to heights of 157 meters (515 feet) above the ocean.

“Our order books are jam-packed, and there are more products than vendors”

Karl Klös-Hein, EEW boss

The dimensions are gigantic, and so is the project volume. Business is booming: EEW now earns about €270 million ($292 million) in annual revenues from offshore foundations alone, about half of the company’s total sales. EEW employs 530 people just in Rostock. Most of them used to work in the troubled shipyard industry.

To reduce the costs of wind energy, EEW boss Karl Klös-Hein chose foundations with thick-walled steel pipes, known as monopiles, early on. The monopiles have two distinct advantages over other designs: They consume less raw material and are lighter, making them easier to transport.

While others became bogged down in the details, Mr. Klös-Hein was already producing in series, increasing efficiency and automating procedures. In this way EEW catapulted itself to the top of the industry. “Our order books are jam-packed,” says Mr. Klös-Hein, noting that the market is better than ever. “And there are more products than vendors,” he adds.

But that is precisely the problem.

“The market for offshore foundation producers is increasingly becoming concentrated on three vendors,” says Dirk Briese, managing director of market research company Wind Research. He pulls out a simple pie chart to illustrate the power structure in the industry. EEW, Denmark-based Bladt Industries and the Dutch Sif Group control more than 80 percent of the market.

A Windy Outlook-01

 

Despite the trio’s overwhelming dominance, Mr. Briese still expects another “massive consolidation.” There has already been plenty of bloodshed in the past. A number of producers – CSD, Weserwind, TAG Energiewende Solutions and NSW – have already gone out of business. They backed the wrong technologies or didn’t have enough production capacity to survive in the price war.

None of this bothers Mr. Klös-Hein. In fact, he likes the fact that the “competitive situation” is manageable. But what he considers a benefit upsets the rest of the offshore industry. The operators of offshore wind farms, in particular, are unhappy about the concentration of foundation producers. They see themselves reduced to supplicants, forced to beg the oligopoly to supply them with its products.

None of the operators is willing to confirm this officially – they are dependent on the foundations and don’t want to spoil things with EEW and the two other vendors. But unofficially the affected operators complained about massive disadvantages.

“With the monopiles, in particular, there are only two suppliers,” the head of an energy utility’s offshore division explained. Both companies are fully booked and are unable to keep up with demand. “Our projects are delayed because of this bottleneck.”

“If the foundation is missing, everything else grinds to a halt,” said the chief engineer of a leading project developer. He is worried when he thinks about the future: “Instead of more competition, it’s getting smaller all the time.”

Attempts to support new manufacturers have failed, he added. “We once wanted to award a contract to the Chinese, but it eventually fell through because of quality problems.” Other manufacturers, such as Steelwind, a subsidiary of steel producer Dillinger Hütte, apparently lack the references.

turbine
Installing a wind turbine in the North Sea. Source: Paul-Langrock.de Agentur Zenit/Offshore Windpark Butendiek

 

Steelwind recently landed a major contract, but “the competition is still far ahead,” says Mr. Briese. He believes that the offshore wind industry will still see high growth rates in the future. The global installed capacity will increase fivefold by 2020, to 40 gigawatts. “But the market is not as big by a long shot as many companies had hoped,” the market researcher explained. The main reason is the reduction in expansion targets.

In Germany alone, the expansion plans for offshore wind were reduced by 40 percent last year. Instead of the target of 25 gigawatts, additional wind farms with a capacity of 15 gigawatts will be built in the North and Baltic Seas by 2030. The result is that smaller foundation manufacturers who do not obtain orders abroad, shy away from continuing to invest.

The situation at EEW is completely different. In a joint venture with Bladt Industries, the industry leader opened a new offshore plant in England in the summer. And EEW even shrugs off supposed drawbacks.

“Our main production plant is actually in an unfavorable location,” said Mr. Zillekens, as the waves of the Baltic Sea crash at his feet. However, most offshore products are built in the North Sea. For wind farm operators, this translates into additional transport costs. “Nevertheless, everyone still orders the foundations from us.” It’s because of the quality, he adds. And because there is no alternative, the operators mutter.

 

Franz Hubik covers the renewable energy sector for Handelsblatt. To contact the author: hubik@handelsblatt.com

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