BVG Associates September 2016 Newsletter 
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Welcome to our latest newsletter

This month, I’m very pleased to welcome two very talented people to our team,  Andy Logan and Margaux Delahaie. Below you can read a little more about Andy and Margaux. 

Their recruitment reflects our belief that it’s a great time to be involved in renewable energy. In Europe, the cost of electricity from offshore wind continues to fall. Offshore wind is rapidly becoming the rational, economic alternative to conventional technology, as well as the right environmental alternative.  There’s also been a significant number of announcements of offshore wind companies investing heavily, creating jobs and boosting local economies. 

The wave and tidal sectors have also moved, with announcements from as far apart as Scotland and Hawaii about real progress being made. 

I’m looking forward to attending the WindEurope Summit this week. If you’re in Hamburg, email me  if you’d like to meet up and make sure you catch our presentations too.

We often get positive feedback about our newsletters. Please take a moment to give us yours and what you would like more of from us in future.
Bruce Valpy 
Managing Director
BVG Associates
Welcome to our newest team members

We're very pleased to welcome Andy Logan and Margaux Delahaie to our team. 

Andy joins us as a prize-winning mechanical engineer with a masters degree and experience in offshore renewables since 2013. At BVGA, he’ll be conducting focused research into the technology, market and supply chain of the wind and marine renewable energy industries. A key area of his work is understanding the impact of technology, innovation and project characteristics on the levelised cost of energy.

Margaux joins us following successful roles in business development and asset management for EDF Energies Nouvelles, both in the Paris headquarters and Italy. She has an MSc in Business Management with a specialisation in finance and cost control. Margaux will be using her experience to develop our capabilities in France, asset management and business advice.
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Offshore Turbine Manufacturer Consolidation

It has been confirmed that Gamesa, soon to be merged with Siemens, will buy the rest of Adwen, the 50/50 joint venture between Areva and Gamesa. If cleared by the European Commission’s competition authorities, the number of wind turbine suppliers active in the European offshore wind market would shrink to four. Just two years ago, there were six. It potentially also drives Senvion from the market. The loss-making German supplier is majority owned by Centerbridge Partners, along with Indian Private Equity player Arpwood Capital.

Senvion has increased focus in competing with its previous owner, Suzlon, in India, as well as in a number of other onshore markets, bringing out products to seek to better compete in these markets. Without major investment in its portfolio, it is difficult to see what role Senivon can play in the offshore market.

So unless the competition authorities step in, we think that there is every chance that the deal will also, indirectly, reduce the pool of offshore turbine suppliers from four to three. Our view is that to retain competition while facilitating investment in next generation technology, four viable players are needed in the market.

You can read more in Bruce Valpy’s article for Recharge “Gamesa deal for Adwen risks offshore market of three”.
The supply chain’s role in the journey to ‘subsidy free’

Many in the renewable electricity industry tend to focus on technology improvements such as bigger turbines as means of reducing cost of energy. Our analysis shows supply chain innovation will continue to play a significant role in cost reduction, especially as economies of scale are realised as project pipelines increase in scale and certainty.

Giles Hundleby will be discussing the role of the supply chain in cost reduction strategies as the WindEurope Summit in Hamburg on 27 September at 14:30 during the "Supply Chain: Thinking ahead" session.

If you cannot attend his presentation in person, you can email him to find out how to develop an effective supply chain strategy and understand the impacts on cost of energy. 
Oil and Gas diversification 

 Although the oil price has recovered somewhat  from its recent nadir, the oil market is still considered generally to be, in the words of the Wall Street Journal, “volatile but directionless”. Certainly, we have seen a continued interest in offshore wind from proactive oil and gas suppliers. We’re busier than ever with our work with Scottish Enterprise “Offshore wind expert support programme” and we’re helping many private clients with using their oil and gas expertise in the burgeoning offshore wind market.

Understanding any market opportunity and building a robust commercial case are vital steps to generating business in the offshore wind sector. To find out how we can help your business grow in offshore wind, email Alan Duncan.
A holistic approach is vital for real cost reduction in offshore wind

It’s relatively straightforward for manufacturers to make claims about how much their innovation can help the industry's cost reduction efforts. Often these claims take a very siloed view by just comparing the relative cost of the component or process the innovation looks to enhance. But it’s important not to be misled by these comparisons. For example, a larger turbine will (typically) have a larger cost per MW compared to smaller versions if only the turbine CAPEX is used. The full cost of energy impact, however, also has to take into account changes in installation, vessels, reliability and OPEX of using larger turbines. Together, these have a big effect on reducing the LCOE.

Looking over the long-term, innovation is thriving throughout the wind energy supply chain, so it is likely that there will be strong downward pressure on costs even if not all of the ideas make it to market. A range of game-changing technologies could reduce costs still further. 

At WindEurope Summit in Hamburg on 29 September, Kate Freeman will be presenting with KIC InnoEnergy on offshore wind innovation for cost reduction at 14:30 during the "Optimising O&M to Reduce LCOE" session. If you’d like to talk about innovation, cost modelling and market analysis, please get in touch via email
Importance of supply chain planning 

Developers of UK renewable energy projects with a capacity of more than 300MW need to submit a ‘satisfactory’ supply chain plan to be eligible to bid for a Contract for Difference. 

Although the UK Government is keen to apply pressure to increase local content without breaching competition law, the Government genuinely wants suppliers to raise their game and take meaningful steps to mature the industry. Companies should have competitive procurement practices that don’t just rely on established suppliers. They should be fully engaged in industry programmes to reduce costs. Also, they should understand what their skills gaps are – and be doing something about it.

We’ve been deeply involved in helping the industry negotiate the supply chain plan conundrum, working with many developers over the last two years. We have also been working a lot with their suppliers, helping them to communicate effectively in their submissions.

By working with suppliers to develop their supply chain plans, we’ve been able to answer the exam questions set by both developers and Government in a clear and effective way. This improves the chances of success for the supplier, the developer and the industry as a whole. 

Alun Roberts has written more about the importance of the correct approach to supply chain plans in a blog on our website.
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This month:            



WindEurope Summit 27-29 September Hamburg, DE

International Offshore Wind Partnering Forum
2-5 October
Rhode Island, US

Renewable UK Market Place
12 -13 October 
Liverpool, UK

Offshore Wind Conference
24-25 October
Amsterdam, NL

Offshore Renewables – Wind Conference
6-7 December
London, UK
Other  news stories 

Current2Current scores funding for tidal device

First wave-produced electricity in U.S. goes online in Hawaii

Scotland Waves Hello to the World’s First Tidal Power Farm

£80million windfarm investment secured for Strathclyde

Nordmark establishes factory for offshore wind turbine components in Cuxhaven

DONG Energy to set up UK’s largest O&M hub

Developer for wind farm off Kitty Hawk to be picked in early 2017

E.ON to build 10MW Lithium-Ion battery for UK grid

NorSea dives into offshore wind

DONG, Deepwater Wind join New York OW alliance aiming for 5GW by 2030

Offshore giants commit to US base

Shetland ‘world first’ tidal array

China toasts 50MW Fujian

Fukushima floating wind farm is Japan’s entry into contested sector
Merger and acquisition news
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