Amid wind's perfect storm of costs, how Inch Cape made the numbers add up
The gigascale Scottish plant was among a raft of offshore developments that won UK power deals just as costs spiked but is now in 'good shape' says its project director
Inch Cape, a 1.1GW project in Scotland, is holding the torch for a raft of UK offshore wind developments that have navigated some of the most difficult economic headwinds to have faced the industry.
“To have financed this is a big success. There are 22 banks involved, so it's significant. Now, our focus is on driving this forward.”
The challenges that Inch Cape has faced are familiar across the offshore wind industry.
Supply chain inflation and rising interest rates hit projects in the UK with an overall increase in costs of between 20% and 40%.
Vattenfall's CEO Anna Borg said Boreas and the UK had been hit by a “perfect storm” of cost increases as she halted the project, which was later revived by RWE.
“There have been challenges on this wave of projects, and this has meant working on some of core strategies, using available levers” Hill admits of Inch Cape.
The CfD terms provided some index-linked protection against inflation, but not enough to reflect the impacts of supply chain constraints and higher capital costs.
This led the Inch Cape consortium to take advantage of a mechanism that allowed up to 25% of the AR4 offtake allocation to be rebid in a subsequent round.
“We had a limited allowance to rebid in AR6 and we were successful with that. This has given us a slightly better revenue line, with some upside,” Hill states. Inch Cape secured 266MW at a healthier £54.23/MWh (2012 prices) in that round.
The partners also decided to revisit aspects of the project design in an effort to optimise all aspects of the project in terms of costs and output.
This was not made any easier by the fact that the Inch Cape wind farm requires a mix of 54 monopiles and 18 jacket foundations, increasing the complexity of the contracting task.
De-risking
More generally, Hill observes a shift towards multi-contracting because the suppliers, too, are in de-risking mode and, he says, less willing to take responsibility for third-parties under EPC contracts.
“But you adapt and change depending on what you think the best solution is, technically, and for the commercials or economics. Fortunately we have a really strong experience in the team, and were able to adapt to that reality and how to negotiate those contracts," he says.
Hill’s own experience includes managing supply chain risk on UK projects like Beatrice and Seagreen.
He highlights foundations as one of the most critical aspects to get right, due to the risk posed to further stages and advocates measures to avoid single points of failure, explaining why two rather than just one Chinese yard has been lined up for the XXL monopiles.
The benefits of early engagement on the transmission aspects of the project are also held up as a highlight.
“I think the striking thing about Inch Cape in construction terms is that we're so well advanced on the transmission side," he observes.
The developer appointed Siemens Energy and a subsidiary of Smulders for the supply and build of its onshore and offshore substations.
Construction of the offshore substation jacket foundation and platform is nearing completion at Smulders’ Wallsend facility in the UK.
Siemens is using its modularised offshore transformer (OTM) platform, with two massive 545 megavoltampere (MVA) transformers were shipped from Zagreb, Croatia.
Siemens Energy is also responsible for the design and construction of the project’s onshore substation in Cockenzie, East Lothian, which is also in an advanced state of completion.
Grid connection agreements are already in place, and, as a former power station, Cockenzie also connects easily to the national grid, Hill points out
“We'll install the export cable and the offshore platform sometime in the third quarter. The ability to get the transmission system up and running and commissioned is a really strong position to be in," Hill says.
The wind farm is expected to be fully operational in 2027 and will likely be notable as the first in the UK to deploy Vestas' 15MW V236 turbines.
“Cost challenge on these projects have been very significant," Hill observes. "But compared to many projects, we're actually in really good shape."
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