-461010201930OPTIMIZATION in 2015 PAGEREF _Toc512886561 h 9Figure 4

-461010201930OPTIMIZATION in 2015 PAGEREF _Toc512886561 h 9Figure 4


TOC h z c “Figure” Figure 1 Cumulative Installed Wind Capacity PAGEREF _Toc512886559 h 6Figure 2 Installed Wind Power Capacity PAGEREF _Toc512886560 h 9Figure 3 Installed capacity & Newly installed capacity by country wise in 2015 PAGEREF _Toc512886561 h 9Figure 4 Supply chain hierarchy of WTGS PAGEREF _Toc512886562 h 10Figure 5 Offshore WTGS Supply chain PAGEREF _Toc512886563 h 10Figure 6 WTM activities – range and flow PAGEREF _Toc512886564 h 12Figure 7 Wind energy hierarchy PAGEREF _Toc512886565 h 13Figure 8 Types of Wind Turbine Generator systems PAGEREF _Toc512886566 h 14Figure 9 Turbine Model WTG – Prototype Testing Cost PAGEREF _Toc512886567 h 15Figure 10 Cross-sectional view of WTGS PAGEREF _Toc512886568 h 17Figure 11 LCOE concept showing the hierarchy of complete Energy system PAGEREF _Toc512886569 h 19Figure 12 Sensitivity analysis of LCoE PAGEREF _Toc512886570 h 20Figure 13 Responsible factors for LCoE PAGEREF _Toc512886571 h 21Figure 14 Territorial boundaries of the project PAGEREF _Toc512886572 h 25TABLE OF CONTENTS
History and Background4
Introduction to the value of Wind Energy5
1. Research Focus and Scope 6
2. Literature Review7
2.1 Global Scenario7
2.2 India as the major contributor8
2.2.1 Supply Chain Scenario in Indian Wind Industry8
2.2.2 Typical Supply Chain of Offshore WTGS8
2.2.3 Major players of Supply Chain10
2.3 Overview of Wind Farms11
2.3.1 Wind Turbines, types and Costs involved12
2.4 Key Components of WTGS and its challenges14
2.5 Study of LCoE17
2.6 Dependent factors of LCoE and its calculation18
2.7 Market & supply chain as driver for cost reduction19
2.8 Framework for assessing risk factors in Supply Chain21
3. Research Framework and Objectives…………………………………………………………21
3.1 Conceptual Framework……………………………………………………………………22
3.2 CASE STUDY: Australian Project on Offshore Windfarm……………….23
3.3 Research Objectives……………………………………………………………………….24

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3.4 Problem Statement, Research Question ….………………………………….24
3.5 Hypotheses…………………………………………………………………………………….24
3.6 Research Methodology……………………………………………………………………24
3.7 Expert Interviews (as of now) ………………………………………………………25
4. Limitations ……………………………………….……………………………………………………….25

History and Background:
The fundamental principles of electricity generation were discovered in the 1820s, where central power stations became economically practical with the development of alternating current (AC) transmission. But the Utility-scale generation is done by rotating electric generators which can transform Kinetic energy to Electric energy.
The power of the wind has been utilized for the past 3000 years. Until the early 20th century wind power was used to provide mechanical power to pump water or to grind grain. In the early 1970s, with the first oil price shock, the interest in the power of the wind re-merged. By the end of the 1990s, wind energy has re-emerged as one of the most important sustainable energy resources.

Reasons and Way Forward:
Wind power is good renewable, clean, non-depletable, carbon-free, abundant, fuel-free and a reliable source of energy for power production, that can reduce dependence on fossil fuels including imported oils and emission of greenhouse gas. The demand for the worldwide wind has doubled and increasing exponentially for the last 2 decades which has grown rapidly into an exciting and historically unique accelerated growth path in recent years, manufacturing capacity is increasing and the component supply chain is getting extended as far as possible with a positive trend.
In 2017, global wind power capacity increased to an average of 12.5% CITATION Wik18 l 1033 (GWEC, 2017) compared to the last year, and continues to grow with the annual installations at 54.6GW and 487GW of wind power spinning around the globe with most of capacity deployments in almost all the major countries.

267970047625Cumulative Installed Wind capacity in MW since 2001CITATION Wik18 l 1033 (GWEC, 2017) and the major contributors are
China: 30,753 MW (48.5%)
United States: 8,598 MW (13.5%)
Germany: 6,013 MW (9.5%)
India: 3,612 MW (5.1%)
00Cumulative Installed Wind capacity in MW since 2001CITATION Wik18 l 1033 (GWEC, 2017) and the major contributors are
China: 30,753 MW (48.5%)
United States: 8,598 MW (13.5%)
Germany: 6,013 MW (9.5%)
India: 3,612 MW (5.1%)

Figure SEQ Figure * ARABIC 1 Cumulative Installed Wind CapacityBecause of this rapid market growth, especially in booming markets such as the US, China, Germany, India and Australia, wind turbine demand continues to strip the world’s cumulative supply capacity which has put pressure on suppliers to construct new factories, to study the market trends for the sourcing of materials, to analyze the potential suppliers, to improve the logistics involving transport, construction of assembly points, warehousing, operational maintenance and installation equipment which made this sector has increased challenges on all sides.
Introduction to the value of Wind Energy:
The value of wind power for societies lies in utilizing a domestic and abundant renewable resource to power an energy future with more energy self-sufficiency and low long-term predictable energy costs in avoiding the harmful effects of emissions from thermal power plants. The value of wind power for owners is primarily generated from power production. While most owners appreciate the green attributes of the technology, wind power owners are almost always commercial, and their willingness to invest depends upon the projected internal rate of return on the initial investment. Wind power as an energy source has undergone a remarkable technological development and is considered among the fastest, cheapest and most reliable energy technologies in the market, and the technology benefits from regulated, relatively stable and predictable markets in most developed countries throughout the world. All in all, the value to society as well as owners to owners is generally high. The recent report from International Energy Agency, “The power of Transformation”, shows that “any country can reach high shares of wind cost-effectively” adding that the key to success lies in “transforming the system, rather than adding wind power on top”. Several countries and regions (e.g. North-western Europe, Iberia, South-western USA, Ireland and UK) will before 2020 have relatively high shares of variable renewable electricity according IEA CITATION Meg14 l 1033 (Megavind, 2014)In the wind industry, focus has been on decreasing costs of energy for several decades. On average, wind power has decreased it costs by 40% every ten years CITATION Wik18 l 1033 (GWEC, 2017). This quest is a result of competition between manufacturers to be able to offer turbines with the highest return on investments for potential investors. The competition has always been a race towards still cheaper turbines with still larger annual energy production. Investors and the industry use Levelized Cost of Energy (LCOE) as a measure to project costs. LCOE is defined as the annualized cost per produced MWh seen over the entire lifetime of the wind power plant divided by the expected annual energy production (AEP) from the wind power plant.

The drive to reduce LCOE is as strong today as it has ever been. In this report, the working group has attempted to look at potential solutions that may further increase the owners overall value of their wind power assets, when these assets are placed in markets where there is a high wind power penetration. The value of wind power assets is primarily derived from annual energy production. Total annual energy production and income of a specific asset is therefore highly dependent on the specific wind resource of a given site, and the distribution of this resource over time. Turbines placed in high penetration markets thus experience longer periods of supplying power at times where total wind production is high. As wind power has low marginal costs, these periods of high instantaneous wind penetration usually mean that obtainable average income for these turbines tend to be lower than on comparable sites where wind power has a lower instantaneous penetration. In these markets with high penetration, it is increasingly relevant to consider whether there is a technological solution to this challenge.

1. Research Focus and Scope
The scope of the project is to review the status of Wind turbine generator system manufacturing and analyze the problems of the supply chain from a macroscopic view as there are many key components of WTG’s still need to be imported, well versed with the transportation facilities and thereby building a successful wind industry. The objective of the research is to provide an assessment of the LCoE (Levelized Cost of Energy) and its optimization with respect to the supply chain and logistics in the offshore wind market, identifying the optimal way to generate further reduction of the LCoE is the major key to develop the large potential in the Offshore Wind which requires vision and setting policies for developing larger scale offshore wind for the future years.
The Research Focus is on assessing the possibilities for further and continued cost reduction. The main objective is to outline the offshore wind agenda for the coming years and to determine the required actions in the short and medium term.
As per the historic study on the Wind energy sector, it is a young sector relatively with other forms of Conventional Energy Sources. It must further face potential challenges for large scale implementation according to the country’s specific energy requirement, expectation of competition and standardization across the Supply Chain which are the major cost levers in the offshore Wind market.
Global scenario in the wind power utilization.

Wind energy capacity management.

Component Suppliers and its supply of key components.

Challenges and possible solutions for the improved supply chain management.

LCoE (Levelized Cost of Energy) and its’ effects.

2. Literature Review
2.1 Global Scenario:
As of the end of 2016, the worldwide total cumulative installed electricity generation capacity from wind power amounted to 486,790 MW, an increase of 12.5% CITATION Wik18 l 1033 (GWEC, 2017) compared to the previous year. Installations increased by 54,642 MW, 63,330 MW, 51,675 MW and 36,023 MW in 2016, 2015, 2014 and 2013 respectively.

Since 2010 more than half of all new wind power was added outside the traditional markets of Europe and North America, mainly driven by the continuing boom in China and India. At the end of 2015, China had 145 GW CITATION Wik18 l 1033 (GWEC, 2017) of wind power installed. In 2015, China installed close to half the world’s added wind power capacity.

Several countries have achieved relatively high levels of wind power penetration, such as 39% of stationary electricity production in Denmark, 18% in Portugal, 16% in Spain, 14% in Ireland and 9% in Germany in 2010. As of 2011, 83 countries around the world are using wind power on a commercial basis. Wind power’s share of worldwide electricity usage at the end of 2014 was 3.1%.

In 2015, global wind power capacity increased by 63,330 MW or 17.14% from 369,553 MW to 432,883 MW. CITATION Wik18 l 1033 (GWEC, 2017)
Figure SEQ Figure * ARABIC 2 Installed Wind Power Capacity3606800559435Data on Global scenario in Wind power capacity as of 2015 CITATION Wik18 l 1033 (GWEC, 2017)Country wise Installed capacity data
Country wise newly installed capacity data
020000Data on Global scenario in Wind power capacity as of 2015 CITATION Wik18 l 1033 (GWEC, 2017)Country wise Installed capacity data
Country wise newly installed capacity data

Figure SEQ Figure * ARABIC 3 Installed capacity & Newly installed capacity by country wise in 20152.2 India as a major Contributor in the Wind Energy Industry
2.2.1 Supply chain Scenario:

Figure SEQ Figure * ARABIC 4 Supply chain hierarchy of WTGS19126202751455 CITATION Bab17 l 1033 (Sarker, 2017) CITATION Bab17 l 1033 (Sarker, 2017)19126202751455Figure SEQ Figure * ARABIC 5 Offshore WTGS Supply chain CITATION Bab17 l 1033 (Sarker, 2017)Figure SEQ Figure * ARABIC 5 Offshore WTGS Supply chain CITATION Bab17 l 1033 (Sarker, 2017)191262062407802.2.2 Typical Supply Chain of Offshore WTGS716280831215Pre-Assembly
WTGS Scenario:
India has a set of targets of achieving overall wind energy installed capacity of 27,300 MW by 2017 and 38500 MW by 2022. Government, being more optimistic than the industry favoring higher installation of renewable energy power plants in the country. There is a huge opportunity in the wind energy market in India in the coming years. Here are some unique challenges typical for wind power plants for such ramp up of the preparation, manufacturing, sources, installation and operating the wind power plants. CITATION Gir15 l 1033 (Paliwal, 2015)Expected life time of 20 years and now there is already trend to discuss about 25 years. That needs a very high level of reliability of each of the part, material, subassembly, machine and the processes to build a wind power plant in its entirety. The customers are evolving to become mature and most investors looking at their investments on long-term basis and they review their options very seriously and critically. So, the supply chain perspective for wind mills must consider a much longer time horizon on their supply chain structure and its reliability.

Wind energy business, very attractive in terms of potential, possibilities, favorable environment, is at the same time an “unforgiving” business. The reputation and corresponding value that wind companies have created over decades can be eroded with just a few failures and breakdowns. This has implications on how wind companies are structuring their supply chain and its quality management system.

The information and data on performance and reliability of the machine is not just restricted to the manufacturer and the owner, as is the case in most other products, it is visible to all. A machine not rotating for a week can be noticed by anyone passing by.

The interest rates in India for any investments including funding of the wind power plants have remained high during last few years and expected to remain high as compared to global levels for some more years in future. This puts immense pressure on the cost of the wind power plants on per MW basis.
The volumes of components and parts though increasing in totality are still at a very low level on per annum basis as compared to many other industry and products and reference example being automotive and even off-road vehicle industry. So, while wind companies cannot expect to get advantage of scale of production, the demand on quality and resources from suppliers remain of very high levels. And therefore, very little is left for the supply chain managers to engage with suppliers on cost and price front.
The Wind Power plant consists of such a large variety of material, parts, components and technologies that getting into an “expert” level of understanding of all elements to derive and drive benefits of such knowledge is more difficult than what would be desirable.

For the Indian context, the Wind energy technology is yet to be “assimilated” across the supply chain in India. Also, the sources of parts and material are spread widely across the globe with multiple and complex cultural, economic dynamics playing.

The wind energy value chain consists of broad specific steps – from the supply of raw materials to the transmission of electricity with multiple interlinks and sub steps for each.

A trend in the wind energy industry is the move towards vertical integration along this value chain of Wind Operated Electricity Generator. With supply chain bottlenecks a constant threat, many of the large wind companies have responded by either acquiring suppliers of critical components or creating in-house production facilities such as blades, generators, towers and gearboxes. By bringing suppliers in house, they could ensure they would get the products they needed on time, and at an acceptable price.

Figure SEQ Figure * ARABIC 6 WTM activities – range and flowWind energy business is composed of developers, manufacturers and operators. Wind turbines manufacturers (WTM) generally embrace a range of activities including: the development, design, production, construction, operation and service of wind turbines. CITATION Gir15 l 1033 (Paliwal, 2015)2.2.2 Major Players of Supply Chain:
There are three different types of players in the downstream supply chain of the wind energy industry. First tier customers of wind energy are the Independent Power Producers (IPPs) and corporate or individual owners of smaller number of machines. OEMs and developers, these are turbine manufacturers and developers. Owners like financial institutions, utility companies, private companies, banks consortium. Financial institutions, bank, private equity venture capital, clean energy fund, capital markets. The main initiating point in supply chain management is Demand Management and forecast about the number of wind turbines to be installed at various regions and this factor is depend on the various parameters like Government policies viz. Generation Based Incentives (GBI), Depreciation benefits, tariff rate at different states, evacuation capacities of a country/province, basic infrastructure facilities etc. Another factor to be considered here is suitability of wind data like wind speed, pattern of wind, land availability and its effective management, liaison with government authorities like forest department, local bodies like Gram Panchayat, localities etc. All these factors are affecting the potential demand for wind energy business. Customers are interested in ROI and accordingly decisions are taken and orders are being placed to wind energy convertor manufacturer. In the financial year the New Government has declared depreciation benefits to be continued which was discontinued and this could be the main reasons to attract the business from the retail customers for availing rebate in income tax. Now a day’s customers are aware on what they can and should expect from a wind power plant. Their understanding about the technical details and specifications about the wind operated electricity generators is evolving both in technical depth and operation width and they are very keen to understand the various process about the manufacturing of wind turbine parts, components etc. CITATION Gir15 l 1033 (Paliwal, 2015)2.3 Overview of Wind Farms
The process of getting energy from the wind into the home or business is complex and involves many players. A modern wind turbine consists of an estimated 8,000 parts and can be up to 300 feet high. Turbines must be designed, built, transported, and erected before they can start producing energy. This process can be split into three major phases: manufacturing, project development, and operation and maintenance. In a successful project, these phases overlap and there is substantial communication among players in all three phases.

Figure SEQ Figure * ARABIC 7 Wind energy hierarchy (BLS, 2009)2.3.1 Wind Turbines, types and Costs involved
There are two basic types of wind turbines:
Horizontal-axis turbines and Vertical-axis turbines
The size of wind turbines varies widely. The length of the blades is the biggest factor in determining the amount of electricity a wind turbine can generate. Small wind turbines that can power a single home may have an electricity generating capacity of 10 kilowatts (kW). The largest turbines have generating capacities of 5,000 kW to 8,000 kW. Large turbines are often grouped together to create wind power plants, or wind farms, that provide power to electricity grids.

Horizontal-axis turbines (HAWT)
Horizontal-axis turbines have blades like airplane propellers, and they commonly have three blades. The largest horizontal-axis turbines are as tall as 20-story buildings and have blades more than 100 feet long. Taller turbines with longer blades generate more electricity. Nearly all the wind turbines currently in use are horizontal-axis turbines.

Vertical-axis turbines (VAWT)
Vertical-axis turbines have blades that are attached to the top and the bottom of a vertical rotor. The most common type of vertical-axis turbine—the Darrieus wind turbine, named after the French engineer Georges Darrieus who patented the design in 1931—looks like a giant, two-bladed egg beater. Some versions of the vertical-axis turbine are 100 feet tall and 50 feet wide. Very few vertical-axis wind turbines are in use today because they do not perform as well as horizontal-axis turbines. CITATION USD17 l 1033 (U.S. Department of Energy, 2017)
Figure SEQ Figure * ARABIC 8 Types of Wind Turbine Generator systems CITATION USD17 l 1033 (U.S. Department of Energy, 2017)The capital cost is slightly higher than fossil fuel power plants but much lower than a solar power plant. For a wind farm, the capital cost ranges between 4.5 crores to 6.85 crores per MW CITATION Wik18 l 1033 (GWEC, 2017), depending up on the type of turbine, technology, size and location. The Running Cost of a Wind Farm is very low as the fuel cost is zero and operations and maintenance costs are low also.

Wind Power Plants in India seen a phenomenal growth of around 33% CAGR in the last 5 years and the total capacity at end of 2010 was 11800 MW with most of the capacity installed. GWEC has set an ambitious target of 65 GW for Wind Energy in India by 2020 which means an addition of 5 GW each year which seems too high given the wind power potential in India is only around 65 GW. CITATION Akb17 l 1033 (Khan, 2017)
Figure SEQ Figure * ARABIC 9 Turbine Model WTG – Prototype Testing Cost2.4 Key Components of WTGS and its challenges CITATION Yes15 l 1033 (Vibhakar, 2015)The WTG consists of four key components: rotor, nacelle, tower and foundation. The OEM primarily supplies equipment for the WTG, the foundation gets cast on site.

Rotors: Captures the wind
The rotor consists of blades and a hub which holds and pitches the blades. Generally, the blades for the rotor and hub come from different factories. Today, universally the rotor consists of a set of three blades, which means blades from one set may not be used for another as they are balanced and make a set. Today blades are becoming larger and larger. Currently, the largest onshore rotor diameter in India being sold is 114 meters, each blade being about 55-meter long. However, larger ones will follow. Once the 50-meter mark is crossed, each such blade may weigh over 9 tones. Whilst inbound logistics for blade manufacturing may not be so much of a challenge, its outbound is one of the biggest challenges. Surface outbound is generally by road, though rail is also used but not in India. To name a few key issues: Vehicle length, ability to negotiate turns, support/cages to withstand transit shocks, loading at factory, vehicle transit time from loading to off-loading, unloading at site/ port. Many OEMs have responded differently to such situations like moving manufacturing lines near to points of consumption or ports. If nearer to site, the economics need to work out and it is not only the costing, but also the ability to get the required skilled workforce. Another key supply chain challenge in the manufacturing of the blade is the disposal of waste generated. Much of it falls under the hazardous category and many items have very limited economical uses. Within the key challenges for inbound, especially in India is significant quantities of material may need to be imported, amounting to longer lead times and balancing between ‘Economies of scale’ and ‘Optimal Working capital’. Further, many of the materials have a shelf life and are sensitive to atmospheric conditions. FIFO (First in, first out) must be strictly followed for many materials, especially glass and resin.
Nacelle: Converts wind (kinetic energy) to electrical energy
Nacelle is an Assembly of the parts that converts the mechanical energy into electrical energy. To do so, it has control systems to sense the wind direction and speed so that it can yaw itself to face the wind direction as well as pitch the blades in or out. Many call it the heart and mind of the WTG. Depending on the technology used, the type of components within the nacelle will change. This part of the WTG has the largest BoM (Bill of Materials), most of it metal contributing to a large head mass.  Besides the large bill of materials, most of the items demand a specialization, which increases the supplier footprint to diverse locations. The challenges supply chain face is enormous; commonality of parts between models, developing vendors for quality, supply security and cost, coordinated sourcing for balanced BoM procurement, maintaining inventory for turbine life, loading ; unloading, vehicle capacity for weight/axle, transit, especially over old infrastructure of bridges, culverts, etc. For the models currently 0469836504698365Figure SEQ Figure * ARABIC 10 Cross-sectional view of WTGS CITATION Dur09 l 1033 (NC, 2009)Figure SEQ Figure * ARABIC 10 Cross-sectional view of WTGS CITATION Dur09 l 1033 (NC, 2009)047244000in the Indian market, the weight of the larger nacelle and hub can be around 100 tones. CITATION Tho17 l 1033 (Thomas Poulsen, 2017)Towers: Establishes the hub height
Towers vary in height and type – and at some regions are considered as BoP. Besides the function of holding the Nacelle ; hub assembly, the tower has other functions too. The access to the Nacelle, either through ladder or lift is housed in the Tower and so are cables for Power Evacuation. Further the Bottom panel and Transformer may also be housed within the Tower. Before the advent of Industrial turbines, the towers used to be of Wood or Masonry. Today’s industrial turbines have towers of Steel or RCC (Reinforced Cement Concrete). Within Steel they may be framework (lattice, space frame), tubular or hybrid of tubular and framework. There are also Hybrid of Concrete and steel. Lattice towers are assembled on site, whereas for concrete towers, the batching plant is generally set up near the site. As taller towers are demanded to tap a higher PLF (Plant Load Factor), the advent of different concepts come up. Different material combinations and technologies – from tubular split to membrane covered space frames. Towers are one of the most fascinating parts of the Supply Chain – the cost, lead time to deliver, freight weight and volume tend to remain fixed for other components – but for Towers, the options are many. Still, all the challenges that are seen in the Nacelle and Blade get combined in the Tower. Also, the challenges of material quality and its ability to remain standing for the life of the turbine remain – in a Nacelle one may change a part – but to change something in the Tower may call for the de-erection of the whole turbine. Material quality and its performance reliability are of utmost importance.

Foundations: To whom all environmental and gravitational get transferred.

Foundations are cast on site and hence would not form part of the equipment supply. Like the adage, ‘when the goings get tough, the tough get going’, the supply chain challenges in the wind industry have got more complex and larger. Probably, it is because of it, the industry has and is maturing well. Two decades ago when the industry started gaining foothold in India, the entire turbines used to be imported, thereafter components and today it is largely raw materials for the blade and some specific components/parts for the nacelle and tower. Today, so many parts are made in India. The ‘Make in India’ for wind turbines is a reality. With a little bit of support, and continued perseverance of the OEMs, what is likely to be a reality is ‘Make in India’ and install across the world. CITATION Yes15 l 1033 (Vibhakar, 2015)

2.5 Study of LCoE
A key measure of the competitiveness of offshore wind is LCOE. A levelized cost of energy (LCOE) approach was applied to the estimation of the potential cost.
LCoE Measures lifetime costs divided by energy production
The cost reduction potential of the WTG and foundation costs have the largest impact, since these are relatively large contributors to the LCoE.
Calculates present value of the total cost of building and operating a power plant over an assumed lifetime.

Comprehensive data on installation costs and sourcing costs (depends on market performance) and supply chain &logistics costs are crucial to understanding the current cost of electricity and opportunities for future cost reductions and thereby LCoE.

LCoE Concept explained well in the below figure. CITATION Off15 l 1033 (Office of Indian Energy , 2015)
Figure SEQ Figure * ARABIC 11 LCOE concept showing the hierarchy of complete Energy system2.6 Dependent factors of LCoE and its calculation
1447800165100 Sum of Costs over lifetime
00 Sum of Costs over lifetime

42545040640LCoE =
00LCoE =
12954008890 Sum of Energy produced over lifetime

00 Sum of Energy produced over lifetime

CITATION LCo15 l 1033 (LCoE calculation, 2015)1051560207010LCoE =
00LCoE =
It = Investment Expenditures in year t (including financing)
Mt= Operations and Maintenance Expenditures in year t
Ft= Fuel Expenditures in year t
Et = Electricity generation in year t
r = Discount rate
n = Life of the systems
Initial capital cost (ICC) and capacity factor are two critical drivers, but discount rate (financing costs) and annual operating expenses (AOE) are non-trivial. CITATION Off15 l 1033 (Office of Indian Energy , 2015)
Figure SEQ Figure * ARABIC 12 Sensitivity analysis of LCoE CITATION Off15 l 1033 (Office of Indian Energy , 2015)2.7 Market & supply chain as driver for cost reduction
The LCOE of a wind power project is driven by total installed costs, wind resource quality, the technical characteristic of the wind turbines used, O&M costs, the cost of capital and the economic life of the project. Thus, the LCOE depends largely on four factors in general.

• Capacity factor: This is the result of an interplay of several variables, among which the most important is the nature and quality of the wind resource, followed by wind turbine design and operational availability – including potential curtailment.
• Total installed costs: The turbine cost is usually the single largest cost item in a wind project, though depending on the complexity of the project, its share can be less important. This is even more so for offshore wind projects.
• WACC: The cost of debt, the equity premium of the investors, and the share of debt and equity in a project all go towards the final value of the WACC.
• Operations and maintenance costs: Operational expenses consist of both fixed and variable costs and can represent up to 20%-25% of LCOE.
Offshore Wind Turbine Generator Systems:
Out of which, Market and Supply Chain developments are the major factors responsible in the reduction of LCoE. The market and supply chain in the offshore wind sector is eager to respond to strategic choices in policy, legislation or specific roll-out scenarios. Here are the four cost reduction drivers have been identified within the offshore wind market and supply chain; competition, collaboration, scale & growth effects and project management & development. These could lead to a combined 19% reduction of the LCoE by 2020. CITATION Roy16 l 1033 (Royal Haskoning DHV, 2016)
Figure SEQ Figure * ARABIC 13 Responsible factors for LCoE CITATION Roy16 l 1033 (Royal Haskoning DHV, 2016)There are opportunities to optimize the logistical process of installation through standardization, interface management, and increased efficiency. More specifically, the outcome shows that cost reduction could be achieved through: When a stable roll-out is guaranteed, harbors will increase their investment in multipurpose facilities or dedicated terminals. The offshore wind sector is now considered a short-term client for harbor facilities; work is often completed within 6 months. It was indicated that each of the three scenarios (base case, 4*1250 MW and 1*5000 MW) would be an interesting scenario for the investments in multipurpose facilities or dedicated terminals. A cost reduction potential of 20% on harbor costs was mentioned which can be proposed as follows.

Usage of the same installation vessel with barges for various components.
Feeding of the installation vessel instead of using the installation vessel for transportation.
Ability to work between 6 and 6 instead of 24 hours a day allows for optimal planning of transportation and installation which increases efficiency.
Management of interface risks2 and planning can be optimized and started earlier in the process of offshore wind farm (OWF) development.
This will reduce waiting time and will allow for cost savings. All these aspects will reduce the installation time per foundation/turbine and accordingly reduces costs. Scale is needed for optimization (coordination and structuring) of the installation flow. The more positions/foundations/turbines are included in one project, the more efficient the installation process becomes and the more cost reduction is achieved. The installation of larger projects will require more manning and equipment. There will be savings in relation to one-off costs (mobilization, demobilization) and there will be benefits from a larger learning curve and the possibilities to maintain trained staff. The future developments towards larger turbines, requires larger foundations, and accordingly larger equipment which can transport and install these larger turbines, e.g. roll-on roll-off technique. The market will be able to supply this equipment, but requires 1 or 2 years to respond with the necessary development and production. To determine the required investment, it is necessary for developers to look 3 to 5 years ahead.
Several consulted organizations indicated that scale is needed for optimization, but up to a certain limit. Congestion and supply shortage may occur (temporary 1 or 2 years) during the time that suppliers are making the necessary investments required for increased production.

3. Research Methodology and Hypotheses:
Offshore Wind Farm — Four distinctively different life-cycle phases, i.e., Development & Consent, Installation & Commissioning, Operations & Maintenance, and Decommissioning
Strategic choices in policy making between the OEM and Potential Suppliers at the time of Sourcing of Key Components of WTG’s with respect to the market and legislation can lead to 19% reduction of the LCoE. CITATION Roy16 l 1033 (Royal Haskoning DHV, 2016)Logistics makes up a significant portion of the cost of each of these four life-cycle phases and is often embedded or hidden in other cost items not captured by current LCoE models.

Typically, the OWF can operate for 20–25 years where in OpEx calculations, the logistics cost component had qualitatively been estimated at 26%. CITATION Ene17 l 1033 (Energies , 2017)Objectives –
Is it indeed feasible for the industry practitioners to implement the identified LCoE savings opportunities?
Do the offshore personnel of the industry practitioners required to implement many of the actual cost-out savings needed for LCoE when compared to the government personnel in capitalizing?
Could a specific life-cycle phase, such as Operations ; Management, be examined in detail and generate practically implementable cost-out opportunities in logistics involved that can realistically be implemented by industry practitioners to reduce the cost of offshore wind?

419735013652600-2921005588000-247650104775Strategic Sourcing
Key Barriers
0Strategic Sourcing
Key Barriers

Total Cost / Total energy for the life time
Total Cost / Total energy for the life time

1593850113665Assembly points
Nacelle – 65000 components
Sub assembly routines
On-site Warehousing
00Assembly points
Nacelle – 65000 components
Sub assembly routines
On-site Warehousing

21831302794000 LIMITATIONS



3054350193675-1333502571751092200191770 Sum of Costs over lifetime
00 Sum of Costs over lifetime
0331470LCoE =
00LCoE =

9271001270 Sum of Energy produced over lifetime
00 Sum of Energy produced over lifetime


Using the above Conceptual framework, Hypotheses are designed with respect to a certain project working on the supply chain of offshore Wind Turbine Systems and thereby analyzing the main three factors Cost of Assembly Points, Transportation ; Transshipment Costs (Freight-in ; out charges) and Cost of Operations and Management in Supply Chain affecting the Levelized Cost of Energy and proposing methods to reduce it.
Further understanding the practical scenarios whether the proposed frameworks and models can be implemented in the industrial practices of the Wind Energy Sector.

One such Ongoing live Project is AUSTRALIAN PROJECT ON OFFSHORE WINDFARM which will be used a major Case study from the practical perspective.

3.2 CASE STUDY: AUSTRALIAN PROJECT ON OFFSHORE WINDFARM CITATION Jas17 l 1033 (Jason Deign, Greentech Media, 2017)Few Details about the Australian Offshore Wind Farm Project
$ 8bbillion 2GW project.

First International Funding Project, by international Green Energy Investment Fund.

25km off the coast of Victoria’s Gippsland region
Long term serious investment for the lifetime.

Future elaboration into 250 turbines over 574 sq km, can generate 8000GW.
Territorial boundaries of the project components

Figure SEQ Figure * ARABIC 14 Territorial boundaries of the project CITATION Sop18 l 1033 (Sophie Vorrath, 2018)3.3 Research Objectives:
•To analyze the support network and the wind energy capacity management and end to end operations in the supply chain of key components of WTGS.

•To study the major component suppliers of WTGS and the challenges faced in sourcing.

•To analyze the logistical hierarchy from the sourcing, until the plant installation.

•To study the sourcing and logistics of the key components of WTGS and the effect of LCoE (Levelized Cost of Energy) on the offshore wind industry.

•To analyze and draw the inference from the information collected from the interviews.

•To work on the possible solutions for the improved supply chain management with the reduction in the LCoE.

3.4 Problem Statement, Research Question:
Global baseline for LCoE is still high in the Wind Industry (compared to other renewable sources), can it be further optimized?
3.5 Hypotheses:
The present LCoE can be still reduced comparatively.

The estimated effect of Supply Chain & Logistics factors is positive in reducing LCoE.

9450070459740Expert Interviews
Expert Interviews
The Supply chain readiness has a positive impact on the exponential expansion of Offshore wind.

3.6 Research Methodology:


3106947940993409067240912Expert Interviews
00Expert Interviews
19605364803300867765233917Supply chain
00Supply chain




3.7 Expert Interviews (as of now):
INWEA in charge
Dimitris Kokkinos – Geopolitics in Energy Sector and Impact on International Business Decisions.
Neeraj – Supply Chain in a broader perspective.

Rosana – Project Manager, Unilever.

4.0 Limitations:
Study of the hardware and the technology involved in the production unit.

Study of the working methodology and the principles behind the Wind Energy.

Study the impact of the global economy on the Wind Energy segment and business growth.

Study of the market scenarios in different countries and their profit-making models.

BIBLIOGRAPHY BLS. (2009, Sept). www.bls.gov. Retrieved from BLS: https://www.bls.gov/green/wind_energy/
Energies . (2017). The Role of Logistics in Practical Levelized Cost of Energy Reduction Implementation and Government Sponsored Cost Reduction Studies. Day and Night in Offshore Wind Operations and Maintenance Logistics, 4-7.

GWEC. (2017, March 09). Global Wind Report Annual Market Update. GWEC. Retrieved from Wikipedia: https://en.wikipedia.org/wiki/Wind_power_by_country#cite_note-GWEC-2015-3
Jason Deign, Greentech Media. (2017). Wind Projects. The Big Problem Facing Offshore Wind in Australia.

Khan, A. (2017, June 15). Wind Power Plants in India – Guide to Cost. Retrieved from QUORA: https://www.quora.com/What-is-the-cost-of-setting-up-a-Windmill-power-plant-1-MW
LCoE calculation. (2015, 09 18). Retrieved from www.solarmango.com: http://www.solarmango.com/ask/2015/09/18/what-is-levelized-cost-of-electricity-lcoe-and-how-to-calculate-lcoe/
Megavind. (2014). Increasing the Owners’ Value of Wind Power Plants. Denmark: IEA, The Power of Transformation.

NC, D. (2009, Sept 2). Center on Globalization, Governance and Competitiveness. Retrieved from www.cgcc.duke.edu: http://www.cggc.duke.edu/environment/climatesolutions/greeneconomy_Ch11_WindPower.pdf
Office of Indian Energy . (2015, Aug). Levelized Cost of Energy (LCOE). Retrieved from www.energy.gov: https://www.energy.gov/sites/prod/files/2015/08/f25/LCOE.pdf
Paliwal, G. (2015). Supply Chain Scenario of Indian Wind Energy Industry. The Value Chain, 8-9.

Royal Haskoning DHV. (2016). Large Scale development of Wind Energy, far offshore and after 2023. In consultation with TKI Wind op Zee.

Sarangapani, S. (2015, jan). Criteria for WTG Prototype Certification . Retrieved from www.indianwindpower.com: http://www.indianwindpower.com/pdf/IWTMA_magazine_v1_issue1_Dec_14-Jan_2015.pdf
Sarker, B. R. (2017). Osshore WTGS Supply Chain.
Sophie Vorrath. (2018). Renew Economy. Plans for Australia’s first offshore wind farm gather pace.

Thomas Poulsen, R. L. (2017). Key components of WTGS.
U.S. Department of Energy. (2017, Nov 28). EIA. Retrieved from www.eia.gov: https://www.eia.gov/energyexplained/index.cfm?page=wind_types_of_turbines
Vibhakar, Y. (2015, Jan). Wind OEM Supply Chain – Challenges. Retrieved from http://www.indianwindpower.com: http://www.indianwindpower.com/pdf/IWTMA_magazine_v1_issue1_Dec_14-Jan_2015.pdf


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