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Vertical Integration in Offshore Wind

Led by European utilities, offshore wind has emerged from a niche market to one of the largest opportunities for growth in the global wind industry. The global offshore wind market, which is expected to install nearly 43GW by 2020, has recently accumulated turbine orders exceeding 6GW, covering demand through 2013. Europe is set to lead global offshore expansion, with around 76% of the global offshore wind installed between now and 2020.

{access view=!registered}Only logged in users can view the full text of the article.{/access}{access view=registered}Turbine manufacturers seem to be preparing themselves by vertical integration and they plan to be involved in the maintenance and construction of wind farms as well. An increasing number of offshore wind projects in the near future will lead to high demands for installation and maintenance vessels. Clearly turbine manufacturers expect that this might be a bottleneck in the process and they are investing in their own vessels or forming alliances with current players in this market.

Just recently REpower announced its new offshore service concept. From 2013 the company will use a tailor-made jack-up vessel and two further special ships for the maintenance of future offshore wind farms. At the heart of this concept is a jack-up-crane vessel, a hub platform that operates independently in the wind farms. It is designed for permanent operation at sea and accommodates a crew of up to 90 people. But REpower is not the only company doing this.

Bard Offshore followed this strategy from the beginning. The Bard Group engineers, procures and constructs and also operates offshore wind farms on a turnkey basis. Bard has its own installation vessel ‘Wind Lift 1’, which is designed to the group’s specific needs for the installation of offshore wind farms.

Other manufacturers are forming strategic alliances with specialists in the field of offshore construction and maintenance. Areva is joining forces with Beluga Hochtief Offshore joint venture (a joint venture between Hochtief Construction and Beluga Shipping), to offer its customers an installation and maintenance solution for large-scale offshore wind parks in reduced time. With this partnership, the group will provide a new package based on a purpose-built jack up vessel. Beluga Hochtief Offshore developed the concept and the design to handle these tasks and will also operate and charter the vessel once it is constructed. The vessel should go into service in 2012.

In June this year it was announced that Siemens will become a significant shareholder (49%) in A2SEA A/S. The Danish energy company, DONG Energy, will continue to be the main shareholder of the company. A2SEA currently has four vessels in operation and recently signed a contract for the construction of a new vessel named ‘Sea Installer’. With Siemens as a new shareholder in the company A2SEA will now look into the possibility of expanding its installation capacity.

The moves towards vertical integration are a departure from the past half-century, when companies increasingly specialised, shifting functions like manufacturing and procuring raw materials to others. Historically, vertical integration is seen as usually bad for companies, and definitely bad for consumers. Some say that it is blocking competition and that the industry players will fight among themselves rather than looking to the future. In history there are examples of failures of vertical integration but success stories as well. What will be the case for the offshore wind industry? Let’s wait and see.

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