A pioneering offshore wind company has unveiled details of its multi-billion pound INTOG plans; aiming to decarbonise “every rig” sitting in Scottish North Sea waters.
Cerulean Winds is bidding for four huge gigawatt-scale sites from Crown Estate Scotland when the auction opens in August, which are expected to fetch around £6billion each.
If successful, the company estimates the work would create more than 10,000 jobs in the UK, with the majority in Scotland, with ‘full fabrication and assembly’ of the wind turbine towers and foundations to take place in Britain. Brittany.
The aim is to help the Scottish supply chain grow in scale and expertise now that key ScotWind contracts are approaching later in the decade.
It comes as Crown Estate Scotland is due to open the Innovation and Targeted Oil and Gas (INTOG) auctions next month; a program of floating wind projects to supply green energy to offshore platforms.
Cerulean – INTOG
Ultimately, through its electrification plans and other means like using green hydrogen, Cerulean believes it can help every offshore facility meet government-mandated emissions reduction targets of 25% d by 2027 and 50% by 2030.
Engineering company NOV was hired as the main contractor – which in turn signed a memorandum of understanding (MoU) with UAE-based manufacturer Lamprell on the foundations.
Despite this, Cerulean promised that the manufacture of the foundations and towers would be done in the UK. He added that “our partners are expected to be in the UK” to build heavy manufacturing capacity and “the levels of work involved would lead to substantial overseas investment in the Scottish economy”.
Speaking to Energy Voice, Director Mark Dixon said: “We want to create a system that enables every rig, if it can, to decarbonize and by creating an affordable cost base of energy, you offer this opportunity.
“When we talk about the magnitude of this to any group initially they say, ‘wow, that’s big’,” he added, but “the climate challenge is huge, we can’t not produce enough green energy fast enough as a planet to do what we need”. to do – so of course it’s big”.
The plans are modular so can be built “like a set of Legos for power generation”, providing economies of scale.
The company is the brainchild of offshore engineering pioneers Dan Jackson and Mr. Dixon, whose previous company DeepSea Engineering was acquired by McDermott International.
Last year Cerulean announced a program similar to this, but it has been modified for the INTOG cycle which has since been unveiled by the Scottish Government.
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At its heart is the ambition for four separate sites – one in the east and west of Shetland and two in the central North Sea.
Because the offshore wind is intermittent, wind farms must deliver many times more power than needed for rigs, hence the gigawatt scale.
Excess electricity will be converted into green hydrogen sent to a processing plant in Shetland – and one or two others in the north of Scotland and the east of England – to deliver to local markets.
Each site will be funded through a special purpose vehicle (SPV), owned by Cerulean Winds and institutional investors, covering 30% of the capital needed.
The remaining 70% of funds will come from the infrastructure debt market, where investment banks Societe Generale and Piper Sandler have been engaged.
Cerulean said he had no concerns about hitting funding targets, with investors “on hold,” but money won’t flow until INTOG’s leases are secured.
Adopting this approach means that oil and gas companies will be insulated from development costs and only need “plug and play” for the energy they use, at a guaranteed price – the company is also in talks on the flexibility of power purchase agreements for platforms whose production shutdown dates are uncertain and therefore have unclear economics.
However, electricity costs are only one piece of the puzzle, with some operators facing “prohibitive” costs to modify electrification platforms.
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In these cases, an as-yet-undisclosed Cerulean supply chain consortium partner will retrofit gas turbines onboard the platforms to take a hydrogen blend, helping them meet emissions targets, or finding a hydrogen solution for heat.
Mr Dixon said: ‘Understanding how you come in and retrofit in situ so you can take a mixture of hydrogen, then that starts to solve that brownfield problem, and that’s where we go to a solution tailor-made for each installation
“You have green electrons and green molecules, and it is this combination that is supplied to the platforms from the INTOG lease.”
Cerulean INTOG success – will it happen?
Cerulean is targeting four sites each requiring around a million tonnes of steel for the foundations and towers, which “could cover the lot” in terms of decarbonizing the offshore platform.
However, Cerulean said he recognizes that INTOG is a “competitive process” that also includes smaller projects, although Mr Dixon said these have “a certain attractiveness that goes away because it doesn’t is not profitable”.
Cerulean has also been in talks with companies that are also studying shore power and how its projects would interact with that infrastructure.
INTOG is looking to offer option deals in the winter of 2023, so the projects are expected to be operational well before ScotWind, giving the supply chain a chance to grow.
If Cerulean gets the acreage from INTOG, it will be responsible for four million tonnes of steel needed for the new floating projects – which the Scottish supply chain simply cannot deliver on its own, Mr Dixon said.
According to Cerulean’s plans, some 10,000 jobs in the UK would be created through manufacturing and assembly, with work expected to ‘far exceed’ the 50% local content target set out in the transition agreement from the North Sea.
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It remains to be seen how this will be achieved as ‘large-scale manufacturing left Scotland and the UK a long time ago’, said Mr Dixon – the plan is to try and close the gap quickly .
“No company knows how to scale, and that’s no disrespect to any of the companies, but they don’t operate at yard scale or anywhere else in the world.
“I think that’s why there have been real challenges with fixed wind contracts in the past and competitiveness.
“We have very specific information from our contractors about the differences, for example, in the construction of turbine towers in competitive locations and in Scotland.
“So we have access to that, so we know what we need to do to close that gap and help the supply chain close that gap.”
Cerulean’s aim is to have “as many contractors as possible with experience of building, manufacturing and assembling whole units” in the UK, and a request for information has been sent to the entrepreneurial community.
Not everything can be done in the UK – hence the non-binding Memorandum of Understanding with Lamprell. In both cases, the company needs more partners to deliver the work and uses British shipyards.
“Lamprell sees the market, they see their role and they see their role to be able to come into a space set up for themselves and also to work with the supply chain that is already there.
“They’re not necessarily there to move, because if you add up all the tonnage – Four million tons, if we get it all, we should deliver that.”
On Scottish manufacturing and assembly, he said it would be “not at the start of the project – it’s too early, they need time to grow and ramp up”.
“But at the end of the project, if you have five of the big manufacturers running: ‘I built six floating wind turbines from scratch. I now know how to do it. I have a process, I will be much more competitive with foreign companies”.
“We are working with them to bring the knowledge that lies outside of the UK to large-scale manufacturing.”
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