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Supply Chain Issues and Potential Bottlenecks

Will potential supply chain issues such as shortage of rare-earth mineral Neodymium or transport availability cause bottlenecks in the development of the US Offshore Wind industry?

The US DOE produced a comprehensive plan for Wind Energy in the US called Wind Vision, last updated in 2017. It projected 404 GW of onshore capacity by 2050, and forecasts US offshore wind having an installed capacity of 86 GW by that date. This assumes building large onshore and offshore arrays, and increasing the size of wind turbines, especially in the sea, while improving efficiency and maintaining a grid which can accommodate increasing levels of renewables.

The updated plan proposes many areas of improvement, including more research and better modelling, updated technology, streamlined permissions and regulation, monitoring of extreme weather events, and upscaling of supply chain, manufacturing and logistics.

This energy transition will accelerate and bring down carbon emissions: “The energy transition is affordable. As a proportion of world GDP, expenditure on energy will be lower in 2050 than today. Big shifts in investments are expected: more capex will go into grids and renewables than into fossil projects from 2029 onwards.

“Capital expenditure (capex) on both renewable generation and grids is accelerating, and will surpass new investment in the fossil sector by 2029 onwards. By 2050, 47% of the global energy expenditures will be capex for renewables and grids, up from 17% in 2016.” DNV GL Energy Transition Overview 2018

Coal Becoming A Stranded Asset

 Coal, in particular is becoming the ugly uncle in the fossil fuel family. Many coal plants are no longer financially viable or coming to the end of their productive lives. “With so much cheap wind and renewables coming on line, billionaire Warren Buffet’s Berkshire Hathaway-owned utility giant, PacifiCorp has concluded that most of its 10 coal fired plants, with a nearly 6,000 MW combined capacity, are no longer economically competitive.” Energy

This is good news for renewables, and given the opportunities that exist in the fledgeling US Offshore Wind market this should be good news for developers, supply chain companies, and customers.

Blockages in the Supply Chain?

Yale University Researchers Tomer Fishman and Thomas Graedel have just released a paper suggesting that there could be bottlenecks in the supply chain for the US wind industry. Their specific concern is the rare-earth mineral neodymium. “We find that regional differences in deployment schedules will result in complex patterns of new capacity additions occurring concomitantly with turbine retirements and replacement needs. These demands would total over 15.5 Gg (15.5 kt) of neodymium by 2050, of which 20% could potentially be avoided by circular usage from decommissioned turbines but only if recycling technologies are developed or, better still, magnets are designed for reuse.” Each offshore turbine requires around 2000 lbs (or around 900 kg) of the rare-earth to function.  As currently, most of it is extracted from China, sent to Japan, where the magnets are manufactured, then exported to wherever the turbines are built, this could put a cap on how many turbines could be manufactured.

“Nearly all of the world’s neodymium is mined in China, where costs are cheaper and environmental regulations are less stringent,” Fishman said. “Each step along the way, issues — like the current fractious trade relationship between the U.S. and China, for example — can cause a bottleneck in the supply chain,”

The DOE plan also does not consider the availability of neodymium. It has been mined in the USA in the past, however financial viability and environmental concerns brought this to a halt some years ago. Other potential mining sites are:  Brazil, India, Sri Lanka, and Australia. The researchers consider that there will need to be recycling and reuse of neodymium for the DOE’s plan to move forward in an appropriate timescale.

Transport Bottlenecks

New Energy Update previously reported that transportation bottlenecks including driver and railcar availability could cause issues in 2019-20 as transportation is vital in the third quarter of each year, as turbines are generally installed in Q4 for weather reasons. “By 2020, most blades installed on new turbines will be longer than 55 m, requiring special trailers, escorts and longer transport times,” the Wood Mackenzie Power & Renewables consultancy said. Specialised drivers are also in short supply and also needed for other large loads such as pipelines.

The U.S. installed 7.6 GW of wind power capacity in 2018, of which 5.9 GW was installed in the fourth quarter. GE Renewable Energy installed 40% of turbines while Vestas installed 38%, Nordex USA 11% and Siemens Gamesa 8%, according to the American Wind Energy Association (AWEA).

Wood Mackenzie predicts 11.0 GW of capacity will be installed in 2019, rising to 12.9 GW in 2020. As offshore wind turbines and associated systems will need to be manufactured inland in the USA, or elsewhere and transported via a Jones Act compliant vessel (see earlier blogs), this will potentially cause additional complexity in the supply chain, which will have an effect on costs and quite possibly delivery dates as well.

At the 4th Annual US Offshore Wind Conference, June 10-11, 2019 in Boston there will be a panel on Supply Chain Opportunities, Outlook and Local Content. Find out more here.

By Julian Jackson


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