The importance of risk analysis
Being an expert in any industry is a great responsibility. Being an expert in assessing the risk of potentially dangerous situations in an industry is an even greater responsibility. It is not only financial investments that rely on expert advice, lives also depend upon the policies and decisions made by these experts. Costa Renewables is such a company that has a reputation for taking on that responsibility based on their experience and lessons learned in offshore wind.
By anonymously recording their experiences, and those of others, with a combined time line of over 25 years they now have a database of facts, lessons learned and experience. Using every tool a computer can supply to, they have built the Risk Mitigator to share this knowledge with the industry. Offshore WIND Magazine spoke to Rob Tegel and Ed Wehnes of Costa Renewables about their risk mitigation for offshore wind.
Identify, assess and avoid
The offshore wind sector is young and experience is therefore spread very thinly, quite simply there is not enough of it to go around. The oil and gas sector always had an answer for such problems, although perhaps not so obvious today as in the past. Their answer was to throw money at the problem until it went away. Even today the LCOE for oil and gas is still lower compared to that of offshore wind so there is still a big difference between the amount of money the offshore wind sector can spend and the amount that oil and gas has. In the offshore wind sector the risk has to be identified, assessed and avoided, it will not go away otherwise.
To mitigate unnecessary risks in the construction and operation stages of a wind farm project it is important to include risk management already in the planning stage. Here the Risk Mitigator can provide guidance. Take the selection of marine equipment, for example. The difference between a vessel being ‘fit for use’ and ‘fit for purpose’ is not always recognised.
Sufficient purpose builds?
“Take a situation where,” explained Wehnes, “a crane vessel is booked for a certain job. If it should be delayed for whatever reason then there is a problem as day-rates range in €100K a day. To avoid further project delays another crane vessel may be deployed. This could be a vessel that is ‘fit for use’, however, not 100 per cent ‘fit for purpose’. A cable layer, in another example, that has been adapted from its original purpose as rock dumper. These situations create potential risks; we see it as our task to mitigate these risks as early as possible.”
“As the industry matures purpose built vessels are being built”, Tegel added, “the question remains, will there be sufficient purpose built vessels to meet the demand when already with the current offshore wind projects in the EU most vessels are booked years in advance?”
Contractual risk is another type of risk which is identified by the Costa men. The different forms of contracts on offer, EPC, EPCM, EPCI and Lump sum turnkey (LSTK), do not suit every company and every situation. A mistake made at this level is catastrophic; accepting a wrong definition of the risk can cost too much. Technically a contract may be sound, but the risk assessment, or lack of it, for example, concerning the weather risk, may not be so very strong, which results in a weakened contract. Using the example of the crane vessel again, avoiding the risk that the crane vessel could be delayed is not easy especially when the previous work for the vessel is with another company.
The damage, however, can be reduced by making an assessment of the risk at the planning stage and allowing for delays reducing lost time and continuity. This is what risk assessment is all about. “The Military ‘7 P’ rule should be remembered”, says Wehnes; ‘Proper Planning and Practice Prevents Piss Poor Performance.’
A more efficient solution
“Proper planning, preparation and co-ordination, with all logistical partners and equipment suppliers being contractually bound to guarantee timely delivery”, says Rob Tegel, “and a pre-assembly site sufficiently large to absorb stock when there is a problem lower down the chain, is essential for a project. If one supplier or component manufacturer fails to deliver in time to the pre-assembly site it will affect the complete chain! The port of Esbjerg has an enormous advantage with the Danish supply chain at the back door. These hubs provide a more efficient solution. Here the industry is able to marshal wind farm components for assembly and provide a buffer for potential delivery problems.”
“This industry is like no other”, says Ed Wehnes.
Never in a peace time operation has planning and risk assessment been as important as today in offshore wind projects. There is a certain amount of arrogance in some management. He quotes cases of ‘copy and paste’ procedures with errors compounding time after time and still not picked up on. He often hears people say, “It is a business like any other business,” …“NO IT IS NOT,” he demands. Lost time caused by whatever problems, man-made or natural problems, it does not matter; they both result in the same high costs to the sector.
For example a wind turbine installation vessel with lost time is running up un-necessary costs of €60 – 100K per day, but when the other vessels and equipment are added the cost could easily reach €500K. This is to a large degree caused by the lack of experience in the people expected to work in these projects. “It is no way to reach targets of an LCOE of €120/MWh or even lower when there are avoidable costs of €20 to 30 million in project development.” But it is not only these two men who know about this, surely?
When asked about how lessons learned should be treated, Rob Tegel replied, “Carefully, because past experience cannot always be used in new situations. First ask the right questions and then look into past experience for the right answer.” Risk mitigation can only succeed when a policy of transparency is followed. “Real mistakes have to be noted and there should be no more secrets.”
“Perhaps”, they suggest, “it has to be the investors who should insist that openness and transparency is required.” Learn how to do! But it is not all gloomy news, there are good news stories about wind farms with long ‘no lost time accident’ records. Wind farm management with a high level of responsibility, where feedback is encouraged and observations are followed up. Listening to these two experts talking about their experiences, and knowing that they have all been logged in a database gives an insight into their way of risk mitigation and how planning should be carried out.
Wehnes quoted Richard Branson, who said that if somebody offers you an amazing opportunity but you are not sure you can do it, say yes – then learn how to do it later! Whether it is the industry sector that is so different or just that we live in different times today, this is not what Costa Renewables would advise today unless you have the money available to spend to solve it along the way.
This article was first published in the second 2016 edition of the Offshore WIND Magazine.