As governments around the world are reducing subsidies for renewable energy-based generation, renewables are expected to start competing more with fossil fuel-based energy sources and reach grid parity. To make the energy transition economically visible, energy companies need to identify solutions for cost reductions in order to remain competitive within bid processes – and we believe digitalization can play a major role here.
In the Nordics, we now see that several companies are busy building their renewable energy portfolio within the offshore wind sector, transferring the knowledge gained from decades of experience within the offshore oil and gas industry. In the past decade, offshore wind capacity has been growing rapidly: from 178 GW in 2010 to 594 GW in 2019 and is expected to triple in the next five years, according to the International Renewable Energy Agency.
Complex construction, harsh environment
What are the main challenges that offshore wind developers face? Based on our experience, the main challenge is about achieving significant cost reductions across the value chain to remain competitive within the bidding process, offering the lowest LCOE (levelized cost of energy) while keeping sustainable margins.
Undoubtedly, offshore wind structures, especially floating ones, could be considered as highly complex solutions designed to operate in harsh environments. According to renewables industry specialists BVGAssociates, the cost for a typical offshore wind farm arises within three main areas:
- Project development (development and project management): 3%
- Construction (balance of plant, turbine, etc.): 61%
- Operations and installation (maintenance and service, installation and commissioning, decommissioning): 36 %
Digitalization to reduce costs
Cognizant’s view is that digitalization should be considered as one of the key enablers for cost reductions across the offshore wind value chain, having the quickest time to market with a high ROI.
However, our research reveals that energy organizations lag behind other industries in 12 of 13 key measures of digital maturity.
Future success and competitiveness will be highly dependent on embracing digitally enabled processes, applications and modernized IT infrastructure and data architectures. Cognizant operates as a trusted global partner to electric, gas and water utility and energy providers, helping them accelerate business performance and drive growth through the power of digital. We have a proven track record in digital transformation, delivering value in everything from the development phase to plant balance as well as operations and installation. Below are some examples from energy projects across the offshore wind related value chain:
- Supply chain management: Spans across several areas such as:
- Predictive planning with the aim to improve inventory turn by 100% at the same service level and 10% cost reduction on bundled frame agreements
- Predictable Delivery visibility & Control leading to up to 30% reduction in major delivery issues
- Waste Control & Inventory Optimization (WCIO) with the potential to reduce excess inventory by 20%.
- Automated engineering: Estimated 30–50% reduction in engineering hours with 2% reduction in the cost of materials and 3–6 months reduction in EPC (Engineering, Procurement, and Construction) schedule, based on implemented case done with major EPC energy client.
- Process automation: Assistance in project/program management, market research, and analysis with automation implementation for repetitive and manual tasks.
- Workforce digitalization: Estimated up to 20–25% reduction in overall construction hours and improvement in productivity of the workforce, based on the implemented case at large EPC yard.
- Industrial IoT: cuts across:
- Production and quality of locally manufactured elements aimed to increase visibility to production operations and improve productivity including process robustness.
- Equipment O&M aimed monitoring of critical equipment in real-time to identify reliability issues and predict failure, reducing unplanned downtime and potential batch losses.
- Energy consumption, greenhouse emissions reduction, and optimization across key machinery and energy-intense process.
- Digitalization of warehouse processes: Overall 40% efficiency improvement across all warehouses of a large EPC client.
- Digital twin: Up to 86% reduction of power cable related offshore wind farm downtime utilizing external and internal data.
- Drone-based rust detection: Leveraging power of Image analytics and AI/ML solution, to auto annotate and detect rust anomalies.
- O&M planning optimization: By utilizing common data store and analytics tools for predicting time of failures and related criticality.
Services from A to Z
We are committed to contributing to solving the world’s hardest challenges such as meeting climate change. We thus support leading energy companies in their transition and acceleration within the renewable energy space, like within offshore wind, to deliver more energy options, reduce cost and provide higher customer satisfaction. We also help energy companies increase their competitiveness across the value chain.
Our key value proposition is that our domain expertise, market experience and technical capabilities support companies from A to Z; from digital strategy development to agile implementation and further value realization. Reach out to our consulting team to learn more.
Read more in this research report conducted by Cognizant and ESI ThoughtLab.