German transport firms turn offshore headache into profits

BRANDE, Denmark/BREMERHAVEN, Germany Tue Jul 10, 2012 2:54am EDT

1 of 7. Towers are pictured at Siemens Wind Power's port of export in Esbjerg June 11, 2012.

Credit: Reuters/Fabian Bimmer

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BRANDE, Denmark/BREMERHAVEN, Germany (Reuters) - Andreas Wellbrock is proud of his pontoon.

The floating vessel transports gigantic tripods - reminiscent of rusty space rockets - through the harbor of Bremerhaven, a German port city located on the North Sea.

The tripods are foundations for offshore wind turbines and have to be shipped to wind farms being built off the coast. They are huge, some standing 65 meters tall - as high as the towers of London's Tower Bridge - and weighing as much as 950 tonnes, or 950 passenger cars.

"They're the biggest of their kind, so you need an elaborate mechanism to move them from A to B," says Wellbrock, who is in charge of wind energy logistics at firm BLG Logistics, and has helped to devise a special carrier to take the load.

He is hoping that his vessel - the first of its kind worldwide - will bring in ever more business, as offshore wind farms provide an increasing share of Germany's power supply.

Since its abrupt exit from nuclear power - announced by Chancellor Angela Merkel last year following Japan's Fukushima disaster - Germany has ambitious plans for its renewable energy sector.

Europe's biggest economy aims to derive at least 35 percent of its power from renewable sources in 2020 and 80 percent in 2050, from 20 percent now. By 2020, the country plans to install 10,000 megawatt (MW) of offshore wind power, from about 200 MW by the end of 2011.

Offshore wind farms, driven by stronger and steadier winds at sea, are proving to be more efficient than their onshore counterparts and a growing area of interest throughout Europe.

For BLG, a haulage and transport firm founded in 1877, the logistics of offshore wind energy is an important new business area. The group is aiming to make revenues around 15-20 million euros (18.5-24.6 million dollars) in the segment this year, or up to 1.8 percent of expected sales.

Wellbrock believes this could grow to 50-100 million euros by 2016 or 2017.

TAILWINDS

Offshore wind currently accounts for less than 2 percent of global installed wind turbine capacity, but that share is expected to rise to about 10 percent by 2020, driven by the global push for more green power, says global industry association GWEC.

About 90 percent of all offshore capacity comes from Europe, with Britain, Denmark, the Netherlands and Germany the top four players, data from industry association EWEA shows. The North and Baltic seas provide excellent conditions for wind farms, and Europe is ahead of the pack in providing government incentives to the industry. The region is also home to some of the world's biggest wind turbine makers, such as Denmark's Vestas, Gamesa and Siemens.

"Order books are looking very, very strong, and they could become stronger. We think 2015/2016 is the sweet spot for wind installations when the bulk of offshore products will come online," said Colm O'Connor, a fund manager at Kleinwort Benson.

O'Connor, who manages the 40-million euro KBI Alternative Energy fund, said he expected the offshore wind market to post strong growth until at least 2020.

In Germany alone, the market for offshore wind logistics is forecast to produce revenue of up to 31 billion euros by 2030, according to a joint study by German logistics journal DVZ and management consultancy Barkawi.

Against that background, German logistics companies - those equipped to transport massive pieces such as rotor blades and tower segments down narrow roads and out to sea - stand to win big.

...AND HEADWINDS

There are still several obstacles to be overcome.

Setting up offshore wind farms can take several years due to challenging logistics, the size of the components and the fact that they can only be built in fair weather. Wind, waves and currents make work with heavy equipment difficult and potentially dangerous.

"Installing wind turbines only works in 3-4 months during the year," said Frank Reichert, vice president at Barkawi.

Their expansion also depends on political support, a fate shared by most renewable energy sources but particularly relevant to wind turbines, which often provoke extreme reactions from protesters objecting to their size and appearance.

Red tape, local opposition and questions about who will finance the sector's growth and carry risks of failure are all hindering expansion. In Germany the sector is also hampered by a lack of grid infrastructure, which can mean delays in transporting power across the country.

This has been acknowledged by the government, which is working on new regulation to reduce insurance risks and attract investments from the private sector.

Awaiting those new rules are a variety of construction and logistics companies. Ranging from large corporations to small family-run firms, they include BLG, Rhenus Logistics, Goldhofer and Hochtief - all preparing to vie for a slice of this new business.

FROM LAND TO SEA

The wind power headquarters of German engineering conglomerate Siemens stand just outside the central Danish town of Brande, some 50 km from the coast.

At its factory there, it makes covers for the parts that drive the wind turbines: the generator, gearbox and drive train.

These covers, called nacelles, are trucked to the coast, then transported onto barges and shipped to offshore sites. It is a laborious process, high in fuel and equipment costs.

The nacelles are big, but other parts are bigger again, and simply too large to be transported by road.

"The utilities and manufacturers will try to eliminate the issue of land transport as much as possible" to reduce high costs in this area, said Frank Matzen, senior manager at Ernst & Young, who focuses on renewable energy.

Siemens, for example, is investing 80 million pounds to build a factory at the port of Hull in the UK, where it will build its new six-megawatt wind turbines.

"We took the first 6 MW (turbines) on the road, but that is, due to the size of the machine, not an optimal solution," said Michael Hannibal, head of Siemens' offshore business in Europe, the Middle East and Africa.

Other firms, like German construction company Hochtief, have started companies to build barges that can construct the turbines at sea. The vessels cost more than 100 million euros apiece.

Back in Bremerhaven, Wellbrock points to an area beside the port on which private investors plan to build a terminal to serve the offshore wind farm.

"If everything goes according to plan, the whole shipping process will happen here," he says.

He, and his pontoon, will be waiting.

(Editing by Sophie Walker)

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