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Q7 breathes new life into offshore wind financing

Dutch offshore wind farm Q7, which is expected to begin full operation later this month, has attracted a lot of attention, not least because of its unique and award-winning financing structure. PEi looks at this innovative 120 MW project.

Heather Johnstone, Senior Editor

At the very end of last year, the 120 MW Q7 offshore wind farm reached a significant milestone when it exported its first power to the grid in Holland. This project has received a lot of attention from inside and outside the offshore wind community, not least because its location is further offshore and in deeper waters than any other wind park. Q7’s site is 23 km (12 nautical miles) off the Dutch coast, which places it outside the territorial waters of the Netherlands and in water depths of between 19 metres and 24 metres.

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Construction of the wind farm began in October 2006, with the installation of the monopile foundations, and as of Sunday 20 April, the 60th and final turbine was installed. Currently, 50 per cent of the turbines are exporting electricity to the grid. The wind farm is scheduled to be fully operational by the end of this month and will produce over 400 GWh of power a year.

However, without doubt the most important reason that this €383 million ($ 591 million) offshore wind project has garnered so much attention is because of its unique financing structure.

Trail-blazing Financing

In contrast to any other offshore wind project, Q7 has been financed on a non-recourse basis by three international banks à‚— Rabobank, Dexia and BNP Paribas. This, in practice, means that the banks rely solely on the project to generate the revenues needed to service the interest costs and principal repayment of the financing, with limited additional sponsored support. They thus act as so-called mandated lead arrangers. The debt financing for the project includes a €189 million, 11-year, long-term project finance facility as well as a €30 million standby facility to cover contingencies.

Sea Jack was used for the installation of both the foundations and the turbines
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The financing structure includes a number of features that lowers the risks associated with the construction and long-term operation of wind turbines in the North Sea. These include:

  • The availability of a contingent facility to cover potential cost overruns or delays. If it is required, this will be shared 50-50 between the project company and the banks, so the banks fully share the construction risk
  • Tailored availability guarantees under the operating contract with Vestas, allowing debt service to continue even during periods when the availability is lower than expected.
  • A cradle-to-grave insurance policy reducing the lenders’ and sponsors’ risks resulting from gaps in the various contracting arrangements.

The fact that the financing covers the construction phase of the wind farm is a unique solution that resolves a serious issue that in past years has prevented the realization of several offshore wind farms in Europe because contractors are wary of bearing the full risks during the construction phase.

The financing model for this project is seen as a key milestone in the future development of other offshore wind worldwide, and, according to Jaap Groenhof of Energy Investment Holding, one of the project owners, Q7 may well serve as the financial engineering template for achieving funding until lenders become more comfortable with the relatively new offshore technology risk.

Individual EPC Contracts

The Q7 offshore wind park is a joint project between Econcern, a sustainable energy group, the specialized investment company Energy Investment Holdings and Dutch utility ENECO Energie. The project partners established a holding company called WindPark Q7 Holding BV.

There are two engineering, procurement and construction (EPC) contractors under separate construction contracts. The first, Van Oord, one of the world’s largest dredging, marine and offshore construction companies, was responsible for the engineering, procurement and installation of the turbine foundations, the electrical infrastructure and all the rock-fill scour protection works for the foundations and cables.

The other EPC contractor was Vestas Wind Systems of Denmark, which, was responsible for the supply and installation of 60 of its V80 2 MW wind turbines. Q7 will be operated at least initially by Vestas Offshore, an affiliate of Vestas under a five-year warranty and maintenance contract.

The wind farm was installed using the Sea Jack installation barge (formerly called Jumping Jack), which is a self-elevating platform that fixes itself to the sea-floor using four feet and then fully lifts itself from the water. This creates a stable working island (covering an area of 100 metres by 30 metres) from which the installation activities can take place.

Foundation Innovation

For the Q7 project, a monopile foundation was selected. The monopile comprises a steel tube, weighing 320 tonnes, with a diameter of approximately 4 metres and a length of over 50 metres. It is driven 30 metres into the seabed.

Each monopile, at the start of the installation process, is brought into a vertical position with the aid of clamping devices mounted on the Sea Jack’s mechanical-hydraulic crane, which has a lifting capacity of 1200 tonnes. The crane then moves the pile into the right location on the seabed, and prior to it being driven into the ground, its vertical position is checked. Any inclination from the vertical is corrected. The complete pile-driving process can take between 2 and 2.5 hours.

Next, the lower submerged section of the so-called J-tube assembly is fitted, which guides the electrical cables from the turbine to the sea floor. This assembly slides into a final locked position with the aid of a patented double-rail system welded to the piles. Foundation supplier Smulders Group of the Netherlands developed the J-tube assembly specifically for the Q7 project. It is said to represent a significant deep-water offshore technology innovation. The transition piece is then placed over the monopile and forms the connection between the monopile and the tower. It is essential that the upper section of the J-tube, fitted to the transition piece and the previously installed lower section be positioned correctly. This is achieved with the aid of a guiding camera.

Maximizing Output

The availability of wind offshore is much higher than onshore, which means that twice the energy can be generated at sea. However, the flip side of this is that the operation of turbines in this environment is significantly more challenging for them.

Thus, because of Q7’s location it was important to use proven turbine technology. Vestas’ V80 2 MW was selected because of its strong offshore and onshore track record à‚— more than 2700 V80 turbines have been installed globally.

According to Vestas, the V80 2 MW has two key features that help achieve maximum energy output, high power quality and low sound levels. The first is OptiTip, which is a pitch regulation system. It features microprocessors that rotate the blades around their longitudinal axes, ensuring continual adjustment to maintain optimal blade angles in relation to the prevailing wind. At the same time, it makes it possible to keep sound levels within the limits stipulated by specific local regulations.

The other feature that helps to maximize efficiency and optimize the turbine’s sound level is the OptiSpeed generator. It enables the turbine rotor speed to vary between 9 rpm and 19 rpm, depending on conditions, with the objective of maximizing output. It achieves this by tapping the higher efficiency of slow and variable rotation, storing excess energy in rotational form and exploiting the full force of transient gusts of wind. It also reduces wear and tear on the gearbox, blades and tower because of lower peak loading. Finally, because turbine noise is a function of wind speed, the lower rotation speeds mean that OptiSpeed also contributes to reducing sound levels.

Grid Connection

The 60 wind turbines that make up Q7 wind park are connected to each other and to the high-voltage substation, located in the middle of the wind farm, by 22 kV electricity cables.

At the high-voltage substation, the voltage is transformed from 22 kV to 150 kV, with a 150 kV export cable running from the substation to the shore near Wijk aan Zee. The export cable’s length is about 28 km.

Cable installation was carried out by a specially-designed ship that unwound both the 22 kV and the 150 kV cables. From this ship, a tracked vehicle, called a jetter, was controlled. This vehicle was driven along the sea floor, picking up the unwound cables, squirting away the sand with a powerful jet of water and letting the cable sink into the sea bed. The subsea cables were laid at a depth of 1 metre.

The sea cables comprise three 1-phase and a fibre-optic cable, which are bundled into a thick cable. They are then further strengthened by steel wire wrapped tightly around them.

The power generated by Q7 is transferred to the grid via a mains connection. The 150 kV export cable is connected to a 150 kV land cable, buried at 3 metres, that runs from Wijk aan Zee, through Beverwijk and Velsen, to a high-voltage substation at Continuon’s power plant at Velsen-Noord. Here, the electricity enters the national grid.

Offshore Wind Advances

The Q7 wind farm can justifiably be described as a pioneering project, and, once fully operational, it will mark a significant development in Europe’s burgeoning offshore wind industry.

Its unique project financing sets an important precedent and its use of innovative technologies mean that developers can now look further out to sea with a smile on their faces.