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A view on steel demand for offshore wind power

London, 24.05.2013

Platts 9th Steel Markets Europe

Speaker introduction

2

Speaker

• Nikolaj Ager Hamann

Email: niaha@dongenergy.dk

Direct line: +45 9951 6236

• Business Analyst, Group Procurement

DONG Energy

Nesa Allé 1

2820 Gentofte

Denmark

Agenda

3

1. Introduction to DONG Energy

2. The opportunities in the offshore wind market

from a steel perspective

3. The challenge to be overcome to unlock the

potential

DONG Energy at a glance

4

DONG Energy is market leading in offshore wind

5

150

466

802

995

Installed capacity in 2011

MW operated

Source: DONG Energy and 4COffshore

Future trend

• All of the major players have a

pipeline of projects. Many of

which have first power in the

foreseeable future.

• DONG Energy reached 1,7 GW in

2012.

• DONG Energy expects to reach

6,5 GW of offshore wind power by

2020.

Agenda

6

1. Introduction to DONG Energy

2. The opportunities in the offshore wind

market from a steel perspective

3. The challenge to be overcome to unlock the

potential

Port Offshore substation Substructure WTG

The role of steel in offshore wind power

73.700

2.000

Total Foundations WTG towers

22.200

49.500

Substations

7

Steel required per wind farm element for Anholt wind farm

Tons

Source: DONG Energy

Steel makes up a substantial part of the foundation cost

8

Source: DONG Energy

Steel

50%

Fabrication

50%

Foundation design and DONG Energy's expertise

9

Source:

• The jacket designs are

believed to be the

preferred foundation

designs for new projects

at deeper water depths.

• The technology still has to

be proven for offshore

wind energy.

• DONG Energy are

working intensely with

optimizing the jacket

design with suppliers and

partners.

• DONG Energy has

extensive experience with

the design and performance

of Monopiles.

• The experience is an

advantage when we work

with our suppliers on

optimizing the design

further.

• But it also means that it

takes a very convincing

business case for a switch

to jacket foundations.

• Monopiles are believed to

be uneconomical when

water depths increase, but

as monopile designs are

improved the shifting point

is pushed.

DONG Energy

Monopiles Jackets

The latest generation of monopiles requires large plates

10

Larger monopiles means larger steel plates

• For one of our later projects the plate dimensions reached:

• Thickness: 110 mm

• Width 3,9 meters

• Pile diameter: 7,5 meters – length 23,6 meters

• Total plate weight: 32 tons

0%

20%

40%

60%

80%

100%

0,0

6

0,0

64

0,0

67

0,0

7

0,0

73

0,0

76

0,0

79

0,0

82

0,0

85

0,0

88

0,0

91

0,0

94

0,0

97

0,1

0,1

03

0,1

07

0,1

1

Accumulated MP mass included in thickness limit Thickness in mm

11

The amount of steel required per MW offshore wind capacity

215

250

165

205

125

181

2016 2015 2014 2013 2012

DONG Energy offshore foundations

Ton of steel plates per MW installed

Source: DONG Energy

Weighted

average

Key observations

• For the most proximate part of the

DONG Energy offshore wind

pipeline 181 tons of steel have

been required for each MW of

turbine capacity installed.

• The foundation weight depends

heavily on the soil conditions,

water depth and sea conditions of

the specific site.

• We do not see that the

foundations get lighter in the

future as there is a trend for

turbines to get bigger and water

depths to get deeper.

MW and steel potential by 2025

12

Source: IHS Emerging Energy Research and DONG Energy

7,1

2014 2015 2016

3,5

2020 2025 2019

5,8

2023

2,9

2018

5,0

2022

2,8

2017 2024 2021

3,1

6,6

5,8 6,2

7,4 7,7

European offshore wind capacity added: 2014-2025

Giga Watt

2023

1,3

2022

1,4

2021

1,3

2020

1,1

2019

1,0

2018

1,2

2017

1,0

2016

0,9

2015

0,6

2014

0,6

2013

0,5

2012

0,5

Estimated steel orders for offshore wind foundations: 2012-2023

Million tons

Agenda

13

1. Introduction to DONG Energy

2. The opportunities in the offshore wind market

from a steel perspective

3. The challenge to be overcome to unlock the

potential

0 100 200 300 400 500

CHP

Coal fired

Natural gas CCGT

Nuclear

Small hydro

Large hydro

Geothermal - flash plant

Wind - onshore

Municipal solid waste

Landfill gas

Biomass - incineration

Geothermal - binary plant

Biomass - gasification

PV - c-Si tracking

PV - thin film

Biomass - anaerobic digestion

PV - c-Si

STEG - tower & heliostat w/storage

STEG - parabolic trough

Wind - offshore

Fuel cells

STEG - parabolic trough + storage

STEG - tower & heliostat

STEG - LFR

Marine - tidal

Marine - wave

LCOE BNEF EU Carbon Forecast Q1 2013 Central Scenario Q4 2012 Central Scenario

-7%

-

-

-

-

-

-

-14%

-

-

-

$1,058/MWh, -

$861 /MWh, -

-

-

-

-

-

-

-17%

-

-

-2%

-

-

-

The cost of energy challenge

14

DONG Energy

2020 target

Source: Bloomberg New Energy Finance

Bloomberg New Energy Finance – Levelised Cost Of Energy

USD/MWh

DONG Energy's business model and long term pricing

15

The new model and the implication on

the steel industry

Source: DONG Energy

On a range of the newer offshore wind

projects DONG Energy has formed Joint

Ventures with institutional investors.

This development has been a key enabler

of the recent growth in the market, and will

continue to be a very important source for

funding.

The partner are involved at an early stage

of the project and the firmer the business

case is the easier it is to attract them.

This in turn means that DONG Energy

requests price certainty ever further into

the future.

The steel industry can support the offshore

wind power growth by offering fixed prices

for longer periods of time.

16

Thank you for your attention

By: Nikolaj Ager Hamann, niaha@dongenergy.dk or +45 9951 6236