DCNS Energies, the next global player in MRE

DCNS Energies, the next global player in MRE

On 6 January, DCNS and three partners set up DCNS Energies, a new company specialising in emerging technologies to generate electricity from marine renewable energies.

To set up DCNS Energies, naval systems group DCNS and sovereign fund Bpifrance joined forces with offshore engineering group Technip and development investor BNP Paribas Développement. The new company aims to develop France’s industrial base in MRE and market its products. The main focus will be on tidal turbines, floating offshore wind turbines, and ocean thermal energy conversion plants.

Majority shareholder DCNS, with a 55% share, has actively pursued R&D in all three technologies for ten years or more. The naval systems group will contribute its MRE assets, including OpenHydro, the Irish subsidiary acquired in 2013. French sovereign fund Bpifrance has a 36% share and Technip and BNP Paribas Développement the remaining 9%. Technip is a world leader in offshore engineering, project management and construction.

To play a leading role in MRE

“We aim to play a leading role in MRE,” says Hervé Guillou, Chairman and CEO of DCNS, before recalling that the group has, over the years, invested €150 million in R&D on tidal turbines, offshore wind turbines and OTEC, or €250m including the purchase of OpenHydro. After years of R&D, prototype development and testing, along with marketing and the establishment of local offices in the most promising markets — and after winning the first contracts — the French MRE industry is about to move up a gear. “We have put in the groundwork and are now ready to advance from a startup to a truly industrial enterprise. To ensure the success of this transformation, we felt that we needed strong partners.”

€100m to start

The success of this transformation hinges on access to significant funding. In addition to some 250 DCNS employees, DCNS Energies will have €100m in equity provided primarily by DCNS and Bpifrance, a public investment bank set up in late 2012. Bpifrance provides financial support for projects, and more particularly innovation-based projects, contributing to French national growth. “DCNS Energies has a strong hand to play. First, the key partners are industrial contractors with proven track records and relevant R&D experience; second, they have stand-out expertise in all three MRE technologies; third, this bundle of energy options should meet the needs of a wide range of clients. This combination of technological resources will benefit, from the outset, from strong know-how in marketing and sales. The company also promises significant economic benefits at the national level. With the MRE market just starting to take shape, now is the time to establish a strong position with a view to future global leadership. This emerging industry promises to create jobs, particularly in and around DCNS’s existing centres in Cherbourg, Brest and Nantes. For Bpifrance, which sees the energy transition as a strategic priority, DCNS Energies also represents a clear contribution to a more diverse energy mix,” says Magali Joessel.

 

Turbine proper for a tidal turbine (© DCNS)

Shaping a new industry

According to Bpifrance’s Magali Joessel, the setting up of a French champion of MRE is “emblematic of French industrial renewal through a project that is profitable, environment friendly and set to shape a new industry”. Like the industries supporting onshore wind turbines and bottom-fixed offshore turbines — two technologies that have seen significant growth in recent decades — the challenge now is to shape an MRE industry supporting tidal turbines, floating offshore wind turbines and OTEC plants. In practical terms, this means bringing together and organising an ecosystem of specialist companies, including a large number of SMEs and R&D facilities, to promote and exploit state-of-the-art expertise and technologies under development throughout France. “We aim to establish a prime contractor with the strength to push the MRE value chain in France, in Europe and beyond, and thereby ensure that France retains its leadership in technologies where it has developed stand-out expertise,” says Hervé Guillou.

In pursuing these aims, DCNS Energies will draw on a portfolio of projects and achievements. The company is currently working on projects in Canada, Chile, France, India, Ireland, Japan, Malaysia, Singapore and the United Kingdom.

Tidal turbines, 3GW by 2030

Of the three MREs, tidal turbine technology is the most advanced. It also offers important advantages thanks to the regularity and predictability of tidal flows, including accurate output forecasting. OpenHydro is currently developing projects representing an installed power rating of 1GW. The pilot turbine farm off Paimpol-Bréhat in Brittany will feature two 16-metre machines, each rated at 2MW, and will be exploited by EDF Énergies Nouvelles. Meanwhile, the first of two turbines for the pilot farm in Canada’s Bay of Fundy was recently installed and is now generating power. In mid-2016, Japan chose OpenHydro to supply a turbine that will be installed in Naru Strait near Nagasaki in 2018.

 

Barge installing a tidal turbine (© EDF EN)

 

In France, the next step will be taken off the Normandy coast following a call for expressions of interest issued in 2013 and the selection of two winners. One pilot farm comprising seven 2-MW machines will be built by EDF Énergies Nouvelles and DCNS to supply power for 15,000 homes. This farm, at Raz Blanchard on the Channel, benefits from particularly strong tidal flows. The seven turbines will be progressively connected to the grid beginning in 2018. This project is expected to prove the last step before progressing to fully commercial turbine farms, with several already at the planning stage. DCNS is also working on the tidal field off the Channel Island of Alderney which could accommodate one hundred or more 2-MW turbines. Planning hinges on the installation of a new underwater power cable between France and England with branch connections to the turbine field. Grid connection is slated for 2021. Meanwhile, the French government has issued a call for tenders for commercial tidal turbine farms on its Channel coast.

“We expect to see the first fully commercial turbine farms in operation by 2020 or 2021 and the installed power base to top 1GW by 2025 and 3GW by 2030,” says Thierry Kalanquin, CEO of DCNS Energies. Thierry sees many opportunities for the technology: “To date, tidal turbines are the most advanced MRE. We see a potential market of 50GW. Over the next 10 to 15 years, we expect to see the installed power base rise to 10GW worldwide. And we aim to win 20 to 30% of the business.”

The turbines will be assembled in a new purpose-built plant in Cherbourg catering for both the French and international markets. Work on the plant is scheduled to begin later this year. “The facility will build turbines for the Raz Blanchard pilot farm and commercial projects by British and French companies at various sites on the Channel. It will also produce subassemblies for our projects in Canada and Japan. At this stage, the aim is to limit the number of production sites while at the same time planning ahead for local production as the demand for commercial turbine farms increases.”

 

Turbine proper for a tidal turbine (© DCNS)

Towards lower production costs

Batch production and industrial methods combined with feedback from the pilot farms should enable DCNS Energies to significantly reduce electricity generating costs. By way of a comparison, the first megawatt generated by the first machine installed in the Bay of Fundy is estimated to have cost $CAN500, or around €350. The company will have to do much better. “We aim to be genuinely competitive over the medium to long term with a production cost of around €100 per MW.h, depending on the site’s inherent potential and the size of the turbine farm. It is early days and we still build each turbine as a one-off product. We expect, however, to achieve a cost reduction curve comparable to that achieved by the onshore wind turbine industry and, more recently, by the offshore bottom-fixed turbine industry,” says Thierry Kalanquin.

Cost reduction is clearly a core challenge. “We are convinced that the three MRE technologies that we’ve chosen to develop can produce electricity at costs compatible with typical energy mixes and, eventually, without subsidies. The challenge is to create a real economy,” says Hervé Guillou. DCNS Energies also aims to quickly cover its costs. Indeed, the Chairman and shareholders believe that the business should start generating profits by the late 2010s.

 

(© DCNS)

Floating turbines

DCNS Energies is also focussing on floating wind turbines, a technology that now looks set for strong growth. Extensive R&D began, via Winflo, first with Nass&Wind, then Alstom (now part of the GE group), as part of the Sea Reed project launched in 2014 to integrate a 6-MW Haliade 150 turbine with a floating ‘foundation’. Following its selection to participate in the development of two pilot offshore wind farms using this technology, DCNS Energies is now ready to move on to the production phase. France’s first call for projects for floating wind turbine farms resulted in a bid to install four 6-MW machines near Groix island off the Brittany peninsula. The project was selected by the French government in July 2016 with Eolfi and CGN European Energy Company as the lead contractors. The turbines will be assembled in Brest then shipped to Groix island. The Maine Aqua Ventus pilot project, the second to use DCNS-designed floating ‘foundations’ will be installed off the coast of Maine in the United States and will have an installed power of 12MW. The winning consortium, which includes Emera, Cianbro Corporation and the University of Maine in addition to DCNS, was selected in April 2016 by the US Department of Energy.

 

(© Maine Aqua Ventus)

Capitalising on the limitations of bottom-fixed turbines

Floating wind turbines are seen by their promoters as particularly promising. Given that bottom-fixed wind turbines are not economically viable in water more than 35 or 40 metres deep, offshore projects are restricted to relatively shallow portions of the continental shelf with strong winds. Other limitations include (a) seabeds that are difficult to stabilise and (b) less wind than over deeper water. Many projects also experience trouble obtaining the necessary permits or facing appeals by local populations, associations and those that make their livings in coastal waters. These obstacles frequently delay the construction of bottom-fixed wind farms, as in the case of the Guérande bank in France where locals have taken legal action pleading that the turbines are eyesores. This is discouraging for contractors and investors as they fear multiple administrative and legal delays to projects representing investments of billions of euros. In sharp contrast, the floating turbine solution is unlikely to meet the same level of opposition given that the fields are much farther off shore. “We have what is beginning to look like a tail wind. The greater the opposition to bottom-fixed turbine farms, the faster attention will shift to the floating turbine solution. With many bottom-fixed projects having trouble obtaining permits, the future is looking bright for floating turbines,” says Thierry Kalanquin.

Commercial floating turbine farms by 2023

From the technical viewpoint, the technology is ready and the first floating turbines are under construction. “While the technology arrived on the scene a little late, it looks as though it will develop quickly, as it is now more mature than its competitors. Between 80 and 90% of the components used in floating turbines are common with those used in bottom-fixed types. DCNS Energies has a strong hand to play given our unparalleled expertise in air flow studies and hydrodynamics. We are confident that our expertise is world class and that we will be able to install floating turbines that will withstand virtually any environmental conditions almost anywhere in the world.”

With regard to scheduling, DCNS Energies plans to complete its first pilot farms in 2019/2020, then build the first commercial floating wind power farms three years later.

 

Floating OTEC plant showing underwater pipework (© DCNS)

OTEC

Ocean thermal energy conversion is the third pillar of DCNS Energies’ business plan. This advanced technology is best suited to warm climate locations with access to surface waters between 25 and 30°C and deep water at around 4°C. OTEC plants use working fluids similar to those used in air conditioners or industrial refrigeration. These fluids vaporise at around 24/25°C and condense, or return to the liquid state, at around 4°C. The fluid flows through a heat exchanger comprising thousands of sealed tubes exposed to warm surface water. The high-pressure working fluid vapour is fed to a turbine driving an alternator to generate electricity. The vapour then goes to another heat exchanger, or condenser, where it condenses on contact, via the heat exchanger, with cold water pumped up from a depth of around 1000 metres. The cycle then repeats endlessly since the working fluid circulates in a closed circuit. OTEC plants generate clean energy on a continuous basis; a major advantage over wind turbines, wave power and tidal turbines, all of which operate intermittently depending on wind, swell or tide.

Ideal for tropical islands

OTEC is ideal for islands in the intertropical zones where severe weather, including cyclones and the like, is common and tidal amplitudes are typically small; two factors that limit the suitability of other MRE technologies. The energy mix on tropical islands is often confined to just one or two choices as renewable resources are generally rare. Land for coastal power plants is often in short supply with the result that power costs for many isolated sites are high. Islands in the intertropical zones have average power generation costs ranging from €250 to €300/MW.h, compared with €100/MW.h for metropolitan France. OTEC plants are thus readily viable for such locations.

 

Proposed Nemo OTEC plant (© DCNS)

First OTEC plant by 2020

Whether at a coastal site or on a floating platform, OTEC plants are extremely complex. The energy needed to pump vast quantities of cold water from a great depth is a major challenge for the overall viability of each project. In 2014/2015, when DCNS surveyed its MRE business and was forced to choose between technologies in operation since 2008, OTEC and wave power were nearly abandoned. Project commitments were the main reason that OTEC remained in the MRE portfolio. Following the construction of an OTEC demonstrator at DCNS’s Nantes-Indret centre, the plant was installed at Saint-Pierre on Réunion island in the Indian Ocean in 2011. In 2014, DCNS was selected for the Nemo OTEC project on Martinique in the Caribbean. Backed by EU funding under the NER 300 programme, Nemo calls for a floating 16-MW OTEC plant providing power for 35,000 homes. Construction work is scheduled to begin in 2018 with a view to commissioning in 2020. This will give DCNS Energies its first full-scale reference in OTEC. The company is also working on other OTEC projects, including, says Thierry Kalanquin “a promising feasibility study for Malaysia”. The DCNS Energies Chairman then added: “OTEC is a huge technological challenge, but it is also one with real potential for growth. This is a promising niche market for tropical islands”.

Complementarity with Technip

In OTEC and floating wind turbines, DCNS Energies will be able to draw on the combined expertise of in-house and Technip teams. The French leader in offshore engineering has a range of complementary skills beginning with vast experience in large structures at sea and subsea networks, including underwater cable laying and sophisticated anchoring systems. With Technip as a partner and shareholder, DCNS Energies will be able to count on a group of international standing that is well acquainted with the extremely demanding requirements of the offshore oil & gas industry and, like DCNS, with complex programme management. “We believe that Technip will give DCNS Energies access to its international experience in complex programme management by adding value to the preliminary design, basic engineering and detailed design phases,” says Nello Ucceletti, Technip’s President Onshore/Offshore.

Oil & gas shows interest

In addition to the complementarity between  DCNS and Technip, Nello Ucceletti also believes that “our geographic reach and long-standing relations with the oil & gas industry will give us access to clients that are showing more interest in renewable energies”. Technip, like others in the oil & gas sector, suffered a serious setback as a result of the slow-down in offshore business, including the cancellation or freezing of many deep-water projects. Even if the market recovers over the next few years — which appears likely given that global energy consumption continues to increase and is forecast to rise by a further 30% by 2030 — the oil majors and the service industries that work for them will continue to diversify. All are aware that even though fossil energy resources are still far from scarce, renewable energies are gaining ground. With this in mind, and in view of the undertakings by many countries in the wake of the COP 21 conference to develop clean energies and limit global warming, MRE offers excellent potential. “As the demand for energy increases a little more each year, it is interesting to note that the projections for 2020 forecast that 26% of all electricity will be generated by renewable resources.”

Technip’s return to MRE

For Technip, which withdrew from MRE over two years ago, the decision to set up DCNS Energies proved an excellent opportunity to take a new look at the sector and its prospects. Here is a brief summary of what happened. Some years ago, Norwegian oil major Statoil awarded Technip a contract to design, build and install a floating foundation for a 2.3-MW Siemens wind turbine off Karmøy in south-west Norway. After installation was completed in 2009, Technip was well placed to contribute to other Statoil projects, including the Hywind Scotland pilot turbine farm off Aberdeen calling for five 6-MW machines. The contracts were awarded in 2014 but, for a range of reasons, including investment delays, Technip decided to withdraw. Today, Technip is part of a newly formed French alliance bringing together skills covering every aspect of MRE.

 

Magali Joessel, Hervé Guillou, Thierry Kalanquin and Nello Ucceletti (© DCNS)

Turnkey solutions and a suite of technologies

In the same way as offshore oil & gas contracts often combine engineering, procurement, construction and installation (EPCI), DCNS Energies plans to offer its clients solutions covering EPCI plus post-installation maintenance. “To become a leader, we must deliver turnkey solutions covering the entire product lifecycle from design studies to production, installation and maintenance, or precisely the services DCNS offers its naval clients. This is essential in an inherently complex area like MRE where the aim is to produce electricity at sea for consumption ashore and to do so at sites where weather, wind, waves and currents are challenging. To make it work, you need expertise in many different fields, which is precisely what DCNS Energies offers,” says Thierry Kalanquin. “Moreover, our suite of technologies enables us to offer solutions tailored to each client’s needs, hence to win more contracts,” adds Thierry.

For international clients, local jobs are an additional benefit of MRE. “Because much of the production work can be undertaken locally, we are in a position not only to sell energy, but also to provide local jobs. In other words, we can meet the client country’s local energy needs in line with its industrial policies.”

Revenue outlook

Thierry Kalanquin stresses once again that the company’s shareholders hope to see DCNS Energies establish itself as a global player in MRE. More precisely, they have set the revenue target for 2022 at one billion euros, or around one-third of what the DCNS group currently generates with its 13,000 employees, most of which are based in France. Diversification into MRE is, moreover, one of the DCNS group’s strategic priorities.

Maintaining jobs in existing catchments

“In naval shipbuilding for clients other than the French Navy, a growing proportion of the production work is done in our clients’ shipyards while we retain the R&D, engineering and design work in France. This was the basis for the submarine contracts with Brazil and India and will be the case again for Australia’s next-generation submarines. The same applied to the corvette contracts with Malaysia and Egypt. To maintain and expand our current levels of employment in our traditional catchments, it is essential that we find more work to do in France,” says Hervé Guillou, Chairman and CEO of DCNS. In terms of employment, the basic idea today is the same as in 2008 when DCNS first diversified into MRE. The group continues to seek business in areas that enable it to make the most of its existing know-how. Thus, for CEO Guillou, many of the technologies that go into MRE systems are similar to those that go into warships. “When you look at a tidal turbine, it looks a lot like a submarine’s propeller, except that whereas in one case the propeller pushes water, in the other the water pushes the turbine. An OTEC plant is basically a lot of pipework and low-temperature heat exchangers. Well, the steam turbine portion of a nuclear-powered warship is broadly similar.”

Indeed, it is precisely on this basis that DCNS came up, a few years back, with the Flexblue concept for an underwater nuclear power station. And, while the idea has not been abandoned entirely, natural energies are clearly in higher demand today than nuclear.

Original, in French, by Vincent Groizeleau, translated and adapted by Steve Dyson