Run like the wind
DONG Energy leveraged lessons learned to manage unexpected risks on Denmark's largest wind farm project to date. BY CLAY DILLOW
The Danish government boasts what is arguably the most ambitious energy agenda on the planet: By 2050, the country has pledged to stop using coal, oil and natural gas, and instead will rely wholly on renewable energy. In the short term, the nation's goals are no less aggressive. By 2020, Danish energy authorities plan to provide half of the country's electricity from wind power, effectively doubling the country's wind energy resources in just eight years.
The Danish Energy Agency is off to a strong start with the US$1.7 billion Anholt offshore wind farm now nearing completion. The farm is located between the Danish mainland and the island of Anholt in the Kattegat, the body of water between Denmark and Sweden that joins the North and Baltic Seas. Now Denmark's largest, it covers 88 square kilometers (34 square miles). Its 111 turbines have the capacity to generate 400 megawatts (MW) of electricity, enough to power 400,000 Danish homes, corresponding to 4 percent of the country's overall power consumption.
To meet the nation's 2020 energy goals, Danish authorities plan to roll out an additional 1,500 MW of wind energy over the next five years. Doing so means Denmark can't afford a major delay, and Danish energy authorities are making sure the energy companies constructing and managing the wind energy projects can't afford one either.
DONG Energy, based in Skærbæk, Denmark, won the tender offer to construct and manage the Anholt project in July 2010 after a one-year bidding and review process. The Danish government had already completed initial environmental studies of the site, essentially handing DONG Energy a development project green-lit for construction. In exchange, the Danish Energy Agency wanted 400 MW installed by the end of 2013. Failure to meet the deadline would result in a penalty of DKK400 million. If the first kilowatt-hour wasn't delivered to the grid by the end of 2012, DONG Energy faced a DKK600 million penalty. From the moment it received the contract, DONG Energy had just three and a half years to develop and complete the entire project.
“In a more ordinary construction project, it's costly to be late—you have your own costs or revenues to lose—but here we had these heavy fines,” says Claus Bøjle Møller, DONG Energy's director of engineering, procurement and construction for the Anholt project, Gentofte, Denmark. “Basically, it was not an option to be late at all.”
DONG Energy came to the project with a long track record in offshore wind energy development—one of the companies that merged to create DONG Energy constructed the first offshore wind farm in Denmark in 1991. Given this history, the company was confident in its ability to execute on the engineering side. But with such a tight timetable, project overseers knew the timing and logistics carried real risks.
“In terms of execution, we have a strong in-house engineering and management structure,” Mr. Bøjle Møller says. “We have a lot of specialists capable of managing the engineering—of seeing through the design risk and the construction risk. Our project managers help us mitigate that risk.”
The Anholt project presented all of the typical risks for a construction project of this magnitude: cost, supply, engineering, etc., says project director Flemming Thomsen, Skærbæk, Denmark. But the high scheduling risk exacerbated all of the others, which meant that even before DONG Energy won the Anholt tender, the company's project managers began working to shield the project from unforeseen problems, primarily in the supply chain.
They did this by front-loading the project as much as possible, Mr. Møller explains. Prior to winning the tender, the team put down costly deposits on highly specialized construction vessels critical to the project, ensuring they would be ready and available if DONG Energy won the contract. The company also hammered out a conditional agreement with German wind turbine-maker Siemens to provide the hardware for the site. And project managers began mapping out a development and construction schedule rigorous enough to keep the project on deadline but flexible enough to bend under the stresses of a complicated infrastructure project.
“In the initial planning, we had to make sure that if we were delayed in one activity we could still start up the next activity without major consequences,” Mr. Thomsen says.
Project managers built enough time into the schedule to provide some buffers that would allow for optimizing certain aspects of the project—particularly the variable and risk-heavy tasks of installing the turbine foundations and laying undersea transmission cables. They created a timeline that would bring the project to a close six months ahead of schedule—if there were no delays.
“We have a lot of specialists capable of managing the engineering—of seeing through the design risk and the construction risk. Our project managers help us mitigate that risk.”
—Claus Bøjle Møller, DONG Energy, Gentofte, Denmark
When construction began in January 2012, the risks began manifesting themselves almost immediately. The schedule was so tight that early on DONG Energy had to sign off on prefabricated components for the turbine foundations before fully completing all of its geophysical site evaluations of the seabed. As crews made the detailed soil investigation, they found that in some places the seabed was too soft, which forced engineers to abandon some positions completely and adjust the wind farm's entire layout on the fly. In addition, because of an early supply-chain bottleneck, the manufacturer of the massive monopiles that anchor the turbines to the seafloor fell behind on delivery.
“We started the project with a vessel that costs more than US$200,000 per day sitting around idling, waiting for supply components,” Mr. Bøjle Møller says. “That was not the optimal start for the project. Luckily we had a schedule and initiatives in place that could absorb this, and it didn't have much further impact on the project.”
One of those initiatives involved introducing roughly 30 local businesses as potential sub-suppliers to DONG Energy's main contractors working at the Anholt site. This strategy served two purposes. Primarily, it shortened the physical supply chain for some contractors, reducing risk and helping avoid delays. But it also involved local community members and local economies in the project, which helped keep one of DONG Energy's most important stakeholders—the Danish public— involved in the Anholt enterprise.
“We are received very well locally by both the people in the area and the local authorities, and that helps drive our activities locally,” Mr. Thomsen says.
As the project moved into full turbine assembly and construction, the logistics and scheduling became increasingly complex, involving some 3,000 people and 100 marine vessels. The fleet included several highly specialized, in-demand construction ships that were not always readily available. Project managers had to align 111 turbine deliveries with the availability of those specialized vessels 111 times during 111 weather windows. The buffer zone the team had built into the schedule provided the flexibility the project required at this stage. The team's intense focus on planning, logistics and supply-chain timing kept major risk factors at bay.
“We didn't have one specific major problem or victory, though there were a lot of small ones,” Mr. Thomsen says. Small problems are manageable, and that's exactly what Anholt's project management team was aiming for.
For DONG Energy, the Anholt farm is a large project, but it's also just one in a portfolio. The company is involved in other major wind projects in the United Kingdom and Germany, and it hopes to be part of Denmark's future energy projects. As such, DONG Energy must continue to refine its project management.
“We are focusing a lot on learning from what we have done so far and keeping that knowledge in our organization,” Mr. Bøjle Møller says. “But it can be challenging to learn from these lessons because of the timing of various projects. They take several years to construct, and it can be hard to channel the lessons from one project into the next one.”
Given that every large-scale energy project is different—and wildly complex—knowledge can easily slip through the cracks, Mr. Bøjle Møller says. To prevent brain drain, DONG Energy employs formalized strategies for maintaining its knowledge base, such as brainstorming between project managers and maintaining a searchable database of case studies based on extensive interviews with its project teams. Yet DONG Energy's most important knowledge assets are the project managers themselves.
“We have built a lot on our experience, but it's challenging to get the most out of it,” Mr. Bøjle Møller says. “There's a lot of know-how embedded in people, so we cycle the same people on projects instead of just bringing in consultants or outside people whose experience we are less sure of.”
This practice seems to have paid off. DONG Energy met its 2012 initiation deadline and connected the final turbine to the grid in July. While commissioning will continue through August, the team met its goal of delivering six months before the deadline.
That extra time won't be spent idly. The Danish Energy Agency is preparing two more tenders for another 1,000 MW of offshore wind energy via 400-MW and 600-MW installations slated for similarly rapid turnaround (January 2017 and January 2018, respectively). The tender process will start later this year, and with construction at the Anholt site winding down, DONG Energy's engineers and project managers are eyeing their next possible offshore challenge.
“We've come out with a project of this size on time and on budget, without any major technical issues or major delays or disruptions,” Mr. Bøjle Møller says. “So we're showing that it can be done.” PM
“We are received very well locally by both the people in the area and the local authorities, and that helps drive our activities locally.”
—Flemming Thomsen, DONG Energy, Skærbæk, Denmark
PM NETWORK AUGUST 2013 WWW.PMI.ORG