‘Our models weren’t sophisticated enough’: Orsted finance chief

‘Our models weren’t sophisticated enough’: Orsted finance chief

The modelling used by Orsted “was not sophisticated enough”, said its finance chief as she insisted the sector leader’s decision to cut long-term production forecasts won’t throw the industry off course.

Marianne Wiinholt said detailed investigations this year and last led Orsted to conclude it had underestimated the impact of wake and blockage effects on offshore turbine output, the main element in a reduction of long-term forecast returns from a string of projects and a 2% cut in lifetime load factor estimates to 48%.

The Orsted executive said the true picture began to emerge as the company used new tools to examine the output from huge new projects such as Walney Extension and Race Bank, and as it began to heed warnings from industry experts such as DNV GL.

“We can see that the modelling used up to now has not been sophisticated enough,” Wiinholt told a conference call with journalists after the announcement, which sent Orsted shares down sharply.

Orsted says it is now working on new models it believes can more accurately gauge the impact of both phenomena, though Wiinholt warned there will still be uncertainties.

The blockage effect relates to the slowing of wind as it approaches the turbine, while the wake effect is the impact of wake between and within wind farms.

The Orsted CFO admitted the offshore wind pacesetter had “asked ourselves the question” over why its previous modelling assumptions had been wide of the mark. She said as Orsted had used the same models as the rest of the industry, it was unlikely to have been alone in its previous assumptions.

But Wiinholt said: “This is a new industry, a very immature industry,” without the years of data available to the onshore sector.

She insisted the downgrade was “not a major setback” for offshore wind, although she predicted the impact of wake and blockage would become bigger issues for the industry to consider as it plans ever-larger wind farms adjacent to each other.

“I still believe there is a strong rationale for using larger turbines”, said Wiinholt, adding that offshore wind’s long-term case as a low-cost zero-carbon generator compared to gas or coal remains unaffected.

On Orsted’s planned cost-cutting drive of up to DKr500m-600m ($74m-$90m) between 2020 and 2022, half of which will come from job cuts, Wiinholt said she expects the majority of staff reductions to come through natural attrition, rather than mass redundancies.