Governments around the world are advancing carbon reduction goals to help mitigate against concerns arising from climate change. As industries strive to meet the goals set by governments, they will continue to seek alternative sources of power besides traditional fossil fuels. Offshore wind power generation is a promising source of renewable energy and will support global goals in carbon emission reduction. It is worth noting that the proliferation of the industry is giving rise to a myriad of legal issues as marine contracting adapts to the unique characteristics of the construction and operation of offshore wind farms.
Development of an offshore wind farm is no small feat, due to a variety of factors including its technical complexity, regulatory requirements and significant upfront costs. Once an entity has received regulatory approval, as well as funding to commence a wind farm operation, the activities of the wind farm are significantly supported by vessels. Vessel support can generally be broken down by the life cycle of a wind farm, which can operate for approximately 25-30 years. A variety of vessel types are employed during the life cycle of a wind farm, including Wind Turbine Installation Vessels, Service Operation Vessels, Construction Support Vessels, Cable Laying Vessels and Crew Transfer Vessels. These vessels support the installation, operation & maintenance, and decommissioning of a wind farm.
A unique component of offshore wind farms is that they often employ extremely large turbines, which require specialized vessels for their installation, operation and maintenance. With the growth of the offshore wind sector, the current availability of such vessels cannot meet the demand. Although existing vessels from the offshore oil and gas sector may be upgraded to service the larger turbines, this alone will not be a sufficient remedy. Accordingly, new orders for vessels that can accommodate more and larger offshore wind projects will be placed. Shipowners, shipbuilders and charterers will need to consider a myriad of contractual, regulatory, legal and other issues as the industry develops.
From the contractual perspective, offshore wind projects demand specialized provisions in both the shipbuilding contract and the charter. Warranties that the vessel is required to meet under each contract is one such issue. The shipbuilding contract and the charter will need harmonized provisions where it relates to the specific performance requirements of the vessel.
Another contractual term that will require close consideration and synchronization between the shipbuilding contract and the charter is delayed delivery. A number of manufacturing issues, including the recent, often cited supply chain breakdowns, may contribute to delayed delivery of the vessel to the owner.
Adding to the complexity of contracts in the offshore wind industry is the fact that the charters are often heavily negotiated involving concepts from the International Federation of Consulting Engineers, not commonly seen in the shipping/offshore sector. It is not uncommon to see provisions dealing with liquidated damages, milestones and strict insurance requirements.
From the regulatory perspective, each jurisdiction will have its own laws and regulations governing vessel servicing of offshore wind operations. For example, in the USA, it is important to consider the application of the Jones Act. The Jones Act applies to many offshore activities, specifically those taking place in U.S. territorial seas and the U.S. Outer Continental Shelf. Depending on the phase of an offshore wind project, a Jones Act-qualified vessel may be required, which restricts vessel use between U.S. ports to those that are, (1) built in the U.S., (2) owned by U.S. citizens, (3) U.S. flagged, and (4) manned by U.S. personnel. Vessel owners and operators will need to maintain awareness of regulatory and compliance hurdles of vessel operation in the jurisdiction where the wind farm is situated.