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Monday Comment: Offshore co-operation - the prisoner's dilemma

One of the big theme's of last week's EWEA Offshore 2015 conference was the United Industry push by some of the offshore sector's major players.

For those who have been on holiday for the last couple of weeks, this United initiative calls for more cooperation between companies, sharing of knowledge and standardisation in the offshore sector. It is a young sector and everybody needs to help it grow.

Cynical maybe, but there are issues with this. The very fact an initiative like this needs to be launched means a) it is something that needs to be done, and b) it's not happening on its own already. If you turned these two points into questions you'd probably find the answer was the same for both of them.

While no one can doubt the desire for it to happen, we must also ask whether it is realistic in a commercial industry where everyone is acting in their own self-interest.

The problem, and potential pitfalls, of competitors helping each other is best illustrated by the "prisoner's dilemma" (click here if you already know what this is), the puzzle used as an example of game theory (a theory about how people/ companies compete with each other).

In the prisoner's dilemma, two prisoners are each in solitary confinement without means to communicate. The police do not have enough evidence to convict the pair on the main charge, while the prisoners have previously made a deal to keep quiet and get sentenced to a year each on a lesser charge.

However, the police separately make each of them an offer. Each prisoner will be offered the opportunity to go free if they say the other prisoner committed the principal crime.

There are three outcomes to this. If both keep quiet they get one year each. If the prisoners blame each other for the principal crime they will each get five years. Finally, if one prisoner betrays the other, who keeps quiet, then the latter gets ten years and the betrayer goes free.

Under the rules of game theory, the correct decision is always to betray the other prisoner. That way the worst outcome is five years in prison while keeping quiet could lead to ten years. In short, people/ companies will always act in their own self-interest.

When there are companies (with shareholders) going for the same projects, there has to be a limit on what can be shared. Under game theory, if a company has a method or technology to accomplish something more efficiently or cheaply it is in their self-interest to hold on to it.

Talking about this to Senvion head of offshore Norbert Giese at the EWEA Offshore technology debate, I mentioned the ongoing dispute between Enercon and Siemens and Gamesa over LVRT technology as an example of how, at the end of the day, a company would always look after itself.

In response, Giese made an interesting point. He said that Enercon was effectively an onshore company and that onshore was a more competitive market in terms of companies acting in their own self-interest. The other panelists agreed.

Yes, the differences between onshore and offshore appear to be growing. But the idea that companies can develop cooperative relationships with each other depending on whether they are working in onshore or offshore is surprising. But then again, the other big wind IP case in recent times, brought on by GE (against MHI) in the US, has been related to onshore.

But if the need to bring down the cost of energy and develop offshore truly is enough to bring people together, then one would have to assume that once costs are reduced to an acceptable level, offshore will become just as competitive as its onshore equivalent.

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