This article comes from the Wind Energy Update and is authored by Matilde Mereghetti
Post-warranty service costs have fallen thanks to increased competition and technological advances. This means operators can select a solution most tailored to their risk profile.
The strong growth in wind power capacity in recent years has led to a sharp rise in the number of turbines reaching the end of manufacturers’ warranty period.
Original Equipment Manufacturers provide around three quarters of post-warranty service contracts, but in the US, where the wind industry is extremely price competitive, a growing number of independent service providers (ISPs) are competing for market share. In addition, some operators are opting to use in-house operations and maintenance (O&M) services.
The choice between the provider of post-warranty services depends on performance risk, cost and flexibility of the necessary services, guarantees and general contractual terms. In a highly competitive market, service providers will need to offer a range of solutions, such as component upgrades and spare parts optimization, leveraging tools such as remote monitoring.
Generally two years is the minimum requirement for a new turbine’s warranty period but wind farm owners typically hold a five-year warranty. During the warranty period, the manufacturer is responsible for all services and repair work.
Operators can extend the warranty arrangement for the whole lifetime of the turbine to reduce asset performance risk, and owners typically sign service contracts with OEM providers of five to ten years.
According to Wind Energy Update’s Onshore O&M Survey 2015, more than 75% of owner/operators, Independent Power Producers (IPPs) and utilities are signing service contracts for durations typically longer than five years, and 18% said that their contracts were for at least 10 years. The survey drew from 144 responses from targeted stakeholders across the wind power industry.
Survey results: Which O&M service strategy is the best fit in the post-warranty period?
Source: WEU Onshore O&M Survey 2015
“We have long-term [O&M maintenance] service contracts with [turbines’] suppliers –we use different suppliers for our farms,” said Diego Carbone, Energy and Asset Manager at Renvico Renewable Energy, a developer and operator of wind farms in Europe.
These long-term service contracts are based on available electricity production and the OEM pays a penalty if energy availability falls below levels set out in the contract, Carbone said.
Some companies, particularly those that want to avoid additional financial risk exposure, i.e. pension or infrastructure funds, may choose to extend the warranty period for the whole lifespan of the turbine. This can be popular for companies operating in new markets with greater supply chain risks.
Cuts to wind power feed in tariffs have increased the focus on costs and incentivized competition in O&M markets.
The US has turned into a highly cost-driven market and there is a growing number of specialized independent service providers (ISPs).
“In the US, each type of provider has a significant share of the market – unlike in Europe, where manufacturers dominate,” Craig Houston, head of strategy and policy at GL Garrad Hassan, wrote in a recent article.
Companies employing ISPs or in-house expertise might incur a higher risk compared with the OEM. The service provider must work with the OEM to minimize risks.
“The reduction of the feed-in-tariffs has posed the theme of industrial sustainability for turbines’ owners and the internalization of O&M services can lead to very significant savings,” Maurizio Suraci, General Manager at ERG Renew Operation & Maintenance, said.
“However, this implies [financial] risks for organizational costs and for the management of very expensive components, such as generators, gearbox and blades. Is important to continue a good relationship working with the OEM, trying to find alternatives [and] mutually beneficial solutions: the know-how of those who built the machine is valuable and difficult to repeat in toto,” said.
The introduction of predictive technologies has allowed operators to take a more hands-on approach to key areas of post warranty asset management, such as component logistics.
Technologies such as Condition Monitoring Systems (CMS) have become widely used and have helped to cut costs such as spare parts management.
One large US operator told Wind Energy Update that predictive technologies can reduce maintenance and spare parts costs’ by 30-50%.
Predictive systems are particularly cost-efficient for turbines situated in remote locations or subject to harsh weather conditions such as storms. These conditions can raise the O&M costs of wind farms in areas such as the north east of the US and the north of Scotland.
“We distinguish among turbines that are older than ten years and turbines that are younger than ten years and we balance the cost/MW to justify accessibility and logistics,” the US operator said.
“Access to cranes has the highest price. Maintenance costs differ depending on the area of the country. We try to limit off-line time and maximise the output time.”
Wind Energy Update organizes the Wind O&M Dallas conference, this year April 11 to 13.
Filed Under: News, O&M