Wind energy asset owners are continually examining the cost-effectiveness of their chosen services strategies and exploring options to reduce cost, manage risk and improve the profitability of their fleets. As the industry has matured, a plethora of servicing strategies, tactics and long-term technology investments have emerged to accelerate asset owners’ business performance.
Conservative groups, such as regulated utilities, institutional investors and community-owned wind plants, often pursue a lower-risk approach to operations and maintenance (O&M). The options are expensive “full wrap” service agreements from turbine original equipment manufacturers (OEMs). These agreements provide a single expenditure that can be planned with confidence and guarantee limited exposure to the risk of unplanned expenses. Although public utilities do not often find themselves in financial difficulty, they abhor risk and may be willing to pay a premium to mitigate their exposure to major component failure.[adright zone=’190′]
Independent power providers (IPPs) represent the other end of the risk-tolerance spectrum and may opt to begin self-performing after the date of commissioning and begin retaining responsibility and risk for all unscheduled maintenance costs. In addition, these IPP groups may be more likely to explore upgrades and retrofits and foster a diverse aftermarket supply chain that may present a lower-cost option than OEMs’ parts and services.
Self-performing O&M allows asset owners more freedom to optimize the cost performance of their fleets, while also remaining flexible enough to involve turbine OEMs or independent service providers (ISPs) for project-based maintenance support. The added risk of self-performing due to major component failure is becoming better understood as fleets mature.
The migration toward self-performance has fostered increased fragmentation within the industry and has given rise to split-scope service arrangements, also known as a hybrid O&M strategy. This is strongly motivated by the trend of asset owners performing routine O&M in-house and, thus, assuming the risk for planned and unplanned maintenance. There are many elements of O&M that asset owners do not have the technical, specialist repair or procurement tools to perform, so they must rely upon the strengths of the OEM and ISP communities. This “hybrid” strategy helps provide flexibility, gives the asset owner control of risk and leverages the strengths of different O&M business models. This trend has led to rapid evolution and fragmentation of service offerings by ISPs and OEMs.
Some large asset owners have used the experience gained on their own fleets to perform O&M services as third parties to other asset owners.
These owner-backed third-party service options are attractive to other owners for many reasons. The asset owner parent provides a strong balance sheet that provides assurance that the service provider will be a lasting partner. Owner-backed third parties may leverage their internal procurement groups, remote monitoring and administrative support functions to help reduce cost and risk for other owners. Many owners have developed these third-party arms via acquisitions of established ISPs, including Duke, EDF, EnBW and Statkraft. These acquisitions create the fastest path to self-performing excellence, while also gaining access to a larger installed base for growing scale economies.
Some owners, such as Invenergy and TerraGen, began providing services as third parties via wind project sales by continuing to maintain the projects under new ownership. Other owners have developed their third-party options organically, including E.ON, NRG, Prokon and Enertrag.
In response to the increasing fragmentation in the industry, turbine OEMs and third parties are increasingly deploying an “a-la-carte menu” of service offerings, with many service contracts bundling elements together to meet the cost and risk preferences of a maturing asset owner population. There are still many O&M contracts signed with OEMs that provide full-service coverage, but many of these agreements have risk limitations, incentive sharing mechanisms or O&M segments that are negotiated individually.
Many turbine OEMs have reached the practical limits of bringing their own lost fleets back under service, so they have turned to targeting other OEMs’ equipment as a method to expand their services revenue base – also known as multi-vendor servicing. This was clearly the motivation behind Vestas’ acquisitions of Upwind and Availon, as these companies have significant experience servicing the GE, Gamesa and Clipper fleets in the U.S. and Europe. Similarly, the alliance between Siemens and Duke Energy Renewable Services is a less equity-intensive method for Siemens to gain insight and experience with the non-Siemens fleet. GE, Gamesa and Suzlon have also made efforts to service other OEMs’ equipment, with varying degrees of success.
The multi-vendor business model faces some significant challenges over the long term. Foremost is the technical difficulty of servicing and troubleshooting unfamiliar technology. Developing advanced services or diagnosing reliability issues becomes very difficult without access to design documentation or proprietary controls. Spare parts supply may become a lasting barrier for multi-vendor servicing, as turbine OEMs may be hesitant to supply proprietary parts to a competitor or may impose higher prices than an ISP or owner would face.
New approaches as assets approach end of life
A whopping 90% of the U.S. fleet is less than 10 years old, with a significant portion of the market between five and 10 years old, due to the installation boom that occurred from 2008-2010. As these turbines transition to the second half of their useful life, asset owners will need to creatively address maintenance issues and risk.
Looking forward to 2025, more than 45% of the U.S. operating fleet will be greater than 10 years old, despite years of solid new installations. Many of these aging sites will be considered for “repowering” upgrades in light of the new IRS guidance on production tax credit (PTC) renewal or may be decommissioned in favor of higher-capacity-factor turbines.
In 2016, the IRS issued guidance that will allow for existing wind plants to qualify for an additional 10 years of the PTC if 80% of the fair market value of the turbines is retrofitted. These aging projects create an opportunity to realize substantial returns from increased energy production, while also deploying significantly less capital than a new project. NextEra has announced plans to spend over $2 billion-$2.5 billion between 2017 and 2020 on the partial repowering of its aging fleet, and other large owners are expected to follow suit. These “partial repowering” upgrades present some substantial technical challenges. Upgrading the rotor on a GE 1.5 with a 2005-2007 vintage involves replacing the rotor and drivetrain components and possibly the entire nacelle, converter and controls. The impact on the turbine foundations remains the biggest unknown, as this will likely not be within the scope of the upgrade and must accommodate the increase in loads. Capital component refurbishment firms will certainly feel the impact, as a large portion of the aging fleet will be prematurely retrofitted and will no longer require replacement drivetrain parts.
The oldest turbines in the fleet will soon be considered for full repowering by decommissioning the turbines and replacing them with larger, more productive units. Many of these farms will operate under a “run-to-failure” strategy, in which some turbines that experience failures that are too expensive to repair will be cannibalized for parts to keep the rest of the wind plant operating. Spare parts availability for these legacy turbines is a significant barrier, as many of the OEMs either are no longer in business or no longer stock spare part inventory for legacy fleets. Other asset owners will choose to invest in life-extension programs to extend the design life of their wind plants beyond the typical 20 years. These retrofit programs can be very expensive but may provide a more cost-effective return than decommissioning and new construction.
Asset owners looking to guard against the high cost of capital component failure
As fleets age, the risk of major component failure begins to escalate. Gearboxes, generators, blades, pitch bearings and other major components require the deployment of a large crane to replace, so many asset owners are investigating options to reduce their exposure to these high-cost repairs. Three primary strategies are being employed: reducing the cost of failure, postponing failure, and anticipating and planning for failure.
A number of options have emerged to reduce the cost of the repairs or replacements for when large components fail. The number of gearbox up-tower repair companies has grown, and asset owners are increasingly comfortable with this repair. MAKE expects that approximately 55%-60% of all gearbox repairs will be performed up-tower in the future. The most common up-tower gearbox repair is exchange of the high-speed stage, while the intermediate stage up-tower repair is also gaining adopters. Generators have long been a reliability nuisance for the wind industry, and efforts are expanding to repair problems up-tower.
Up-tower generator bearing replacements have become nearly a routine maintenance item. Shaft damage, insulation degradation, wye ring failures, generator wedge problems and winding failures are very difficult to access and repair reliably up-tower, but MAKE anticipates that companies will pursue up-tower repairs and fixtures to address specific generator issues. Proactively performing these repairs up-tower can help to eliminate the need for deploying a large crane for gearbox or generator replacement.
For the large operations that must be completed down-tower, there are a number of innovative tower crane technologies being developed to save the cost of crane deployment. Liftra has developed a self-hoisting crane that can be installed and removed in a single day and realize substantial savings for specific turbine types. Gamesa, Vestas and GE have also devoted significant research and development to develop self-hoisting cranes as a method to lower or eliminate crane deployment costs.
Large fleets and the need for replacement parts have also given rise to a robust market for refurbished or rebuilt gearboxes and generators. Many of these major corrective parts are rebuilt from previously used gearbox components by replacing or updating only the parts that have experienced significant damage. This has increased the supply of aftermarket gearbox and generator cores that would otherwise be scrap metal.
Owners are looking to postpone the onset of failure by deploying reliability upgrades to major components, including improved bearings, advanced lubrication and load-limiting sensors. Auto-lubrication systems have also been deployed regularly in the aftermarket to ensure that bearings and components are receiving proper lubrication to delay reliability issues. Some owners have even chosen to de-rate select turbines when major component failure is imminent in order to postpone failure for a larger major corrective repair campaign or scheduled crane deployment.
The most proactive asset owners are seeking to minimize risk by anticipating and planning for major component failure. These owners are investing in condition monitoring systems (CMS) that are often based on drivetrain vibration or oil particulate counting. These systems and the associated analysis allow asset owners to predict a looming failure and schedule an appropriate response.
The capital budgets of asset owners for upgrades and retrofits have been the primary limitation to investing in CMS systems or other advanced asset management tools. There are a number of innovative technical and commercial approaches that are emerging to address this financial hurdle. Many companies are now able to deploy mobile CMS that are installed on the turbines for a period of weeks to months rather than permanently. With careful installation, these systems are able to detect any emerging reliability issues at a fraction of the cost of a permanent solution. The commercial auxiliary to this is the lease program that some CMS providers are starting to contemplate. These lease arrangements help to spread out the cost of a CMS system over many years, while also providing permanent monitoring to anticipate drivetrain failure.
Advanced inspection methods are already being used to help reduce labor requirements and quickly determine the condition of critical components. Drones have been deployed by many large asset owners on a demonstration basis in order to streamline blade inspections and inform proper repairs.
On the technology horizon, mobile technology, advanced inspection techniques, digital cloning and automated asset management systems are being developed to address problems before they lead to significant downtime or energy loss. CMS, advanced wind measurements, advanced inspection tools and load sensors are being paired with complex analysis tools to model the loads on the turbine, monitor for failures and anticipate the need for future maintenance.
Aaron Barr is senior consultant at MAKE Consulting. He is responsible for monitoring global wind turbine technology trends and strategic impacts. He lends technical expertise to provide technology forecasts, economic trade-off analysis, market assessments and due diligence projects. He can be reached at email@example.com.