Battle for wind service revenues set to spur digital consolidation

Growing competition between service providers is set to accelerate digital product savings, opening up advanced technologies to more operators and pressuring smaller digital suppliers, market experts told New Energy Update.

As wind margins fall, operators are turning to digital solutions to minimize unplanned outages and maximize market revenues.

Global onshore wind O&M costs are estimated at $15 billion in 2019, of which $8.5 billion will be spent on unplanned repairs, according to a new report by Wood Mackenzie Power & Renewables.

Unplanned failures can cost up to $30,000 per turbine per year and cut annual production by as much as a week, Wood Mackenzie said. Spare parts and logistics costs represent around 50% of direct costs, it said.

Data analytics and sensor technology allows wind operators to implement preventative maintenance strategies and reduce unplanned outages. Advanced analytics and machine learning can help operators optimize logistics costs, spares management, and energy production.

Adoption of digital technology remains mixed however, with many operators sticking to basic monitoring solutions and others allocating minimal spending to digital products, Daniel Liu, Principal Analyst at Wood Mackenzie, told New Energy Update.

“Currently, we see condition monitoring systems [CMS] having the biggest impact, since it provides early warning and some basic level of predictive analytics,” Liu said.

Data collection and management requires investments and more advanced digital solutions can have a payback period of seven years or longer, a deterrent for some operators, he said.

Operators will soon yield the benefits of automated machine learning solutions, such as pitch and yaw correction, Liu noted.

Last month, technology group Emerson and data optimization specialist Vayu, a subsidiary of Ystrategies group, launched an automated turbine control solution designed to reduce wake losses and boost revenues. The joint project combines Emerson’s Ovation distributed control system with Vayu’s cloud-based machine learning analytics to provide reactive turbine yaw control.

Global wind turbine suppliers have increased spending in digital products and growing competition is set to reduce payback periods in the coming years, experts told New Energy Update.

This will open up digital technology to more participants and put pressure on smaller suppliers, they said.

Digital shopping

A range of companies, including original equipment manufacturers (OEMs), full-scope independent service providers, specialist digital companies and some asset owners, offer digital solutions for wind operators.

The level of digital solutions implemented by operators depends on factors such as asset age, operator size, service strategy and risk appetite.

The greatest benefits are gained from economies of scale across larger fleets and operators with in-house O&M activities are “leading the charge” in digital technology deployment, Liu said.

Invenergy, the U.S.'s largest private renewable energy group, has built analytics-in-house to accelerate development and maximize revenues at over 2,200 turbines. Invenergy used NarrativeWave analytics software to empower wind operations engineers to build new models, cutting analytics development times by up to 90%, company directors said in 2018.

Self-performing operators can yield maximum benefits from digital solutions by integrating them into a combined performance and maintenance strategy, Brian Case, VP of product development at GE Renewable Energy, told New Energy Update.

Operators with third-party service contracts can also use digital solutions to increase performance visibility, identify underperforming assets and automating reporting requirements, he said.

OEM push

Digital solutions will continue to improve over the next five to 10 years and payback periods will fall, Rafael McDonald, Director of North American Renewable Power at IHS Markit, said.

OEMs are investing in digital capabilities to help grow their services businesses. Falling turbine margins have prompted OEMs to expand in the O&M market, where margins have remained higher.

OEM service providers benefit from growing global databases of learnings from deployed assets. Combined with data analytics, this enables them to maximize gains from preventative and predictive maintenance.

GE is currently uniting its digital and services expertise to accelerate cost reductions and revenue gains for operators, Case told New Energy Update.

OEMs are increasingly targeting multi-brand turbine O&M contracts and these could present obstacles to digital deployment.

“OEMs are very protective of their intellectual IP, and are unlikely to share the critical technical turbine information needed for proper digital solutions deployment with other OEMs,” Liu said.

In addition, multi-brand contracts tend to be a "race to the bottom" on price and leave little margin for digital investments, he said.

For new build turbines, OEMs are offering complete digital solution packages as an incentive to asset owners to sign up for full-service agreements, Liu added.

New turbine monitoring technologies will help OEMs secure digital supply contracts.

"In the next one to five years you are going to see turbines coming online with more sensors and capabilities in that regard than ever before and we are going to have better analytics and machine learning to make sense of that data stream," Denver Bane, Onshore Wind Services Strategy Leader at GE, told the Wind Operations Dallas 2019 conference in April.

Digital crunch

Going forward, the digital solutions market is likely to be dominated by OEMs and a few well-known specialist digital companies, experts told New Energy Update.

Utilities and large self-performing operators will also expand in-house digital capabilities or purchase start-ups, Liu said.

“New entrants have considerably less resources and operational history, making their products a riskier proposition for asset owners. Start-ups with innovative technology may find their way to success via acquisition with both OEMs and self-performers," he said.

Increased investments by OEMs and the drive towards lower costs will result in a consolidation of the digital product market going forward, Case said.

“Despite the [digital] transformation underway in our industry, the business operating model of digital-only suppliers will be under pressure,” he said.

By Neil Ford