By Ritesh Gupta

Having a Pro Forma model that will accurately reflect long term O&M costs is the most effective way to ensure the long term economic feasibility of the wind project. This obviously must be done before construction and operation of the wind farm.

Understanding that post warranty costs will increase throughout the life of the project must also be understood. Additionally, when considering these O&M costs, the owners and operators must give careful consideration to their desired operating life expectancy for the wind farm.

Most PPA’s are signed for two decades or so and most turbine models are designed with a similar life expectancy. If operation is planned beyond the 20-year mark this will be reflected within the expected costs for O&M.

Many owners and operators are also able to hedge their operating losses by signing onto post warranty O&M agreements that include availability guarantees, generally either time based or production based. These generally provide more cost certainty to the project, provided the wind resource remains stable throughout the project life.

Assessment of revenue generation

Thilo Langfeldt, partner and managing director, Strategy Engineers, says, “A 3MW wind turbine generates up to €4,300 of revenues per day based on an electricity income of 60 €/MWh during high winds. In average per year it will probably be around €1,500 per day and during some windless summer days even zero.”

He adds that it is obvious that an O&M set-up with a time based availability warranty can create significant differences in revenue losses depending on whether the maintenance is being done during high or low winds. Thus time based availability warranty does not work as an efficient incentive for the service provider to ensure high electricity generation.

“Some OEMs offer productivity based availability warranties that are more aligned with the owners’ interests. The key for the owner is to either be in charge of the O&M operations or to create effective incentives for the service providers which ensure alignment of interests. Incentives could be a high variable share of service fees, real production based availability warranty with penalty and bonus rules or power consistency warranties,” says Langfeldt.

Being pragmatic

When it comes to post warranty costs, it is pointed out that one area that is overlooked is the cost of not producing energy. The loss of energy due to a weak O&M set up can end up costing more than a service contract.

But it also should be noted that 100% availability is hard to reach in practice.

“The costs of not producing energy are much higher offshore because of the higher output and the related calculations. Downtimes must be part of this calculation otherwise the operating companies are getting into trouble. Again the process of finding the right post warranty strategy must start much earlier than due date,” says Matthias Brandt, director of Deutsche Windtechnik.

Level of understanding

Dan Shreve, Partner at MAKE Consulting says sophisticated asset owners with larger fleets understand the need to properly balance operational expenditures with the risks of minor and major corrective actions. He says the important thing to remember is that all asset owners are not created equally, nor are the turbines that they own.

In some cases, troublesome turbines may drive an asset owner to extended warranties with the turbine OEM as the risk of unscheduled maintenance expenditures and the associated downtime are greater than the potential cost savings associated with outsourcing to lower cost ISPs.

Conversely, a technically adept asset owner deploying reliable wind turbines will be able to in-source O&M operations confidently, lowering costs but still maintaining high levels of availability.

“In all cases, spare parts remain a critical item, and establishing the proper procurement, warehousing and distribution resources are critical. MAKE sees a great deal of innovation in terms of parts pooling, but a great deal more needs to be done to establish more effective third party spares distribution services,” says Shreve.

Planning

Specialists have recommend a few steps on how to be better prepared including knowing your turbines and tracking time and parts used throughout the warranty period gives you a good set of cost-to-date data for your model. Also, try to understand what might go wrong with your equipment and either budget for this or obtain a warranty product to cover these costs. It is best to review all aspects of your project’s budget, not just the physical O&M costs. It goes without saying that you have properly trained and an experienced operator for your specific turbine model.

Planning in advance can mean as much as two years before your warranty expires. This can realistically be done by ensuring that owners and operators can interact and share information and also re-examine other wind farms within their fleet if available and interact with ISP’s to converse about how the likely rotor blade manufactured quality may impact post warranty operation costs.

In case there is not enough information available, then working out a manufacturing audit, incoming inspection and full scale end of warranty inspection will enable you to know more about such costs.