Wind owners seek up to 30% cut in maintenance costs

COVID-19 is disrupting maintenance strategies and the biggest savings may be found on contracts with turbine suppliers, Philip Totaro, Founder and CEO of market intelligence group Intelstor, told the Wind Operations Dallas Virtual conference.

As COVID-19 tests the flexibility of wind operators, many are seeking savings in maintenance costs.

Data collected by market intelligence group Intelstor highlights the impact of the pandemic on operations and maintenance (O&M) budgets.

"The indication from asset owners that are self-performing their own maintenance is they are looking to cut budgets somewhere between 20 to 30% across the board," Philip Totaro, Founder and CEO of Intelstor, told the Reuters Events conference on July 21.

This implies an average spare parts budget for in-house O&M of around $8,000 per turbine for the tenth year of operation, compared with $11,400 before the pandemic, Totaro said.

Intelstor, a commercial partner of Reuters Events, has collected data from 386,000 global wind turbines under construction or in operation over the last 10 years.

The cost of service and warranty contracts with original equipment manufacturers (OEMs) is typically higher than self-perform maintenance costs and larger cuts are possible in this space, Totaro said.

OEMs should have easier access to spare parts and are better placed to reduce overheads, by closing regional offices for services and maintenance, as well as personnel costs, he said.

"By leveraging the data they have, they can more intelligently utilize travelling field technicians to go out and perform the service and maintenance according to a predictive and prescriptive maintenance schedule."

However, intense competition has crushed turbine supply margins and OEMs have been looking to lock in higher margins on long-term service contracts.

"There's potential for OEMs to reduce the [O&M] cost, but they are not necessarily taking full advantage of it, because it is a cost recovery mechanism for them," Totaro said.

To trim spending, some asset owners are seeking to renegotiate long-term contracts or terminate contracts early to move to self-perform, he said.

US growth

Rising turbine capacities and improving wind O&M practices have reduced the levelized cost of energy and spurred demand for new projects. Despite COVID, the US remains on track to install a record level of wind capacity this year. Forecasts vary widely around the 20 GW mark and strong activity is also expected in 2021 as developers race to meet tax credit deadlines.

                Average US turbine capacity, size by installation year

                                                           (Click image to enlarge)

Source: U.S. Department of Energy's (DOE) Wind Technologies Market Report, August 2019. 

As turbine capacities grow, maintenance costs per turbine have continued to rise, Intelstor data shows.

Before the pandemic, the average cost per turbine of full wrap maintenance was $43,863, some 12% higher than in 2010, Totaro said. This represents the average cost for the tenth year of operations.

"Currently, for projects that are going [online] in 2020, a full wrap maintenance contract from a wind turbine OEM could be as expensive as $50,000-$55,000, per wind turbine," he said.

Manufacturing shutdowns due to COVID have been of limited duration but budget cutbacks could affect spares availability in the mid-to long-term, Totaro said.

"This is something that we are noting at this point...we are not particularly concerned...but it is something that asset owners and independent service providers certainly need to be aware of."

Data yield

A growing number of wind operators are implementing digital solutions to switch from reactive maintenance to predictive maintenance. COVID lockdowns have tested analytics solutions and spurred fresh interest in digital solutions or system modifications.

Predictive solutions can generate savings in personnel, equipment, spares inventory, and administrative costs, but larger operators benefit the most.

For many groups, the savings are "largely gobbled up by the cost of the digital service," Totaro told conference viewers.

"You don't necessarily see a tremendous overall cost reduction, when you factor in the cost of the digital service," he said.

Some asset owners are also looking into the licensing of asset performance data or operational data to provide an additional revenue stream, Totaro said.

For example, NextEra Energy, the largest US wind operator, could potentially yield $24.7 million of income from data and digital content licensing, he said. This is based on an installed capacity of 20.6 GW by Q1 2021. Turbine supplier GE could yield some $62.1 million, based on 51.7 GW of capacity.

Not all companies will fully monetize their entire spectrum of data, Totaro said.

"But if they chose to, this represents the potential ceiling for them to capture that," he said.

--Robin Sayles