Indeed, operations and maintenance (O&M) for out-of-warranty turbines is a serious issue — especially in the US because the warranties of turbines installed during the building spree of two to five years ago are starting to come to an end.
Owners must now consider who will provide the O&M on turbines that could last 20 years or more, and which include some components that tend to fail earlier, such as gearboxes around year seven. The market is huge.
Ageing turbines usually have higher service costs, and the growing size of turbines means fewer parts being discarded if damaged; a set of blades may cost $300,000 (€209,000) or more.
Industry body American Wind Energy Association (AWEA estimates that more than $40 billion (€28bn) of US wind installations will be out of warranty in 2011.
Research firm Lucintel says the global O&M market will grow by 16.6% in each of the next five years, to reach $10.6 billion (€7.4bn) in 2016, with US and China the hot spots.
Various estimates determine that 2010 to 2012 is the tipping point, after which more US turbines will be out of warranty than not.
An estimated 18,000 turbines will come off warranty in the next three years, says Marty Crotty, CEO of UpWind, one of the three largest independent global providers of O&M.
"Post-warranty O&M is an opportunity for different business models," says Dan Shreve, a director at advisory group Make Consulting.
Original equipment manufacturers (OEMs), typically buffeted most by the highs and lows of wind’s business cycles, are courting O&M contracts because of high profit margins, business predictability and a need to retain skilled labour through the downturn in turbine installations.
Siemens is building its largest US wind service distribution centre in Woodward, Oklahoma — a hub for main components and parts such as blades and generators.
"We’re gearing up for the future," says Tim Holt, Siemens’ CEO for renewables service.
He says there will be a rush of Siemens turbines coming off warranty soon, and estimates the cost of O&M for onshore wind farms, for the turbines and wind farm set up, at $0.01 to $0.015/kWh over the lifetime of a project.
OEMs and independent service providers (ISPs) each have a 50% share of the post-warranty market, says Crotty.
"Now the demand for turbines has dropped, and OEMs are wondering where they can make money," adds Timothy Fratta, manager of O&M business development for enXco, the US’s largest independent O&M provider.
Manufacturers’ experience in O&M is varied. Enercon of Germany has always done its own, and Denmark’s Vestas offers almost all service under warranty in-house.
GE, which will offer production-based availability guarantees on all its turbines later this year, outsources preventive warranty work, and Spain’s Gamesa outsources preventive and corrective warranty work.
NextEra, Iberdrola and MidAmerican, three of the US’s four largest owner-operators already do their own post-warranty work, a trend likely to grow.
And although ISPs offer more sophisticated products, the market is expecting consolidation, with only a few surviving.
Questions to askSo what should owners and operators approaching the post-warranty period consider? Do they risk choosing a small independent provider or go for a pricier contract with the manufacturer?
What about the original turbine purchase contract with the manufacturer — is there access to the all-important end-of-warranty inspection? Do manufacturers have a conflict of interest between acknowledging a turbine’s problems and preserving their products’ image?
Or are they best placed to know the innards of the machines and to source components?
Will an independent provider properly service the blades and other components not necessarily included in the OEM’s warranty package?
Is it worth doing condition-based monitoring, where algorithms track, for example, vibrations to warn of upcoming problems?
Hourly O&M labour costs vary hugely too — some have dropped significantly over the past year, because of the downturn in installations and therefore warranty work. How easy is it to retain skilled labour, especially at a remote wind project?
If a key component has been failing under warranty, is the manufacturer a better ongoing bet because of component costs?
Wind farm operator Horizon Wind Energy, owned by energy firm EDP Renewables, will have more than 1GW of turbines off warranty within two years.
Chief asset operations officer Brian Hayes expects the company mainly to shoulder the risk of major component failure and retain surveillance and control-centre operations.
Preventive maintenance or small-parts replacement is put out to tender, including to the OEM.
"We don’t want to hire technicians," Hayes says.
"We’re more focused on higher-value items." Horizon prepares for post-warranty as much as 12 to 18 months ahead of requirement, leaving little time to gauge a turbine’s performance under a two-year warranty.
With that in mind, says Hayes, a five-year warranty is ideal.
However, two to three years ago, when US installations were at a record high, it was a sellers’ market and manufacturers sometimes offered warranties of as little as two years.
An end-of-warranty inspection by independent engineers must be thorough, and is best done some six months before expiry, says Fratta of enXco.All operational data must be transferred to the owner, adds John Dunlop, AWEA’s technical programmes manager.
In fact, he stresses that post-warranty issues start when purchasing the turbine.
That is when the owner must secure all documents and an agreement for access to perform an end-of-warranty inspection.
Continuing to work with the OEM can prevent you losing engineering and remote-monitoring data, notes John Yost, vice-president of operations for E.on Climate & Renewables North America, although his company is seeking O&M providers for scheduled maintenance and has not settled on a post-warranty plan. Sourcing parts is the main issue, says Yost.
The technology is changing fast, and OEMs eventually will stop making a part, whether a blade or something smaller.
Concerns over warranty careThere tends to be worry in the industry that OEMs will not have performed service properly in-warranty, and while some owner-operators say it is still a concern, UpWind’s Crotty says the issue is waning as OEMs compete for business.
"We’re now more open," says Holt of Siemens, which is seeing its service business grow by more than 30% yearly.
"We have a reputation to keep up. We’d never risk having a turbine go up in flames. Our service approach is more on the conservative side."Diarmaid Mulholland, general manger of global wind services for GE, says that OEMs have the scale, resources and production knowhow for end-of-warranty work.
"If you operate 5,500 units, you will know a thing or two," he says of GE’s experience at running its own turbines.
If an independent firm takes over and parts are not sourced from the turbine manufacturer, an independent repair service company, such as PSI Repair Services, may have to reverse-engineer small parts to repair them, says sales director John Greulich. PSI, which has had success hiring technicians from the military, contracts to enXco, NextEra and Iberdrola.
PSI’s sophistication in O&M work shows the depth of the market transition under way — O&M is becoming as important as design and siting of turbines.
Post-warranty care can last as much as 90% of a turbine’s life so there is a huge opportunity for new business models.