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Denmark

Denmark

Associations warn turbine owners -- Predictions on costs

Both the German and Danish wind turbine owner associations are warning their members that they could be facing repair bills for 500 kW and 600 kW machines that are higher than they have allowed for. The warnings, in the respective association newsletters, are based on a report by the Deutsches Windenergie-Institut (DEWI) which attempts to predict the likely cost of component replacement over a theoretical 20 year turbine life span. There is no actual cost data over that long a period for 500-600 kW units.

According to DEWI, over a 20 year lifetime the cost of component repair and replacement for these turbines is predicted to amount to 64% of the average purchase price of a turbine of DEM 1700/kW. For turbines of about 1 MW, the figure is 71%, though DEWI admits that its 1 MW sample is small. These figures are slightly higher than actual costs reported to Germany's wind measurement program of DEM 60/kW/year. DEWI predicts running costs of DEM 88/kW/year, which, if correct, would add DEM 0.01/kWh to electricity prices (EUR 0.005/kWh).

The institute bases these estimates on a survey in which just 393 replies were received out of 1000 questionnaires sent out. The replies cover 747 turbines, just over 500 of which are in the 500 kW-600 kW size range. DEWI also relies on the prognosis of seven industry experts and on information from insurance companies and wind turbine manufacturers on component replacement costs.

The DEWI study was undertaken for the German wind organisation BWE as part of evidence presented to the government for retaining the country's wind tariff at its 1999 level of around DEM 0.17/kWh. The combined assessment of the seven experts is that over 20 years, turbines between 300 kW and 600 kW will require repairs or replacement of components corresponding to 63.8% of a wind turbine's original purchase price. For turbines of more than 600 kW, it will cost 71.2% of purchase price. They predict that a third of those costs will occur during the first ten years, with the remainder falling in the remaining ten.

DEWI has also calculated the operation and repair costs for each component in wind turbines of 300 kW and over. Over 20 years, bearings, generator, gear box and blades will require repairs or replacement costing 80%-120% of the original price of the components. Only the transformer, foundation and tower are regarded as low risk components, though tower risk rises with turbine size, says DEWI.

Caution

Technical consult to Denmark's turbine owners, Strange Skriver, says the costs are probably not as high as predicted by DEWI, but he warns that they could well be higher than today's expectations among turbine owners. Skriver stresses, however, that experience with large turbines is still limited. "We have yet to see what the actual costs are for running a large turbine for 20 years," he cautions.

The closest Danish study to that conducted by DEWI was conducted by the energy agency in 1991 and 1994 with the title, "Privately Owned Wind Turbine Economics," says Skriver. This study, however, was conducted with the aim of collecting evidence to reduce the wind tariff -- the opposite purpose to that of BWE. It calculated the probability for replacement of all components and concluded that a reinvestment was necessary by year 11. The O&M and component replacement costs over 15 years were projected to be 29% of the purchase price for a 225 kW turbine and 25% of purchase price for a 400 kW unit. Extrapolating from these figures for a cost over 20 years, and in the expectation that costs over the last five years of operating life would be double the average for the first 15 years, total repair and replacement costs would be 48% of purchase price for a 225 kW turbine and 42% for a 400 kW turbine, estimates Skriver. "There's a gap between the DEWI figures and these and I'd guess that DEWI's were closest the truth," he concludes.

Energy consultant David Milborrow comments that the DEWI report falls short of proving that repair costs will be substantially higher than present expectations. "Even if they are, the implications for electricity costs and for profitability in most cases will not be unduly severe," he stresses. "An unexpected repair bill of 25% of purchase price in year ten might reduce a project rate of return -- over 15 years -- by just over 1% and investment returns by 1%-2%," he continues. "If project cash flows only just covered debt repayments within the minimum safety margin demanded by most banks -- around 25% -- then an unexpected repair bill of this magnitude would perhaps halve equity returns from say, 12% to 6%, net of inflation. This is still a respectable return."

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