Slowing growth sparks $16 billion service market

CHINA: China's explosive growth in wind capacity, combined with poor-quality turbine components, has created an operations and maintenance (O&M) market thought to be worth $16 billion by 2020.

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With the installation rate slowing and profits plummeting due to falling prices, there is now a rush of new companies looking to grab a piece of the maintenance action - many of them owned by turbine manufacturers and wind-farm developers.

By the end of 2011, Chinese wind farms amounted to 62.4GW. According to the national wind power development plan, China will have 150GW installed by 2020, comprising about 100,000 wind turbines.

The value of the O&M market is calculated on the assumption that the turbine availability for power-generation averages 2,000 hours in Chinese wind farms in a year, and the current wind-farm operation and maintenance costs are CNY 0.05/kWh ($0.008/kWh).

Maintenance has become a major headache for Chinese developers, as more problems in turbines emerge - often in batches - because of poor-quality components.

Developers are now demanding that turbine manufacturers extend the warranty period to five years. In an attempt to improve market-share among 80-odd turbine makers with surplus production capacity, many manufacturers have agreed to extend the warranty period from two to three, five or even ten years.

In-house option

When the warranty period expires, large developers generally operate and service turbines with their own branch companies specialising in O&M.

Longyuan Power has set up Zhongneng Lianchuang while Datang Renewables has founded Yunwei, both for maintenance services. They have decided to establish their own maintenance companies, because it reduces costs with scaled services and concentrated procurement.

China Wind Power Co has set up Beijing Xiehe Yunwei for maintenance at its own wind farms. In October, it expanded its scope by offering outsourcing services to other wind farms, starting with the Tianjin Jiyunhe wind farm, which comprises five 900kW turbines.

Other leading wind-farm developers have their own maintenance service teams, even though they have not established subsidiary maintenance companies.

Some turbine manufacturers, not keen to lag behind in the maintenance business, have set up branch companies offering specialised maintenance services to wind farms in and out of the warranty period.

Goldwind set the pace in 2005, when it established Beijing Tianyuan New Energy Technology to offer all-round operation and maintenance services.

Guodian United Power followed suit by separating its maintenance business with the establishment of Beijing Guodian Sida Technology. It offers wind farms a one-stop technical service covering all aspects of operation.

Smaller wind farm developers prefer to commission turbine manufacturers or third-party companies with maintenance service after the warranty period ends.

Third-party cover

Zhangbei county, in north China's Hebei province, has 1,300 wind turbines, totalling more than 1GW. According to signed contracts, the county will have 5GW wind turbines by 2015.

Huang Haixin, an official of Zhangbei county new energy office, said the use of independent firms is proving more attractive than renewing manufacturers' maintenance contracts.

"Wind turbines in our county have now gone out of the warranty period," he said.

"Small developers find it hard to maintain operations by themselves (but) they will pay dearly if they renew maintenance contracts with turbine makers. (So) they are looking for third-party companies offering professional services and cheaper prices."

Most of these are localised and many offer maintenance services in specific fields. Baoding Yinglian Wind Technology, for instance, specialises in blade examination.

However, their lack of capital means they are unable to win outsourcing services from leading state-owned developers, who are responsible for about half the country's projects. Also, turbine makers are reluctant to supply core technology documents.

Worse still, Chinese wind-farm developers allocate low budgets to O&M. This is unwise in the long-run, according to Ma You, Gamesa service department director.

Wind farms can cope with minimal maintenance for the first three to five years, said Ma. But once turbines have operated for 10 to 15 years, maintenance costs will soar with the outbreak of more faults and problems. Money saved early on will be spent later, he warned.

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