Hamburg 2016: Caution needed over wind's 'vacuum-cleaner' mentality

EUROPE: Under pressure to cut prices for auctions and tenders, turbine makers are being tempted to supply cheap hardware with the aim of making up revenues on expensive back-up components of O&M.

Deutsche Windtechnik won the full maintenance contract at the Buchonia wind project
Deutsche Windtechnik won the full maintenance contract at the Buchonia wind project

But the so-called "vacuum cleaner mentality" is risky for wind power OEMs, which "may end up shooting themselves in the knee", said Enercon managing director Hans-Dieter Kettwig.

"Governments want prices to fall, but we must be careful not to over-react and assume ‘cheap’ is all that counts," he said. 

Priorities vary sharply between companies. Vestas’ aspiration is to cover its complete company fixed costs out of its turbine service sector earnings, said a company spokesman on 30 September. In 2015, Vestas’ earnings before interest and taxes from its service sector amounted to €201 million, while fixed costs for the whole company that year were €645 million. Vestas’ service revenue amounted to €1.14 billion in 2015.

Its acquisition of independent service providers (ISP) UpWind Solutions in the US in December 2015, and Availon Holding in Europe in March 2016 could help it meet that target by 2020. Both deals strengthen Vestas’ ability to service turbines from other manufacturers.

By contrast, Senvion may have miscalculated. Bought in 2015 by financial investors Centerbridge, industry sources suggest the aim is to sell at a profit in several years time, with profitability boosted by scale — selling more turbines at lower prices.

Senvion duly won a contract to supply nine 3.2MW turbines to the Buchonia wind farm in the German state of Hesse. But in a remarkable success, announced on 15 September, ISP Deutsche Windtechnik — not Senvion — won the full maintenance contract from the commissioning date.

Senvion describes service activities — with revenue of €60.4 million in 2015 — as representing "a high-yield segment of the group". But the vacuum-cleaner mentality may have been why it lost the Buchonia service contract.

Speaking to Windpower Monthly at WindEnergy Hamburg, Deutsche Windtechnik managing director Matthias Brandt said the contract means the company will re-engineer the Senvion turbine software and controls to avoid intellectual property issues, but in principle every wind farm operator can choose an ISP from the start. Independent companies may be smaller but are often faster, more efficient and with more reasonable prices, he said.

Owned by Klaus Meier and Gernot Blanke, which also owns wind project developer wpd, Deutsche Windtechnik clocked up revenue of around €100 million in 2015, expected to rise to €115 million in 2016. The company has service contracts running between two and 15 years for 2,800 wind turbines.

Their aim is to double revenue and employee numbers (currently 850) by 2021, Brandt said.

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