We are seeing genuine progress in how the value of assets is maintained and revenue optimised. Improvement is being driven by a combination of technology advances, more efficient commercial structures and expansion in the range of qualified service suppliers.
However, an observer from outside the wind industry may well express some surprise, and concern, over the nature of the issues that continue to cause inefficiency and attract management attention.
Slow and irrational response to turbine downtime; incomplete knowledge of the asset; inefficient multi-party approaches; disconnected site management and turbine-servicing activities; limited use of incomplete operational data; poor technical knowledge. These are all more common than they should be in a mature industry.
It is apparent there is a further dynamic at play here — the size of portfolios and the nature of ownership can lead to a difference in appetite for change. We also see significant differences in approach between market, depending on the stage of their development and level of support.
Large organisations with sizeable wind portfolios are more likely to have a critical mass of projects and impetuts to drive efficiency, corporate size and organisational structure, particularly where portfolios are international. But their size can make change harder and more complicated to implement with inertia often being the enemy within.
Smaller organisations with more modestly sized porfolios may not have the economies of scale to drive change, but they are often able to react quicker to opportunities.
While bigger players may be slower to react, many are now taking on the challenge of finding new ways to drive down operational costs, or, better still, optimising net reveneues from the remaining life of assets. It is high time that more of the smaller and mid-size players work to access these benefits.
In the first operational life of many projects, subsidies have often enabled owners to make a good return without having to work too hard.
As we move to a post-subsidy world with a much busier competitive landscape, we see two routes for asset owners and their suppliers: minimise change, take reasonable profits short-term, and then develop an exit strategy; or, get hungry, get creative, and work assets to the full for increased profit now and to build an ongoing revenue stream.
For example, those taking a more hungry and creative approach can realise some interesting benefits through:
- Blade extension on ageing wind farms. Rather than simply looking to repower or extend life beyond a nominal certificated turbine life of 20 years, fit extensions to the tips of blades and start maximising reveneue increases as soon as possible
- Spares clubs. Rather than living with turbine suppliers’ high spares costs (and sometimes excessive lead times), collaborate with other owners of the same turbines to build confidence in alternative spares supply. Managing a pool of spares across a larger and more predictable portfolio of turbines can provide better service at lower cost
- Latest material and applications. Move beyond repeating blade leading edge repairs using solutions that have been proven not to last, and which lead to significant energy loss, to using latest materials and application technologies
- Maximising performance. The wind industry has for too long relied on a 97% availability warranty, and ineffective testing and tracking of power curve performance. Both of these legacy approaches need to be increasingly challenged by owners as they seek to maximise asset value
- Integration. Full integration between site management and servicing activities, asset knowledge and date, including performance benchmarking.
It is time, too, for wind project owners to demand more disciplined approaches to asset management, with decisions and focus areas based objectively on maximising net renvues based on a conscious decision about a portfolio risk profile.
For those with projects in the early years, and needing to ensure sufficient debt service, the avoidance of risk may take priority over potential revenue maximisation.
This should be quite different to those with projects in later life, seeking to maximise revenue before the end of subsidies and a period of low-margin ownership. There are good rewards for those that are proactive, and there is every sense in re-evaluating through-life stragegy, whether across portfolios worth billions, or a handful of local wind farms.
Weighing up the options may feel bewildering, but it is vital that owners get to work on their onshore assets sooner rather than later.
Neil Douglas is director at BVG Associates