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By 2021, IHS Markit estimates O&M expenses for wind assets
will cost the industry about $7.5 billion annually, when operating
expenditure (OPEX) for the
North American wind industry is expected to eclipse capital
expenditure (CAPEX). With so much at stake, the wind industry is
likely to increasingly focus on providing services and minimizing
costs at existing projects, compared to planning and constructing
new ones.
Figure 1: North American Wind CAPEX Vs. OPEX Outlook
2018-2030
In late July, IHS Markit published 2018 IHS Markit Wind
O&M Benchmarking in North America: Aging Turbines, Rising Costs
- a study of operations and maintenance (O&M) costs for
North American wind power plants. The report is part of the IHS
Markit Wind Power Plant Benchmarking Service, which is designed to
help the industry determine the optimal O&M strategy using
concrete, standardized data of costs and performance.
What are the big takeaways from the Wind O&M
Benchmarking report?
One of the key findings is that larger, newer wind projects have
O&M costs averaging 25 percent less per MWh than ones using
smaller turbines installed before 2010. Overall, the study showed
there is a steady increase in annual costs per MW installed after
about three years, although there is a great range of costs from
project to project, with age, location, and O&M strategy all
being important factors. Large projects are not immune to this
trend, though the effect appears more modest for them.
What does the IHS Markit Wind Power Plant Benchmarking
dataset contain?
The study comprises data from more than 325 wind projects,
representing 34,000 MW of capacity and nearly 20,000 turbines
installed in North America (about one-third of the market). The
data represent more than 150,000 turbine-years of operational
history from more than 15 turbine original equipment
manufacturers.
What other costs trends have been shown by wind power
plant benchmarking?
Analysis indicates first-year O&M costs are on the decline,
falling from an average of $46,000 per MW during 2008-2013, to
$38,000 per MW from 2014 to 2017.
As wind projects age, O&M costs increase on average to as
much as $58,000 per MW annually, with direct costs (the costs of
actually maintaining the turbines) rising sharply by the end of the
project's first decade of operation. Rising total O&M costs are
due to increasing direct costs, which are partially but not fully
offset by declining indirect costs (e.g., general site
administration and other business services, taxes and
royalties).
What factors are driving these cost trends?
The IHS Markit study found that around one-quarter of all
turbines' gearboxes and generators each need replacement during
just the first decade of operations. These component failures
result in many turbine failures with the proportion of annual
downtime due to failures rising from just 20 percent in year three
of operations all the way to 65 percent by year 10.
What are other insights from wind power plant
benchmarking?
Safety incidents occur most frequently at very large projects in
the first five years of operation. No clear correlation is evident
between safety incident rate and project size or OEM, but the rate
for projects greater than 300 MW is nearly double that of the fleet
average.
Why is this study significant?
The O&M market for North American wind installations is
growing rapidly. Growth is driven both by more turbines and-as
those turbines age-more spending per turbine. Federal tax credits
that support new wind installations will phase out in the early
2020s, leading to a forecasted decline in new wind projects being
built.
Before this benchmarking study was established, there was no
good way for wind-asset owners to compare the performance of their
projects against the market as a whole. Now that owners have access
to a comprehensive assessment of the entire O&M market, they
can select the O&M strategy that best balances cost,
convenience, and risk profile for their portfolios.
