Wind Power’s Operating and Maintenance Costs Plunge

Operation and maintenance costs for the wind energy sector fell 38 percent from 2008 to 2011, Bloomberg New Energy Finance reports.

If this keeps up, the wind power industry might not need the embattled production tax credit for very much longer. Which, come to think of it, is the stated point of the subsidy: to provide support for the industry while it evolves to a lower cost structure and ultimately becomes self-sufficient.

The new evidence that this hoped-for storyline is unfolding comes from Bloomberg New Energy Finance, which reports that operation and maintenance costs for the wind energy sector worldwide fell 38 percent from 2008 to 2011, or about 11 percent per year.

Wind power has done much to improve its competitiveness against gas-fired and coal-fired generation in recent years, via lower-cost, more technically advanced turbines, and more sophisticated siting and management of wind farms,” BNEF’s Michael Liebreich said in a statement. “This new O&M Price Index shows that servicing wind farms at the operating stage is also becoming much more cost-efficient.”

These cost figures aren’t based on some kind of theoretical estimate — BNEF used actual contractual data submitted to it by 38 wind power companies around the world. “The data have covered 104 confidential and undisclosed O&M contracts, totaling 5.3 gigawatts of contracted capacity, in more than 24 markets,” BNEF said. “In all cases, the service providers are the turbine manufacturers, with a main focus in Europe and the Americas.”

Bloomberg listed six main points from its O&M research (quoting here):

  • Average prices for full-service O&M contracts fell to EUR 19,200 ($24,700) per megawatt per year in 2012 — a 38 percent decrease since 2008. The decline in O&M prices was driven by increased competition, as turbine manufacturers vie for service contracts, as well as by improved service performance of the underlying turbines.
  • Average contract duration has risen from 4.5 years in 2008 to 6.9 years in 2012, as manufacturers attempt to lock in longer-term agreements.
  • Average availability guarantees in the contract sample reached 96.9 percent, with any upside beyond that generally shared between the developer and service provider. Guarantees on actual energy production are also becoming more commonplace.
  • Markets in Eastern Europe and the U.K. had the highest pricing for full-service offerings. This may be due to higher labor costs and/or a limited local supply chain. The U.S. displayed the most competitive pricing of all markets.
  • Pricing between manufacturers has been fairly similar in 2008-2012, with the exception of one manufacturer, German company Enercon. Its prices for full-service contracts were nearly 20 percent lower than the market average throughout the whole period.
  • Index participants expect O&M pricing be fairly stable at least until 2015. They regard Enercon, Siemens and Vestas as the best service providers in the industry in terms of promptness and quality of service for scheduled and unscheduled works.