In September 2016 New Power considered how onshore wind operators should think about the supposed ‘end-of-life’ for existing wind farms.
Repowering windfarms with larger, more efficient turbines is a huge opportunity to improve plant economics. But in the current policy environment, repowering looks challenging from all perspectives. The answer may be to extend the life of existing windfarms until the future is clearer. The technical challenge is manageable, but are the industry relationships in place?
The UK has a policy vacuum at the moment on onshore wind. The Conservative policy that is halting subsidies for projects means not only a hiatus on new sites but also uncertainty for existing windfarms that are coming to the end of their 20-year initial life.
But the uncertainty over how to redevelop existing sites has had a side effect: the UK may become something of a pioneer in extending the life of existing windfarms. Eventually many sites are likely to be ‘repowered’, with new, possibly bigger, turbines. But that decision cannot yet be taken with confidence, so operators instead are keeping existing turbines in operation for five or even ten years longer than expected.
It sounds obvious; but it is not so simple. A life extension programme requires careful cost benefit analysis – ageing plant may be less reliable and require more expensive maintenance, and there can be no compromise on safety.
Joe Phillips is a partner at consultancy Everoze. He says life extension is a logical step: “It is natural enough for a relatively young industry like wind, as it goes toward maturity, not to be so obsessed with just getting projects in the ground but looking more carefully at assets in operation.” But the UK’s policy changes have accelerated that: “Most obviously the closure of the Renewables Obligation, which has meant that projects will be somewhat curtailed. Looking at the current policy environment, there is a great incentive to focus both on day-to-day operations and the longer-term future of these ageing assets.”
Phillips says the key point is that “nothing magical happens overnight on the 20th year. It is a relatively arbitrary one used primarily by the turbine manufacturers in their design process”.
In some cases, such as Delabole in Cornwall, turbines have been replaced already, but Phillips says: “Those that have been repowered early have been more driven by a strong economic case rather than the technical integrity of the machines being in question. By and large that original 20-year design life has proved to be achievable. We are seeing some sweated beyond the 20-year life.”
Dan Dufton is a professional engineer at PB Power. He says: “We have noticed an increase in interest. People are considering it.”
Dufton notes it is not just longstanding windfarm owners watching their assets age: “There are companies who are buying portfolios of existing assets and they have a range of ages within that. They are thinking ‘I have some equipment more than ten years old, what can I get out of it?’.”
What is required to carry on operating? Dufton echoes Phillips’ point about the artificiality of the 20-year life: “It’s not a cliff edge, where suddenly you have to do more. You are already going down that path of having to put more effort, resource and money into the maintenance of the equipment, even in the second ten years of the design life. It’s an enhancement of the kind of things you may well have been doing already.”
The option will be open to many projects – Phillips says experience so far is that lifetime damage in cases he has seen “were not as bad as had been assumed in design calculations… so we do expect life extension beyond
20 years to be an option for most projects”.
Phillips adds: “There are probably two approaches. A more marginal extension without significant investment, except perhaps a bit of increased TLC. It may be there we are talking about five years. Beyond that there is more substantial investment needed to overhaul some of the key electrical and mechanical components and there we could be talking up to a ten-year extension.” A still longer life could be an option for some projects, but “the industry has to gain confidence in going through five to ten year extensions before talking about anything further”.
The issue is not just a technical one. Leases, planning consent and connections may all assume a 20-year lifetime for the windfarm. Even if most people assume that a site is more than likely to continue to host the asset, perhaps with new turbines, if may be necessary to extend or renew existing permissions.
Colin Innes, head of planning at law firm Shepherd and Wedderburn, says the construction phase is often one of the biggest barriers to planning permission – something that will not arise for
a simple life extension. But the consenting regime has changed since some of the windfarms were built, not least because some aspects of planning have been devolved to Scotland (and now Wales).
One issue to consider is whether a new Environmental Impact Statement (EIS) is required. Innes says it’s possible, because “the state of knowledge has changed. The effect on birds may have to be reconsidered. [But] unless there are other effects picked up in monitoring, the ongoing effects are unlikely to be other than noise and visuals”.
Phillips sums up the benefits of a 20-year old plant – even if it requires more maintenance and has a higher risk of failure: “If you can show five to ten years [more life] is possible and you can cost that, suddenly it opens up very attractive refinancing opportunities for those projects. The asset value has been increased.”
Operating an old plant almost certainly requires a rethink of a company’s management strategy. A key issue is that the turbines will be out of warranty and that has implications for how long they are kept in operation.
Phillips describes different strategies: “There may be a case to increase your operating expenditure to try to increase production.
“There may be a case to do the reverse – take more of a ‘managed decline’ approach, as we see in other industries. You reduce operating expenditure and accept that you will be operating at lower production levels, on the basis that it’s not worth making that additional investment but you still get a profitable project for a few additional years.
“Our experience is that there is no one-size-fits-all answer to that. It depends on the technology in question, its reliability and prognosis.”
Dufton says managed decline might mean accepting that some of your turbines will not survive to the end of the new site lifetime. “Rather than actively trying to maintain the turbines, you might accept that they will produce less energy than they did before,” he says.
Phillips explains that there may be other reasons for accepting the loss of some turbines: “The projects that are approaching 20 years are using very outdated technology, models that are no longer sold and often no longer supported. So the availability of spares becomes an important factor to take into account when you are evaluating your options. That’s the case we have seen on a couple of projects recently.
“Even if you want to extend life, if there are no spare gearboxes anywhere in the world then the first time the gearbox fails that’s it. In that case you can look at a cannibalisation approach and shut the site down machine by machine as you hit mechanical failures. Use the spares from the down machines to help the rest of the plant keep going.”
There is a planning issue here. Innes notes that in some cases, planning provisions say that “if a turbine doesn’t operate for six months or a year, you have to take it down. [The provision is there] to stop turbines being abandoned. Non-performance can lead to the turbines being removed”.
Owners’ dialogue with their insurers is also likely to be more challenging for older plants, as ‘wear and tear’ is more often the reason for failures.
When does life extension start?
Dufton says it may be in an owner’s mind from the start: “You could think about it straight away and decide to operate the windfarm with the intention of getting more than the 20-year design life out of it.”
The other end of the scale is not at 19 years, but “maybe five years before the end of life. Then you start thinking about the extra monitoring and refurbishment you might want to do, so you can flatten off the curve of degradation and get extra years out of it”.
But Phillips says the industry is not yet set up to make those decisions. “There is certainly not common industry practice on how to make these decisions and implement them.”
He suggests a comprehensive model is needed: “The most important thing you need is a decision-making framework. That can’t just be technical, commercial or regulatory – we have to take all these into account. We have tried to develop that. Once you have the framework in place you can start looking at the trigger points for making the decision. That means a profitability matrix that you will use and the thresholds those metrics get to before you switch your strategy. You have to be confident that you have a cost-able solution that will deliver long-term benefits and that you will deliver that at the right time so you don’t have a hiatus in production. It’s quite a challenge getting it together.”
Innes says planning extensions will require forethought to avoid that potential hiatus: “Say you were coming to year 17 and thinking ‘at year 20 we will take a substantive decision’. At least a couple of years in advance you would want to have everything available to put your application in, potentially deal with any environmental statement, and the extent to which you are required to do survey work will affect that.
“Ornithology has to be seasonal so you may have to do a year’s survey work.”
Will the leaseholder relationship be good enough to allow a smooth passage to a longer life? Innes thinks that will sort itself out if the opportunity is real: “Money talks and generally speaking people are quite well disposed to having windfarms on their land. It’s a steady income stream that’s often used to help in rural areas.”
As for whether landholders may seek a bigger return than they had before, he says: “It’s a market and it will find its level.”
Who can do it?
Already, over 130MW of onshore wind in the UK is more than 20 years old and 250MW is between 15 and 20 years old (see next page). This represents an opportunity for companies that provide the services needed by ageing assets – condition monitoring, maintenance strategies, even management of spares.
What about the changing requirements of plant owners? Phillips believes that “even the more mature players in the sector who have a portfolio of assets are only just thinking about what the framework looks like [for continued operation] and what they have to do to their corporate management systems to implement it.
“There is a lot of thinking to be done, a lot of work to be done. It is rising up the agenda right now because you are starting to see the first tranches of capacity getting to the right age.”
Given that it takes a different, and perhaps more active, approach, might we see some owners and some operations and maintenance (O&M) companies specialise in these plants? Phillips says yes: “There is an opportunity there. Investors such as pension funds will have made solid inflation-linked returns. They are not in the right place necessarily to take advantage of this opportunity.”
Up to now, companies that focus on taking on operating plant have not necessarily been well connected with developers. “They are about keeping assets going, not major spend decisions,” said one commentator. But the trend could present an opportunity for developers whose teams have been run down in the past year.
Could they partner with O&M specialists to pick up older plants? Phillips highlights this as an option: “It could be a new role for the smaller developers in the UK now that are struggling to find a business model. In a way you are developing the site rather than doing it from scratch. There are skills that are transferrable.”
Phillips says specialist O&M companies – some of which were and are developers – could take plant on and “you could see that as a transition. There are companies providing O&M services and perhaps they could take some form of equity in the projects towards the end of their lives”. Such companies are likely to be aiming to redevelop or repower the site eventually, but they could take on “life extension to get over the transition”. The next five years will see a big hike in the amount of capacity reaching 20 years old. Who will take them on?
Moving towards ‘energy hubs’?
A site with a sympathetic owner and a grid connection is valuable and as revenues from a windfarm decline it may prompt owners to look at some other options to increase profitability.
Everoze’s Joe Phillips says there are some interesting opportunities that can make the most of the grid connection, such as incorporating storage and offering ancillary services, or adding solar: “We have seen the first examples of that in the UK already and I expect it to continue.”
All the ideas have the same rationale: “You have precious landholder relationships and you have a site that is consented – even if it has to be amended – and crucially you have a grid connection. I can see a trend towards older wind projects incorporating solar and storage over the next five to ten years even without specific subsidy. The business case is starting to stack up.”
That is a long-term option, however, and may require changes in the electrical infrastructure. You have to start looking at the connection agreements. “If you are going to do something different on your site, the DNO [distribution network operator] may require upgrades because the grid code changes over time. Older projects were allowed to connect with less stringent requirements… even if you are not replacing the turbines there are likely to be clauses in the connection that require you to invest to make the connection more grid-friendly and up to date with current requirements.”
Planning for an ‘energy hub’ site could also add complexity. Shepherd and Wedderburn’s Colin Innes notes that wind and solar have very different local effects. “Depending on scale you would need a new impact statement and because [PV] is more physical coverage you would need full survey work.”
That leads him to believe that co-location “will be targeted at newer sites, where you will get a better return for your investment”.
When will windfarm opportunities arise?
The UK’s surge in wind power started more than 20 years ago and windfarms are already passing the 20-year lifetime landmark.
How much wind capacity will be passing that benchmark? What is the potential opportunity for companies that offer technical support, consultancy, monitoring and all the other services that will be required by windfarms operating past their initial planned lifetimes?
The New Power database records its first onshore windfarm (more than 10MW in capacity) starting up in 1991 and by 2015 around 100MW had passed the 20-year mark, in addition to windfarms, such as Good Energy’s Delabole, that were repowered early.
This year and next, some 110MW will reach the 20-year milestone, and a similar total will pass it between 2018 and 2022.
If the time to start thinking about management strategies for the post-20-year period is at least five years in advance, owners must build their decision-making framework now for the next tranche of windfarms, those that reach 20 years of operation between 2022 and 2026.
The middle of that period sees a leap both in the number of windfarms and windfarm size, up from 58MW of capacity in 2022 and 2023 to 306MW of windfarms reaching the 20-year milestone in 2017. (We have excluded Whitelee from these figures, which now totals more than 500MW but was built in several stages.)
By the end of this period, the first windfarms sized above the 50MW threshold are beginning to reach the 20-year limit. This has implications in extending plant life, as the original planning application will have been handled in Westminster under section 36 planning rules, and devolution has changed that regime.
Some small projects (around 10MW) remain in the mix, while most reaching maturity at this period are in the 30-40MW range.
Is it too early to start considering ‘end-of-life’ strategies for newer windfarms? New Power’s database reveals there is a large tranche of onshore wind that is reaching the mid-point of its initial expected lifetime – around 2GW will reach that point by 2030, and we see many more sized at about 50MW.
For the owners of these windfarms, some visibility of the framework for onshore wind post-2020 is urgent. Will they be able to repower, or should they plan for longer-term operation of the existing assets?
What are the technical issues?
An ageing turbine is more likely to be subject to faults and need more care and maintenance. Everoze’s Joe Phillips separates faults and preparedness into three types.
“There is the minor, more frequent type of fault that can be inspected. It may not require component replacement and it is related more to teething problems during the early years of turbine life.”
The next level faults “are less frequent and more serious, where you are replacing subsystems or components. That can be anything from some of the power electronics – converters in particular are an area prone to failure – or a significant mechanical component such as a gearbox or a blade. There are obvious cost implications but most owners will have budgeted for a degree of that category through the project life.
“The other approach is to do a more significant overhaul and systematically replace subsystems during a project’s life. We haven’t seen a huge amount of that going on in onshore wind yet. In offshore wind projects we have seen several that are planning that approach based on the additional loads and wear expected in the offshore environment.”
Finally, there will be “terminal issues around the structural integrity of the machine. This is where the 20-year assumption comes in.
“When the design was done, that 20-year lifetime would have fed into the design calculations for structural elements. Within that there are safety factors, and other areas of concern which means that what we are seeing in reality is that projects can continue to operate safely beyond 20 years provided that appropriate -inspections and measurements have been undertaken.”
PB Power’s Dan Dufton adds some detail: “You are looking at higher frequency of component failure, but if you are being pro-active you may be increasing the frequency and types of condition monitoring so you can anticipate and take action before failure occurs to minimise downtime.
“You would be looking at doing more intensive monitoring and checking key mechanical components – blades, bearings, gearbox, the kind of components you would be looking at anyway – and ramping up efforts to understand the condition of each of your turbines.
“You would also be wanting to be looking at structural elements, making sure you won’t see any issues that will scupper your ability to keep an individual turbine operating longer.”
What does that mean for O&M costs – might they double? -Dufton says it’s very hard to make a guess: “You might get up to that level, it depends on how it has been maintained in the previous period. And [it depends] on site conditions, whether it is tough or straightforward depending on wind and weather condition.”
Is there a data gap? Information on how turbines have aged is very specific to turbine and manufacturer as well as to the site, and it’s clearly commercially sensitive. But there are many precedents in the energy industry where such technical data is anonymised and made available industry-wide.
Dufton says: “That’s something that as an industry we would all be interested to see, in terms of getting a broader picture of what are the older assets out there and what can happen to them. It can only help the industry.” Phillips agrees, saying: “I think the trade bodies should get on top of this and it’s somewhere they could do more work.”
First published in the September 2016 issue of New Power Report. For more information about New Power Report contact firstname.lastname@example.org