A lot of time and metaphorical ink is spent on the installation and operation of renewable energy installations, be they onshore wind or offshore wind or solar, with very little attention paid to the before and after — the investment and maintenance phases, arguably the more important and vital stages of any renewable energy project. Beyond my hyperbole, however, is a potential multi-billion-dollar industry that is only set to grow as renewable energy installations continue to increase in number and frequency.
A new report from Bloomberg New Energy Finance predicts that the operation and maintenance (O&M) of China’s extraordinary wind industry is going to cost $16 billion between 2015 and 2022, reaching $3 billion per year by the time we hit 2022 — a fantastic opportunity for O&M companies.
China is, as you might have guessed, the world’s largest wind market, having installed more than 100 GW of wind energy — the equivalent of 65,000 wind turbines. And it is still adding approximately 30 wind turbines each and every day.
Maintenance and operation of these wind turbines currently costs $500 million per year, and that figure is only expected to grow in line with the industry’s growth.
“This market has not attracted much attention up till now, partly because China’s wind capacity only started to grow at world-leading rates late in the last decade and partly because many of the turbines that have been installed have been working through extended warranty periods,” said Justin Wu, head of Asia research for Bloomberg New Energy Finance (BNEF). “But the next few years will see the birth of a multi-billion-dollar O&M business.”
Often the operation and maintenance side of the renewable energy industry is packed away in half a line about the obligations one operator or another has signed with the respective construction company — an obligation that usually lasts anywhere between 2 and 5 years. Siemens recently announced that it had signed two long-term wind service agreements with Harvest Wind and White Creek wind projects in Washington State, a piece of news which was easily dismissed as relatively unimportant.
But as turbines age, these existing contracts expire, at which point the O&M industry finds itself with an opportunity.
According to BNEF, 14 to 18 GW worth of China’s wind turbines are set to come out of warranty annually between 2014 and 2016, a number that is set to increase in line with growth, with 26 GW coming out of warranty in 2017, and 30 GW in 2018. By 2022, a total of 187 GW worth of wind turbines in China will be out of manufacturer’s warranty, and be requiring regular operation and maintenance services.
China’s industry is relatively new, kicking into world-leading installation figures only in the last decade. As such, the number of wind turbines coming out of warranty have been fewer than more established markets, such as those spread throughout Europe. As a result, 75% of Chinese owners have been maintaining out-of-warranty turbines on their own, whereas in Europe that figure sits at a measly 10%. The outcome, therefore, is obvious:
This is likely to change over the coming years, as owners’ assets under management grow. In-house O&M management will eventually become unwieldy so large owners will seek to mitigate operational risk through outsourcing.
BNEF predicts that in-house maintenance of China’s warranty-expired fleet will drop to 50% over the next five years. The existing crop of 90 or so independent wind farm service providers vary in experience and quality, with many having sprung up over the past 2 years. As with any other industry, the cream will rise to the top and over the next five years it is expected that an experienced group of O&M companies will exist to be servicing China’s wind industry.
Image Credit: Lance Cheung, via Flickr | CC BY 2.0
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