Aging US Wind Energy Fleet Drives O&M Spending

A new study from analysis firm IHS Markit has found that the aging US wind energy fleet of turbines will drive increased operation & maintenance spending, with the wind industry spending $3 to $4 billion annually and O&M spending exceeding $40 billion between 2015 and 2025.

According to new benchmarking study — 2017 IHS Markit Wind O&M Benchmarking in North America: Summary of Key Findings — conducted by IHS Markit and published earlier last month, the North American wind energy industry is aging and will reach an average age of 7 years in 2020, and 14 years in 2030. As such, and unsurprisingly, operation and maintenance (O&M) for the wind energy sector will balloon out to between $3 to $4 billion annually and cumulatively exceed $40 billion between 2015 and 2025.

“The average age of the North American wind fleet will rise from 5.5 years in 2015 to 7 years in 2020, and to 14 years in 2030,” said Maxwell Cohen, senior research analyst at IHS Markit and co-author of the report. 

“Along with that, equipment maintenance and operating costs are increasing significantly, leading operators to focus on performance optimization and cost management. We designed this study to help wind-asset owners compare the performance of their projects against the market as a whole, as well as to help them determine the optimal O&M strategy for their business.

“Though it may seem counterintuitive, first-year start-up costs are quite expensive as problems with new equipment are addressed, then, as projects age, we see a spike in costs for equipment maintenance at about the five-year mark through to 10 years of operation. Some wind installations in California date back to the 1980s, so you have a wide variety of equipment and installations, and there is a real need for some comparative analysis to help the industry assess and manage operations and maintenance costs.”

“The IHS Markit benchmarking analysis includes input from many of the largest wind project owners and operators who asked IHS Markit to fulfill their need for concrete, standardized data and analysis to help benchmark the cost and performance of wind-farm operations,” added Ryan Siavelis, senior research analyst, at IHS Markit, and co-author. “There was a void in the market for this type of analysis.”

The IHS Markit report is based on data from nearly 300 wind projects in the North America, representing 30 GW (gigawatts) and nearly 20,000 wind turbines — around one-third of the market. Project start dates for the projects included in the study range from 1994 to 2016, and turbine data represents over 115,000 turbines-years of operational history. Overall, the North American wind energy sector is made up of over 50,000 utility-scale wind turbines of nearly 100 GW installed in 42 US states and 12 Canadian provinces with an average age of 6 years.

By 2030, IHS Markit expects these numbers to reach over 70,000 wind turbines and 150 GW worth of capacity.

“The age of that capacity in 2030 will make the O&M business very lucrative, which is why so many players are expanding into this sector of the business,” Siavelis said. “We see new entrants from across the value chain competing for wind O&M service agreements. Original equipment manufacturers (OEMs) including Suzlon, Siemens Gamesa, MHI and Vestas are becoming more active in offering to service turbines manufactured by other OEMs, for example.”