The Cost of “Peace of Mind” - a comparative review of terms and costs of long-term, comprehensive O&M contracts offered by Original Equipment Manufacturers

Introduction

Increased focus on Levelised Cost of Energy (LCOE) is leading wind project owners, funders and investors to consider the long term options available to them with regards to O&M strategy. The most commonly selected O&M strategy option, in particular by small to medium portfolio owners, is to sign long term, comprehensive in scope, O&M contracts with Original Equipment Manufacturers (OEMs). This “peace of mind”, low risk strategy however also comes at a price and also usually is the most expensive option.
The aim of this paper is to present a comparative review of the terms and costs observed in the onshore wind industry for long term O&M contracts, therefore providing a “benchmark” to owners, funders and investors, to be used in their financial model or to explore alternative to these contracts.


Approach

Natural Power has monitored, as part of the extensive number of Due Diligence projects we have conducted internationally, the main terms (fees, term, and scope) of O&M contracts offered by leading OEMs.
In order for a meaningful comparison to be made, costs will be normalised on a EUR / MW basis.


Main body of abstract

Natural Power is conducting numerous due diligences internationally. This paper will focus on the European market in general and selected countries such as the UK, Ireland, France, Finland, and Germany in particular.
Natural Power is maintaining an internal database in which we record the main contractual terms and fees associated to the main construction and operation contracts. This database includes main manufacturers such as Vestas, Siemens, Enercon, Nordex, Senvion, and GE.
This paper will focus on Wind Turbine Generators (WTGs) O&M contracts, for which terms of between 5 to 20 years have been observed. Costs, usually presented in unit of Currency / WTG or Currency / MWh, will be normalised to a common unit of EUR / MW in order to allow meaningful comparisons to be performed.
Contract terms (nature of scope offered, from comprehensive at one end, to only covering basic scheduled maintenance at the other end) will be scrutinised to ensure like for like comparison.
An analysis will be performed in order to establish how these costs vary depending on main factor such as scope and term of the contracts.
Our paper will also investigate if other secondary effects (number of WTGs in the project, jurisdiction, technologies (manufacturer and drive train configurations, WTGs rated capacities) appear to influence costs or not. The confidentiality of OEMs offerings will be respected by insuring that the information presented is anonymised.
Finally, with these benchmark O&M costs established, Natural Power will present offer views on alternative O&M procurement approach and strategies (for example more ‘hands on’, or using Maintenance Reserve Accounts to cover for unscheduled Opex spikes), and summarises the pros and cons of various O&M strategies available to wind project owners and investors.


Conclusion

This paper will present a comparative review of the terms and costs observed in the industry for the long term O&M contracts, therefore providing a “benchmark” to owners, funders and investors, which can be used in their financial model or to explore alternative to these contracts.


Learning objectives
The main learning objectives of this paper are:
• Provide a “benchmark” to owners, funders and investors, to be used in their financial model or to explore alternative to full scope contracts offered by OEM;
• Present information on how WTGs O&M costs vary depending on key terms such as term or scope of the contracts;
• Present the range of costs observed in the market depending on OEMs;
• Investigate effects, if any, of other parameters such as size of projects, turbine models, jurisdiction, commercial pressure, etc…