When building a wind farm, typically the wind turbines are sold to the wind farm developer along with a service contract for a number of years from project practical completion. The service contract can take a number of general forms:
- Availability Guarantee
- Energy-Based Guarantee
- Energy Conversion Guarantee
- Service Only
This was the most popular guarantee for many years, as it was simple to measure and low risk for the wind turbine supplier. It is a time-based performance metric. In essence, the OEM offers the customer a guarantee that their wind turbines will be available to generate power a certain percent of the time. Typically, this is in the 97-98% range. The OEM is paid a monthly service fee which is reduced via availability damages if the agreed performance is not met.
In its simplest form an availability metric is:
(Time Wind Turbine is Available to Generate)/(Total Time)x 100
Some periods of un-availability are allocated to the owner and some to the OEM/service contractor. Typically, breakdowns go against the OEM and reduce their availability metric while grid outages, and out of specification weather events (e.g. too hot, too windy) do not count against the service contractor’s performance.
An availability guarantee was often sold with the wind turbines for a period between 2-5 years and served as a mechanism for demonstrating the OEM’s faith in their product, even beyond the warranty period.
It is also simple for a third-party service contractor to offer an availability guarantee once the service contract is offered to the market. There is still risk, but predictions on future wind farm availability can be made based on historical wind farm SCADA data.
While an availability guarantee incentivizes the service contractor to address breakdowns as soon as possible, one main disadvantage of the availability guarantee is that it does not completely align the priorities of the service contractor with the wind farm owner:
- There is no benefit to the service contractor for identifying and rectifying underperforming turbines
- Availability is identical if a turbine is taken out of service to perform maintenance at high wind than at low wind, when obviously the wind farm owner would prefer servicing to be performed during low wind periods
An energy-based guarantee attempts minimise lost production. It addresses some of the shortcomings of the availability guarantee by using energy as the performance metric:
Energy% = (Produced Energy)/(Theoretical Maximum Potential Energy) x 100
While the calculation is slightly more complicated, the additional required data (being turbine wind speed and generated energy) is already available in the existing wind turbine SCADA system, so it is simple to take any period of downtime and calculate the lost production. The energy-based guarantee addresses the problem of the availability guarantee which is that all downtime is treated equally no matter the wind speed. Now the service contractor is motivated to plan servicing for low wind speeds to minimise lost production.
Some difficulties/downsides associated with energy guarantees:
- Wind Turbines tend to break down more at higher wind speeds so some downtime during high wind speed is unavoidable and a risk to the service contractor
- It requires accurate wind forecasting in order to schedule wind turbine servicing
- One often overlooked issue is that periods of low wind speed might not coincide with normal work hours – it may be low wind at night or in a particular season which may require wind turbine technicians to work very long hours during low wind seasons and not have enough work during high wind periods (although there will be breakdowns to attend to).
- Depending on the complexity of the calculation, the energy-based guarantee may still not incentivise the service contractor to address underperforming turbines
Energy Conversion Guarantee
The energy conversion guarantee takes the energy-based guarantee a step further and is becoming increasingly demanded by wind farm developers as a way of minimising production uncertainty and increasing the bankability of a project. The wind turbine manufacturer assumes all risk for the performance of the turbines including:
- Wake effects
- Wind turbine blade degradation
- Balance of plant electrical efficiency
Basically, the OEM guarantees that when the wind is blowing x m/s, the wind farm output will be y MW. The duration of the guarantee can be very long, up to 15 years and the OEM assumes significant risk and must consider the maximum level of likely performance degradation that will be experienced over the period of the guarantee. In some cases (e.g. where they are the head EPC contractor or Partner) they will also assume the risk for the performance of the balance of plant, being the electrical cables and overhead lines, wind turbine transformers and substation plant including their associated losses.
The OEM builds this risk into the price of their wind turbines and ongoing service fees, but it affords a lower risk investment for the wind farm developer/owner.
At the other end of the scale is service only. As the name implies, the service contractor is paid a monthly per-turbine fee to service the turbines. Ad-hoc work (e.g. attending to breakdowns) is charged at an hourly rate and major component failures are typically open for external contractors to offer competing prices to perform these large work packages.
Service-only contracts are popular on old wind farms where reliability is too uncertain for a service contractor to take on availability risk. They are the cheapest upfront form of service contract, but one where the wind farm owner assumes the most risk for poor performance. Wind turbine availability can seriously suffer under a service-only contract, as it can be administratively burdensome to prepare a quote to perform major repair work, and wait for the quote to be approved etc. During this time, a turbine is shut down and the service contractor is not incentivised to quickly get the turbine back into service.