Typically an OEM sells wind turbines to the wind farm developer along with a service contract. The service contract extends for a number of years from project practical completion. It 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. It is simple to measure and low risk for the wind turbine supplier. It is a time-based performance metric. 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 owner pays the OEM a monthly service fee. The wind farm owner reduces the fee (via availability damages) if the contractor does not meet agreed performance.
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. Grid outages, and out of specification weather events (e.g. too hot, too windy) do not count against the service contractor’s performance.
The wind turbine OEM would often include an availability guarantee for a period between 2-5 years from practical completion. It 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. After the expiry of the original availability guarantee, the wind farm owner may renew it or invite tenders to external contractors. There is still risk, but predictions on future wind farm availability can be made based on historical wind farm SCADA data.
Availability guarantees incentivise 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 under-performing turbines
- Availability is identical if the contractor takes a turbine out of service to perform maintenance at high wind or low wind. Obviously the wind farm owner would prefer the contractor to service the turbines 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. Low wind may be prevalent at night or in a particular season. To minimise lost production wind turbine technicians must work long hours during low wind seasons. They may also have insufficient work hours 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 under-performing turbines.
Energy Conversion Guarantee
The energy conversion guarantee takes the energy-based guarantee a step further. It is 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 long – up to 15 years. The OEM assumes significant risk and must consider the level of performance degradation that will be experienced over the period of the guarantee. In some cases the OEM is the head EPC contractor or Joint Venture Partner. Here 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 (and 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.
At the other end of the scale is service only. The wind farm owner pays the service contractor a monthly per-turbine fee to service the turbines. The contractor charges ad-hoc work (e.g. breakdowns) at an hourly rate. The wind farm owner may tender (to external contractors) work associated with rectification of major component failures.
Service-only contracts are popular on old wind farms where reliability is too uncertain for a service contractor to guarantee availability. They are the cheapest upfront form of service contract, but one where the wind farm owner assumes the most risk. Wind turbine availability can seriously suffer under a service-only contract. This is because the service contractor must prepare a quote to perform major repair work. The wind farm owner must then assess the quote and wait for it to be approved etc. During this time, a turbine is out of service and the service contractor is not incentivised to quickly get the turbine back online.