Sunday, April 24, 2016

Wind Turbines Operations and Maintenance Costs

Subtitle: O&M Is Key To Profitability 

Operations and maintenance costs, O&M, are one of the major concerns of those who own and operate wind-turbine energy projects, along with wind speed and duration.   The chart below from US Dept of Energy shows actual O&M costs for dozens of wind projects, by year of initial operation.  (Source: US DOE 2014 Wind Technologies Market Report, Riser and Bolinger)

O&M Trend Line and Typical Revenue -- added by Sowell
With project revenues comprised of two parts, a Power Purchase Agreement, PPA, of typically 30 $/MWh, and Production Tax Credits, PTC, of 23 $/MWh, total revenue is as shown in the red line as 53 $/MWh.  PTC exist only for 10 years from initial operation, therefore revenues before 2005 would be only 30 $/MWh.   As can be seen from the black trend line, O&M costs increase with age so that at year 1995, which is 20 years from 2015, O&M costs essentially the same as revenue.  In other words, there is no longer any incentive to operate the average wind-turbine project.  

However, for projects that signed PPAs with higher values, such as the period from 2005 through 2010 where 45 to 51 $/MWh were typical, the projects will likely operate profitably up to and perhaps beyond the 20 year mark.  

There is typically much moaning and hand-wringing by the anti-wind crowd because they complain that wind-turbines are not turning whenever they happen to drive by.  One must ask if the wind-turbines in question are older than 20 years; if so, they are likely not turning because the costs to repair and operate exceed the project revenue.  

Roger E. Sowell, Esq.
Marina del Rey, California
copyrignt © 2016 by Roger Sowell, all rights reserved

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