North America’s aging fleet of wind turbines could lead to a surge in operations and maintenance spending through 2030, according to a report released this month by IHS Markit. The report found cumulative O&M spending for the wind energy sector in the United States and Canada will top $40 billion from 2015 to 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, in a statement.
Cohen and co-author Ryan Siavelis gathered data from nearly one-third of the wind energy market in North America -- 300 wind projects comprising nearly 20,000 turbines -- to prepare the analysis.
According to the report, O&M costs average between $42,000 and $48,000 per megawatt during the first 10 years of a wind turbine’s operations. Over time, direct O&M costs related to turbine maintenance increase, while indirect O&M costs for site administration hold steady or decline.
By 2030, an older, larger turbine fleet in the United States and Canada -- estimated at more than 70,000 turbines -- will present service providers with ample opportunities for growth. “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,” said Siavelis in a statement.
Cohen and Siavelis identified Suzlon, Siemens Gamesa, MHI and Vestas among the original equipment manufacturers that have entered the space in pursuit of wind O&M service agreements.
O&M’s emergence as a “strategic battleground”
Analysts at MAKE Consulting likewise see significant growth opportunities in wind turbine services. MAKE’s own wind turbine O&M report was published this month. By 2026, the report found, the global wind turbine services market could exceed $27 billion. MAKE Consulting is owned by Wood Mackenzie, Greentech Media’s parent company.
In an email, MAKE Consulting’s Aaron Barr noted that his firm’s O&M average for the U.S. market was lower than IHS Markit’s -- $28,000 per megawatt, compared to a range between $42,000 per megawatt and $48,000 per megawatt -- but he identified the same salient industry trends.
“The overall O&M market is growing primarily because the fleet continues to grow with new installations,” he said. “All of these new turbines coming online must be maintained for 20+ years.”
“Another factor contributing to the growing O&M market is the increasing age of the existing fleet,” added Barr. ”Older turbines face higher O&M costs due to legacy equipment, accumulated fatigue damage, and spare-part obsolecense.”
Seeking to control O&M costs, project owners have been forced to decide whether to keep turbine servicing in-house, and they are turning to digitalization to optimize project performance.
“The O&M segment has emerged as a key strategic battleground within the industry,” said Barr. “Asset owners are increasingly sensitive to O&M costs, and many of the largest owners are now performing their own maintenance. OEMs still maintain a majority of the global fleet, but they face competitive pressure from self-performing asset owners (their customers), independent service companies, and their OEM competitors.”
He went on: “The O&M market has also become one of the central focuses of technical innovation -- including application of data science, aerodynamic enhancements, and controls strategy R&D. The digitalization revolution the industry is going through is also primarily driven by the O&M market and associated operational improvements.”
To address an aging wind turbine fleet and increasing O&M expenditures, project owners are increasingly turning to repowering -- replacing obsolete turbines with new more powerful turbines at the same project site, or replacing select components such as blades or gearboxes on existing turbines.
The Energy Information Administration recently published an update on the potential for wind farm repowering in the United States. EIA found that 12 percent of the turbines installed in the United States came on-line before 2000; those turbines account for just 2 percent of the country’s installed wind electricity generating capacity.
EIA cited data from GE, which has already repowered some 300 wind turbines, indicating that repowering can increase wind turbine fleet output by 25 percent and add 20 years to the life of the turbine.
Current tax law incentivizes owners to repower projects. Projects qualify for the federal Production Tax Credit if at least 80 percent of the property’s value is new. Qualifying repowering projects that meet the 2019 deadline established under the December 2015 PTC extension can then receive an additional 10 years of tax credits.
The National Renewable Energy Laboratory estimates that annual repowering investment in the United States could reach $25 billion by 2030.