Operations and maintenance (O&M) activities play a key role in ensuring the long-term sustainability and growth of wind power projects. According to the Global Wind Energy Council (GWEC), after-sales and services have emerged as a strong business area in the wind energy industry, with leading wind turbine original equipment manufacturers (OEMs) generating about one-third of their revenues from their service business. Moreover, revenue from their service business will only increase in the coming years. Wind O&M players not only increase the efficiency of wind energy assets, but also create significant opportunities for local job creation. However, the role of O&M players in the wind industry does not receive much importance.
According to GWEC, with the global wind energy sector expected to grow 4 per cent annually over the next five years (till 2023), the afters-ales and services segment is also expected to grow at a similar pace. The ageing of wind turbines and failure of components such as blades and gearboxes are the major drivers for the expansion of the wind O&M market. The wind O&M market dynamics have also been evolving continuously. Currently, the main players are turbine OEMs and component suppliers, which are able to generate business by working with asset owners. Specialised independent service providers are also entering the wind O&M space.
According to a GlobalData report, “Wind Turbine Operations & Maintenance Market – Global Market Size, Trends, and Key Country Analysis to 2025”, the global wind O&M market grew from $2.12 billion in 2006 to $13.74 billion in 2016, at a compound annual growth rate (CAGR) of around 21 per cent. Further, it is set to grow to around $27.4 billion by 2025 from just over $13.7 billion in 2016, representing a CAGR of around 8 per cent.
The report mentions that China will remain the largest wind O&M market in the world with a share of 27.4 per cent by 2025. The country accounted for 30 per cent of the total O&M market size in 2016. This can be attributed to an increase in the installation of wind power projects in the country. A large installation base, government plans and strict environmental laws are the other key drivers for the growth of the country’s wind power market and, consequently, the wind O&M market.
The US is expected to remain the second largest wind O&M market in 2025 (the country had a share of 14.6 per cent in 2016). Germany, the largest European wind O&M market, is expected to hold an 11.9 per cent share by 2025. These countries are expected to lose their market share due to the emergence of newer markets, such as India and the UK. According to GlobalData, the share of India in the global wind O&M market is expected to reach 6.4 per cent in 2025, while the UK’s share will reach 7.1 per cent.
It has been well established that offshore wind projects incur higher O&M costs vis-à-vis onshore wind projects. This is primarily due to higher maintenance requirements and logistics costs, and the lack of skilled manpower. It is estimated that the offshore wind O&M market will continue to grow to reach $5.04 billion in 2025, representing an 18.4 per cent share of the total wind power O&M market. The UK, Germany and China will be the largest contributors to the offshore wind power O&M market, with investments of $1.46 billion, $0.86 billion and $0.69 billion respectively.
Various other reports have also assessed the market size of the wind O&M industry. According to a Research and Markets report, “Global and China Wind Farm O&M Industry Report 2017-2021”, the global wind O&M market is expected to reach $18.612 billion in 2021. The report has a special analysis on China as it represents the largest O&M market. Given the rising number of old wind turbines nearing expiry, China’s wind farm O&M market size is anticipated to maintain an average annual growth rate of 13 per cent during 2017-21 and is expected to reach $5.021 billion by 2021.
Currently, Chinese wind O&M market players can be divided into three segments – wind turbine manufacturers, wind farm developers and third-party O&M companies. In 2016, wind farm developers, represented by Concord New Energy and Longyuan Power, enjoyed a combined share of 74 per cent, followed by wind turbine manufacturers such as Goldwind, Ming Yang Wind Power, United Power and the Sinovel Wind Group with a combined share of 15 per cent, and third-party O&M companies including EULIKIND, Han Energy Technology and CLCP accounting for 11 per cent of the wind O&M market.
The Chinese wind O&M market is evolving with the use of new technologies. Select large companies in this space have begun to deploy smart O&M systems, which use IoT, big data and intelligent manufacturing practices. United Power has built a remote data monitoring centre based on the cloud platform in Beijing. In 2016, Goldwind launched an integrated digital wisdom wind farm O&M management model to cater to wind farms around the world with operational services. The use of technology to improve O&M services will be the key market trend for all countries that have ambitious plans to promote the wind power sector.
In view of technology and other cost considerations, the focus of the industry has shifted to reducing O&M costs. One of the main reasons for rising O&M costs in the wind industry are failure of components such as blades and gearboxes, particularly in old wind turbines, and the high cost of logistics. With the growth of the industry and the entry of more companies providing specialised O&M services, the cost of wind O&M is gradually decreasing.
While the use of smart technologies is increasing the initial upfront costs, technological innovations are helping the industry reduce the overall wind O&M costs. One such innovation is the use of direct drive technology. This technology eliminates the gearbox, which is one of the major areas of failure in a turbine, thus reducing O&M costs in the long run. Tension control measurement technology for turbine bolts is another innovation that is helping reduce costs. Over 90 per cent of wind turbine failures are due to insufficient bolt tension in wind installations, and this can be minimised using tension control measurement, according to GlobalData. Another common market trend is the use of predictive maintenance. With the use of predictive maintenance, O&M service providers are able to schedule work in advance. This reduces O&M costs as the number of plant visits and the manpower required can be reduced. Also, select issues can be solved remotely without the need for personnel to go to the plant site.
According to GWEC, the increasing consolidation in the wind O&M segment is a positive trend. Leading turbine OEMs have been continuously acquiring independent service providers. One of the key reasons for such consolidation has been the need to limit competition in the industry. This trend is expected to continue going forward as many players are interested in expanding to different countries. However, becoming bigger will not help O&M companies increase their margins and expand their operations. Service providers need to significantly invest in emerging technologies that not only improve the efficiency of wind plants but also help in reducing costs in the long run.