Why do wind farm owners fail?

During the last decade, most windfarms in Sweden struggled with the lower than expected income from electricity sales. Some windfarm owners overcame the uncertainty of the income stream through long-term, bilateral power purchase agreements (PPA). Many of those who couldn’t ended up in economic distress or even went bankrupt.

Do you need to rebuild your service set-up?

Cost for operations & maintenance of onshore windfarms can make up to 30% of total cost of energy. As Capex cannot be re-negotiated ex-post (except for financing conditions) Opex is often the only cost category for wind farm owners that can be impacted even after the wind farm has started operating. The challenging market conditions for wind power in the Nordics and especially in Sweden force windfarm owners to optimize the management and performance of their windfarms to achieve lowest possible cost of energy. This might require to rebuild the wind farm’s service set-up. Rebuilding the service setup usually requires a change of the ownership role.

A thinkable use case could be that a windfarm has been managed so far with a typical Full Service Agreement (FSA) between owner and turbine supplier with a high price tag. In this case, the owner might be forced to rebuild the service structure by de-bundling the FSA into different service modules to be concluded with different, specialized contractors to bring the remaining operational life cycle cost down to the lowest possible level.

Re-negotiate your service agreements

With a few exceptions practically all new windfarms are being served by the turbine supplier at least during the warranty period for the initial two to five years of operations. The conditions are usually being agreed upon through a Service Agreement (SA) between owner and turbine supplier signed at the same time as the turbine supply agreement. The prerequisites for re-negotiating a SA are different depending on the status of the service- and maintenance setup at time of re-negotiation. A long term SA with a service provider should always contain a certain flexibility for the owner e.g. regular break points at which the owner has the option to terminate for convenience. Meventus has performed multiple re-negotiations of service agreements on behalf of wind farm owners to ensure long term profitability even with record low electricity income levels. We have achieved service cost reductions between 14% and 25% just by re-negotiating existing contracts. Re-negotiation should always come before considering a rebuilt of the service set-up as it might be that the achieved cost reduction through the re-negotiations will already suffice the purpose