5 Reasons Why a Laid-Back Approach To Full-Service Contracts Won’t Serve You as an Owner

New wind farms include robust warranties for the equipment provided and for good reason. A modern multi-MW wind turbine installed in 2021 is expected to run continuously until at least 2041. The warranties cover more than just materials; they cover the availability of the machines – an essential metric.

Full-service contracts (FSCs) are widely used today, which means the OEM or an ISP manages all service and parts for a multi-year service period; thereby taking the risk, with a contractual structure, that guarantees a specific turbine wind availability. While this works well for many owners, there are potential disadvantages if they do not take a proactive stance during an FSC period.

Let’s take a more detailed look:

Full-service contracts (FSC) are expensive

FSCs are often above €60,000 per turbine each year, depending on several factors, and the trend is rising. Will there be €60,000 worth of repair costs or downtime for each turbine every year? Probably not. It’s tempting to view an FSC as an insurance policy, but it can be an expensive one.

Is your FSC scalable?

Now that IPPs and asset owners are amassing ever larger fleets of wind turbines, FSCs on multi-GW portfolios may not be able to scale, and risk being too costly. As one large wind fleet owner once said: “One turbine could fall apart every year, and it would still be cheaper to go without a blanket FSC.”

FSCs guarantee availability, not performance

Availability targets can be hit while energy (budget) targets are missed. Availability can look good while the power curve steadily degrades. It’s worth being wary of wayward incentives. Know that your KPIs as an owner may greatly differ from those of the operators and the OEM’s. Short-term steps to patch problems and keep availability up may damage the turbine’s long-term health and longevity, leading to more costly repairs down the line.

Wind turbines are meant to operate all the time

Long periods of standing still can lead to degradation in the condition of the turbine. Frequent starting and stopping adds stress and increases wear, and thermo-cycling as the turbine varies from cold to warm operational temperatures. Some turbines serve the role as “balancing turbines” meaning that when a grid curtailment is in effect, these turbines are the ones which are repeatedly stopped or limited. Turbines within a wind farm can have drastically different operational lives, presenting an unknown risk to future buyers.

Who exactly does the FSC serve?

FSC payouts are designed to reduce risk on the behalf of the owner, but also to protect the  exposure of the contract provider, rather than guaranteeing the owner’s financial goals will be met. Payments are capped both annually and lifetime, which ultimately means these payments occur months after the production loss occurred. Consider the old principle of the time value of money. The revenue from every produced MWh goes straight into the bank account, so a produced MWh is always better than a compensated MWh. This applies even more in markets like the US, where a production tax credit goes on top of the energy revenue.

In the pursuit of minimising the risk of your assets, it’s important to maintain a proactive approach. Produce more energy and reduce downtimes by using modern tools and smart software, like i4SEE technology. In doing so, you will incrementally increase performance and prevent downtimes before they happen. In turn, you’ll improve your KPIs, and your bottom-line will look better.