How Can Wind Farm Expenses Be Reduced?25 April 2016
Fixed expenses over long periods of time provide planning certainty for wind farm operators. Nevertheless, there is a permanent focus on reducing costs. Particularly in years when winds are weak where the aim is to compensate for possibly reduced yields through other areas of the business.
- If the design of the contract can be adapted to meet the current reality for a wind farm, this strong link between expenditure and financial growth represents the most effective means of making savings. Optimum solution: agree sensible minimum values combined with a strong link to any excess; this can be the way to establish a base line. If the wind farm exceeds or fails to meet its earnings before depreciation – but after interest and tax – the remuneration will increase or reduce accordingly. If appropriate, caps can be agreed.
- If the wind farm has been operating for a long time, it will probably only be possible to adapt contracts in times of demonstrable crisis. In the case of existing wind farms, business and management costs, leases, interest and maintenance are regularly fixed for a certain length of time. But here too there is potential:
It is worth comparing prices for insurance as the range can be enormous. The fact that the control room at wpd windmanager is manned at all times guarantees close supervision of the turbines, and optimum operational management can be demonstrated. The early detection of faults reduces maintenance costs and downtime. That can be proved on the basis of the insurance claims made and leads to lower costs.
Finance costs can also be reduced. The interest on borrowing represents around 15 to 25 percent of all operating costs during the lifetime. For the first ten years, this is nearly always the largest cost item. Whereas in the past we were able to save more than half of the interest expenses by rescheduling the debt, premature repayment is today subject to corresponding compensation charged by the bank. But in some cases this is negotiable. And if you are prepared to accept the risk of interest rates going up, you can finance part of the investment on flexible terms and with no fixed rate of interest. That means you will derive full benefit from low interest rates and you can make repayments at any time.
There is strong competition with regard to maintenance as a result of independence from manufacturers. It is often possible, therefore, to negotiate significant price reductions when contracts come up for renewal without having to switch to full service contracts. In the case of gearboxes, wpd windmanager has been able to reduce the average maintenance costs by 15 to 20 percent every year for the last ten years.
We regard the servicing costs as the most interesting cost component. The tendency to conclude full service contracts is unbroken on the market, and strong competition has meant that full service contracts are now being offered even for turbines which have been in operation for some time. That provides security – as servicing costs are the hardest to predict. On the other hand, every one also knows that a full-service contract for a larger quantity of turbines must be expensive.
Conclusion: There is no general formula for realising savings potential and there are usually restrictions and dependencies in place which lead to many accepting the cost situation as a given. However, due to its many years of experience, the number of wind farms it looks after and the exploitation of synergy effects, wpd windmanager is in a position to recognise the potential for savings and to act accordingly.