New Delhi: China’s onshore wind energy operation and maintenance (O&M) market is expected to reach a total of $5 billion over the next 10 years, underpinned by a fleet of over 60 Gigawatt (GW) projects which have been operating for five years or more and the continued rapid growth in new installed capacity.
An unexpected surge in wind asset operating expenditure has depressed the mood of investors recently. Share prices of key wind players such as Longyuan Power Group, Huaneng Renewables, Huadian Power and Datang Corp Renewable Power, declined between 12 per cent and 28 per cent from March to June this year. This has called into question project profitability as the Chinese wind power market begins the transition to a subsidy-free era, consultancy firm Wood Mackenzie said.
“Much of the 2018 opex spike is attributed to the considerable number of early generation turbines reaching the end of their original equipment manufacturer (OEM) warranty,” Daniel Liu, principal analyst at Wood Mackenzie said.
The OEM warranty is usually provided as a bundled service with turbine procurement, and typically consists of O&M guarantees from turbine suppliers over a five-year timeframe.
Wood Mackenzie expects more asset owners in the Chinese wind power market to rely on their in-house team for O&M. They aim to lower the costs with internal resources and accumulate knowledge to improve O&M practice and operations for their growing wind power fleets.
In terms of O&M costs, China already enjoys some of the lowest cost levels in the industry. “We expect China’s average per megawatt O&M cost to be around $13,000 in 2018, less than half of the estimated $27,000 seen in the United States. The favourable cost position is driven by comparatively lower labour and spare part costs,” said Liu.
Meanwhile, wind asset owners are also feeling the pinch from government moves to scale back or eliminate wind subsidies for new projects in China by the end of 2020. Innovations in new technology and improving O&M practices are in urgent demand to help reduce project costs and reach government targets for grid parity.