May 2019

DIGITAL TECHNOLOGY IN WIND

POWER OPERATIONS AND
MANAGEMENT

Daniel Liu, Principal Analyst, Global Wind and PV O&M

Contents

CONTENTS
1. Unplanned repairs will cost the global wind power industry more than $8 billion in 2019 ..... 5
2. Digital technologies may be a solution to reducing O&M costs ............................................... 7
3. The use case for full digital technology remains unproven .................................................... 10
4. The path to mass adoption lies with technology vendors ...................................................... 12
5. A collaborative approach to digital technology adoption ....................................................... 15

Digital Technology in Wind Power Operations and Management May 2019 │ 2

Contents

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Digital Technology in Wind Power Operations and Management May 2019 │ 3

About the Analyst

ABOUT THE ANALYST

Daniel Liu, Principal Analyst | Wood Mackenzie Power and Renewables
daniel.liu@woodmac.com

Daniel is a Principal Analyst responsible for Wind Power Operations and Maintenance
market research, technology, and asset management. He joined Wood Mackenzie in the
London office in 2018 after completing an MBA at London Business School.

Daniel has extensive experience in wind power plant management, having spent time as
an operations project manager, overseeing key maintenance and upgrade campaigns,
production improvements, and remote monitoring for a fleet of 800 wind turbines.

Digital Technology in Wind Power Operations and Management May 2019 │ 4

Unplanned repairs will cost the global wind power industry more than $8 billion in 2019

1. UNPLANNED REPAIRS WILL COST THE

GLOBAL WIND POWER INDUSTRY
MORE THAN $8 BILLION IN 2019
Tender prices for new wind turbine developments are declining globally. This has
sharpened focus on operational expenditures for wind power plants, and asset owners
are searching for new solutions in an effort to reduce O&M costs. Global onshore wind
O&M costs will reach nearly $15 billion in 2019. Of that number, 57% - or $8.5 billion –
will be spent on unplanned repairs and correctives caused by component failures. Asset
owners increasingly dedicate resources and strategy to reduce the frequency of
unplanned failures.

Figure 1.1 Global onshore wind power O&M spend estimates to 2027
26
24 23
22
22 +7% 21
20 19
18
18 17
17
16
16
USD Billions

15
14 13
12
10
8
6
4
2
0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Unplanned repairs Scheduled maintenance Other - BoP

Source: Wood Mackenzie

Component failures are a fact of life for every asset owner. Operators dedicate tens of
thousands of USD per wind turbine annually in working capital to cover contingencies in
unavoidable turbine failures and unplanned downtime. In the U.S, failures cause an
average of USD 34k per turbine per year in terms of repairs, spare parts, and production
losses. Unplanned repair directly causes an average US wind turbine 6.2 days worth of
lost production per year, not including losses caused by pre-emptive shutdowns or long
delivery times for materials, equipment and technicians to the affected turbine.

Digital Technology in Wind Power Operations and Management May 2019 │ 5

Unplanned repairs will cost the global wind power industry more than $8 billion in 2019

Figure 1.2 US losses due to component failure (per turbine, 2019 estimates)
35,000
Direct cost of repair

Losses due to unplanned repairs (USD)

30,000 Other losses

25,000

20,000

15,000

10,000

5,000

0
Spares and Major Minor Unplanned AEP losses Total losses
materials correctives correctives repair per turbine
downtime per year
losses

Source: Wood Mackenzie

Figure 1.2 US average turbine downtimes due to unplanned repairs

6.5
6.0
5.5
5.0
4.5
Downtime (days)

4.0
3.5
3.0 6.2 days
2.5
2.0
1.5
1.0
0.5
0.0
Electric Drivetrain Capital Hydraulics Other Minor Total
systems components and yaw major failures downtime
drives failures
Source: Wood Mackenzie

Digital Technology in Wind Power Operations and Management May 2019 │ 6

 Spare parts and associated logistics comprise approximately 50% of the direct costs
associated with unplanned repair. The biggest contributors are the three capital
components - gearbox, generator and blades. These capital repairs cost asset owners
nearly $10k per turbine per year in replacements. The cost of these replacements
highlights the recent trend by asset managers in pursuing digital technology as part of
an industry wide trend towards predictive monitoring and prognostic maintenance.

Figure 1.4 Wind turbine unplanned repair cost breakdown (US, 2019 estimates)

9%

3%
4%
4%
23%
Spares spend:
11%
$14k

69%
$28k per turbine 49%

Capital components
28% Bearings
Blade repair
Electrical components
Materials
Drivetrain repair
Labour
Others
Equipment

Source: Wood Mackenzie. Spares spend also includes associated logistics costs.

2. DIGITAL TECHNOLOGIES MAY BE A

SOLUTION TO REDUCING O&M COSTS
The evolution of digital technology has led to a proliferation of services across the O&M
value chain. The most basic digital technologies include remote monitoring and
diagnostics tools to identify turbine failures, conduct basic site and turbine performance
assessment, and generate reports. These tools are now ubiquitous, and nearly all asset
managers deploy basic digital technology in some form or another.

More advanced technology incorporates data analytics and machine learning to provide
some form of early-warning predictive analytics around component failure. The latest
evolution of digital technology are Enterprise Resource Planning (ERP) systems that
have some form of autonomous control of supply chain logistics, technician dispatch,
and plant controls. These systems offer end-to-end optimisation of maintenance costs,
logistics and spares, and energy production.

Digital Technology in Wind Power Operations and Management May 2019 │ 7

Digital technologies may be a solution to reducing O&M costs

Figure 2.1 Actions enabled by digital product type along the O&M value chain
Maintenance and repair Operations Asset management
Digital product Scheduled Major/minor Condition Prognostics and Inventory/ spares Workforce Curtailment
Site operations
type maintenance correctives monitoring pre-alarm management planning management

Proactive Automated Automated

MTBI/MTBF “Smart” site Curtailment
ERP system maintenance inventory technician
reduction controls forecasting
Increasing sophistication/resources demand scheduling management dispatch
Energy and
Production
revenue
forecast
forecasting Scheduled downtime planning and
revenue impact minimization
Plant Machine learning power curve
optimization optimization and plant management Unscheduled
downtime
Data Automated
reduction and Integration to
analytics monthly report
component energy storage
platform generation
failure
Remote forecast Integrated
Failure Availability
Diagnostics troubleshoot spare parts
diagnosis tracking
and diagnosis ordering Curtailment
Under-perform. Component monitoring
Remote Site wind Site spare
turbines condition
monitoring assessment monitoring
identification monitoring

Advanced Analytics and Big Data approaches Traditional SCADA based approaches

Source: Wood Mackenzie

Digital technologies currently used or being developed for wind turbine operations can
be broadly classified into 7 categories:

Figure 2.2 Summary of the 7 key digital technology types for wind O&M
Technological Commercial
Technology Use examples
readiness readiness
Spares and logistics
ERP optimisation, technician
dispatch
Artificial intelligence based
Machine
yaw and blade-pitch
learning
misalignment correction

Data analytics Component, turbine, and

platforms site performance analysis

Physics based simulations

Digital twins of components or entire
turbine models
Energy production
Production
forecasts, revenue
forecast
forecasting

Autonomous UAV inspection drones,

Inspection blade repair bots

Component early failure

CMS detection and remote
monitoring
Source: Wood Mackenzie

Digital Technology in Wind Power Operations and Management May 2019 │ 8

Digital technologies may be a solution to reducing O&M costs

Most asset owners deploy at least one form of digital technology. However, to fully
leverage the benefits of digital technology requires the deployment of the full digital
system ecosystem made of multiple technology types. Digital technology is data-driven,
requiring inputs from multiple sources to be used effectively. A simple digital technology
ecosystem would be the pairing of a data analytics platforms with CMS hardware – the
analytics platform draws real-time performance data from CMS hardware to augment
historical data and OEM provided technical information.

The future digital ecosystem may well have technologies deployed along the entire O&M
and asset management value chain. Turbine and site level monitors can provide real-
time data to feed analytics platforms, which in turn feed raw inputs for production
forecasting, machine learning and ERP platforms. These platforms then optimise the
O&M process – ending up back at monitoring software to provide data for any necessary
corrections. This is the iterative process which can realise the full value from digital
technology deployment.

Figure 2.3 Wood Mackenzie's vision of the ideal wind O&M digital ecosystem

DATA ANLYTICS DIGITAL TWINS

PLATFORMS

Predictive
Analytics

CONDITION Descriptive Prescriptive

MONITORING Analytics Analytics

PRODUCTION
FORECASTING

AUTONOMOUS
INSPECTIONS

Asset &
Operations
Mgmt.

MACHINE ERP PLATFORMS

LEARNING

Source: Wood Mackenzie

Digital Technology in Wind Power Operations and Management May 2019 │ 9

 3. THE USE CASE FOR FULL DIGITAL
TECHNOLOGY REMAINS UNPROVEN
For all the touted benefits offered by digital technology, adoption rates by asset owners
are mixed. Many of the leading asset owners only deploy some basic form of digital
technology; cases of full digital ecosystem deployment are rare.

The most common responses Wood Mackenzie receives when surveying asset owners
about incorporation of digital technology into wind O&M practices is that the use case is
still unproven for many tasks. Data analytics platforms need quality historical datasets to
produce quality forecasts and analytics. Historical performance and technical data can
be difficult to obtain, due to organizational hurdles, the time required to digitize and data
control by OEMs and other groups. Certain leading self-performing asset owners prefer
instead to rely on their operational experience and heavy personnel engagement to
manage assets, with some asset owners in the North America shunning digital
technology altogether.

Figure 3.1 Select industry feedback on digital technology deployment

“Implementing data-based decision making is

“Cost to deploy digital solutions is quite stark
difficult due to analysis complexity, lack of
especially in light of asset owners being forced
meaningful insight/information, data quality” –
to reduce OPEX spend” – European utility
Multinational IPP

“We look to OEMs as partners for data

“Industry consensus seems to be that the
analytics… OEMs are reluctant to share data
evidence of effective utilisation of digital
and technical information as they see it as
technologies in improving O&M and reducing
losing control over services” – European asset
OPEX costs is minimal” – European IPP
manager

Source: Wood Mackenzie 2019 survey responses

In quite a few cases, the basic economics do not always stack up for digital solutions.
Deployment costs for retrofitting a complete ecosystem to existing fleets and operations
ranges into the 100's of thousands of dollars per site, for uncertain improvement in
annual energy production (AEP). While CMS, drone inspections, and performance
monitoring have proven use cases and are widely deployed, the cost vs. benefit
equation is one of the key barriers to deployment for more sophisticated technologies –
with some having a payback period up to 7 years or longer.

Digital Technology in Wind Power Operations and Management May 2019 │ 10

The use case for full digital technology remains unproven

Figure 3.2 Digital technology returns vs. payback period for wind power
applications
9.0

8.0

Simple payback term (years) 7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0
0 4,000 8,000 12,000 16,000 20,000

Gross value delivered per year - USD/turbine/year

Production Forecasting Condition Monitoring

Digital Twins Data Analytics
Machine Learning Enterprise Resource Planning
Autonomous Inspections More attractive

Source: Wood Mackenzie

More importantly, asset owners are actively focusing on reducing unplanned repairs.
Certain managers use purchasing and supply agreements with turbine and equipment
OEMs to mitigate the materials and logistics impact on their OPEX budgets. Also,
maturing O&M practices and improvements in turbine and component design have
helped to eliminate the most egregious of capital component failures. The US is
expected to trend downwards for unplanned maintenance spending and capital
component replacement rates, thanks to a combination of improved O&M practices,
lifetime extension retrofits and component design improvements – and it is not
unreasonable to expect the same trends in Europe and Asia very soon.

Digital Technology in Wind Power Operations and Management May 2019 │ 11

The path to mass adoption lies with technology vendors

Figure 3.3 Correctives spend and replacement rate trends in the US

18,000 1.2

1.1
17,000

Capital component replacement rates (%)

Unplanned correctives spend (USD/MW)
1.0
16,000
0.9
15,000 0.8

0.7
14,000
0.6
13,000
0.5
12,000 0.4

0.3
11,000
0.2
10,000
0.1
9,000 0.0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Correctives spend/MW Gearbox replacement rates
Generator replacement rates
Blade replacement rates

Source: Wood Mackenzie

4. THE PATH TO MASS ADOPTION LIES

WITH TECHNOLOGY VENDORS
Undoubtedly, mass deployment across the global turbine fleet will increase the value
position of digital technologies. The onus, however, is on technology vendors to
encourage uptake of more sophisticated digital technology beyond basic monitoring and
production forecasting. Determining the right strategy to push digital technology uptake
requires an understanding of asset owner needs and risk appetite.

Turbine operators largely fall under one of 4 ownership classes. Each class is defined by
scale and risk appetite, and this influences their approach to service and maintenance
strategy. Institutional and financial owners, for example, tend to focus more on reducing
operational risk in order to protect turbine revenues. Large self-performing operators
have the resources and operational sophistication to conduct major cost-reduction
campaigns internally.

Digital Technology in Wind Power Operations and Management May 2019 │ 12

The path to mass adoption lies with technology vendors

Figure 4.1 Operational pain points and service strategy by asset owner class
Community & self Institutional
Utilities Self-performers
powering investors

Operational “pain points”

Availability Availability Availability Availability

Energy production Energy production Energy production Energy production

OPEX costs OPEX costs OPEX costs OPEX costs

MTBI/MTBF MTBI/MTBF MTBI/MTBF MTBI/MTBF

Operational lifetime Operational lifetime Operational lifetime Operational lifetime

3rd party full scope 3rd party full scope 3rd party full scope 3rd party full scope
O&M strategy
preferences

service service service service

Partial operational Partial operational Partial operational Partial operational
flexibility flexibility flexibility flexibility

Full control over O&M Full control over O&M Full control over O&M Full control over O&M

Key asset owner O&M and asset

xoncerns management preference

Source: Wood Mackenzie

Presently, all leading OEMs and full scope ISPs offer digital technology products
alongside specialist vendors and some self-performing asset owners. Each type of
vendor has a preferred business model, and each model is better suited for a certain
asset owner class that encourages uptake of digital technology.

Figure 4.2a Wind power digital technology adoption pathways by vendor

Specialists ISPs OEMs

Specialty Full Wrap Performance Full Wrap

Path to Subscription/
Acquisition services / Service based Service
adoption upfront cost
consulting Agreements compensation Agreements

Sentient
Example Nabla Wind Deutsche
Science, Utopis, NEM GE, Enercon GE, Vestas
Vendors Power Windtechnik
Uptake

Self
Institutional IPPs, Institutional Investors,
Ideal for Utilities, IPPs Performers, Utilities, IPPs
Investors, IPPs Community and Self Powering
Utilities

TAM (global
onshore 249GW 231GW 249GW 192GW 240GW
fleet, 2018)

Source: Wood Mackenzie

Digital Technology in Wind Power Operations and Management May 2019 │ 13

The path to mass adoption lies with technology vendors

Figure 4.2b Wind power digital technology adoption model descriptions

Adoption
Description
model
Subscription/ Offered as either yearly enterprise package, or as a one-off product
upfront cost cost
Start-up vendor with promising solution acquired by an established
Acquisition
wind player looking to build/enhance digital capability
Specialty
Digital technology used to augment service offering, or as part of a
services/
services consulting engagement
consultancy
Performance Product revenue model relies on field results. Production/ revenue
based improvements above a certain threshold are shared with the vendor.
compensation This option is incredibly risky for the vendor
Full Wrap Digital technology offered as part of a full scope contract. Usually,
Service vendors offer this as part of signing up asset owners to long term
Agreements agreements
Source: Wood Mackenzie

OEMs are likely to find success with the enhanced FSA model. This model is
technologically and financially least risky for asset owners – especially cost constrained
institutional investors – as it is the OEMs who are accountable for the technology they
provide. For OEMs, the benefit of an enhanced FSA model is twofold:

 Site wide deployment of a digital ecosystem will help control or reduce costs of
providing a FSA
 OEM FSAs become more attractive to asset owners.

In the battle for service agreements in the O&M market, Wood Mackenzie expects to
see increasing growth of FSAs offered with digital services enhancements.

ISPs are often unable to follow the FSA model, due to high risk and cost of covering
capital replacements. However, full-scope ISPs can offer value differentiation amongst
a crowded marketplace. Full scope ISPs service a greater number of turbine models - a
digital ecosystem offers ISPs potential operational improvements as well as increasing
their technological expertise across turbine models.

A growing number of ISPs are now specializing in one or a few services in the O&M
value chain. These ISPs use digital technology to augment their service offerings or
consulting engagements. One well-known example is Nabla Power, which uses
Aeroelastic modelling – a form of digital twinning – to develop a complete turbine lifetime
extension upgrade service.

Established specialty vendors line up well with the needs of utilities and self-performers.
These asset owners prefer full operational control and flexibility, and require customized
digital solutions tailored to their needs. Established vendors have the experience and the

Digital Technology in Wind Power Operations and Management May 2019 │ 14

A collaborative approach to digital technology adoption

resources to develop these tailored solutions. New entrants have considerably less
resources and operational history, making their products a riskier proposition for asset
owners. Startups with innovative technology may find their way to success via
acquisition with both OEMs and Self-Performers.

5. A COLLABORATIVE APPROACH TO
DIGITAL TECHNOLOGY ADOPTION
The future success of digital technology requires navigating the key hurdles for each
stakeholder. OEMs, technology developers, asset owners have specific needs and
service strategy requirements which hinder uptake of digital technology. The issues of
development, operational, and financial risk can only be solved by full stakeholder
engagement with all parties.

Figure 5.1 Key barriers to digital technology adoption

Key barriers to
digital
adoption
OPEX Access to
limitations for quality datasets
deployment
Financial
resources for
development

Financial risk Lack of track

sharing Collaborative record (for start-
stakeholder ups and smaller
engagement developers)

Operational
risk sharing

Proprietary
information
Compensation leakage
for digital
technology
Reputational damage
for unsuccessful
deployment

Source: Wood Mackenzie

The first barrier to overcome is developer access to OEM and asset management
datasets, which will greatly improve the outputs of analytics platforms. More dialogue is
required to determine how to adequately share financial and operational risk between
stakeholders, and fairly compensate vendors. Engagement on these issues need to be
led by digital vendors to develop adequate solutions that satisfies all parties and may
result in novel services models being developed in the future.

Digital Technology in Wind Power Operations and Management May 2019 │ 15

A collaborative approach to digital technology adoption

Digital Technology in Wind Power Operations and Management May 2019 │ 16