The largest wind energy market in the world, China currently has more than 100GW of operational wind capacity. This is equivalent to around 65,000 wind turbines currently in service, and China is steadily connecting more than 30 additional turbines to the system daily. Costs for maintaining and operating China’s wind turbines are currently running at $500m yearly. With the increase in fleet size projected to 2022, costs are anticipated to rise to $3bn annually.
China Wind Capacity Poised for Growth
Bloomberg New Energy Finance (BNEF) recently completed this analysis, estimating that China’s operational wind capacity will increase to 250GW by 2022. From 2015 through 2022, BNEF found that China would spend $16bn for operations and maintenance (O&M) of the country’s fleet of wind turbines.
“This market has not attracted much attention up till now,” says Justin Wu, head of Asia research for Bloomberg New Energy Finance. Wu states that this is “partly because China’s wind capacity only started to grow at world-leading rates late in the last decade, and partly because many of the turbines that have been installed have been working through extended warranty periods. But the next few years will see the birth of a multibillion-dollar O&M business.”
Time Keeps on Slipping, Slipping, Slipping…
In 2014, more than two-thirds of all wind turbines operating in China were still under their original manufacturer warranties. Typically turbine manufacturers around the world offer 2-3 year warranties on their turbines. When the warranty expires, the wind farm owner must find a means of securing O&M to run their turbines, either through “self-service” by wind farm employees, or by outsourcing to a third-party contractor.
Because of quality concerns about Chinese-made turbines in China, however, sometimes standard warranty periods are extended for several years. In their research, Bloomberg New Energy Finance estimates a dramatic growth in the number of turbines coming out of warranty in the coming years. Warranty extensions will become fewer, as well, as quality improves and turbines age.
…Into the Future
BNEF forecasts that 14-18GW of wind capacity will come out of warranty annually between 2014 and 2016. A further 26GW and 30GW per year will reach warranty expiration in 2017 and 2018, respectively. By 2022, China’s total fleet in operation outside of manufacturers’ warranty is expected to be around 187GW of wind turbines.
The Revolving Door of Service Providers in China
In a first-ever wind O&M survey of nearly two dozen market participants, BNEF researchers uncovered key points relevant to the wind farm boom in China. The top three challenges for the industry include a lack of industry standards and regulations, a lack of experienced independent service providers, and a lack of trained technicians.
Cost, quality of service, and an existing relationship with the vendor are seen in China as the most important criteria for selecting a service provider. 36 percent of Chinese wind farm owners are wary of maintaining their own assets, although wind turbine manufacturers and independent service providers are less optimistic. A large majority of them (77% and 80%, respectively) expect wind farm owners to continue dominating China’s O&M market. Outsourcing will undoubtedly increase, however, as growing numbers of turbines enter operation, leave warranty, and in-house management becomes unwieldy.
There are more than 90 independent wind farm service providers already operating in China. However, more than two-thirds of these service providers did not exist two years ago. Service quality and technical expertise vary significantly between them, as well. Many have poor expertise and a lack of strong financial backing, and are likely to exit the market as quickly as they arrived.
A Wealth of Business Opportunities Wafting on the Breeze
Creating major challenges, the 250GW of wind capacity that China is forecast to have in 2022 will ultimately create many tens of thousands of new jobs. Blade maintenance is seen as the biggest O&M opportunity, followed by maintenance planning tools, and condition monitoring systems.
Providing O&M for this capacity of wind energy, which is several times that of any other country, will bring a wealth of business opportunities for everyone, from specialized service providers to wind turbine manufacturers. Who will be the next Halliburton of Chinese wind energy? The answer, my friend, is blowing in the wind…
(Top Image note and source: Wind farm on Changshan Islands, China – wikicommons)