The longevity of wind projects is growing and with it, the economic competitivity of wind power

Energize Weekly, October 2, 2019

The operating life span for U.S. wind farms has increased by more than a third to 30 years in the last two decades, according to a survey and analysis by the Lawrence Berkeley National Laboratory.

The increasing lifetime of the wind projects is improving the economics of wind energy and is being driven by technological improvements and, in some cases, economic need.

The Berkeley researchers surveyed wind industry professionals about life span estimates and operating issues of wind farms.

“We find that most wind project developers, sponsors and long-term owners have increased project-life assumptions over time, from a typical term of ~20 years in the early 2000s to ~25 years by the mid-2010s and ~30 years more recently,” the researchers said.

The range of the lifetime estimates was from 25 to 40 years with an average of 29.5 years.

The levelized cost of energy (LCOE) is used to compare the competitivity of generating sources by adding up all the costs of construction and operation, and dividing that by the number of megawatt-hours (MWh) generated over the life of the plant. The longer it operates, the more MWhs it generates.

The estimated LCOE for a new wind plant built in 2018 is $40.40 a MWh with a standard 20-year project life, the study said. If the plant’s operation is extended to 25 years, with no appreciable change in the operating and maintenance costs (O&M), the LCOE drops 10 percent to $36.20 and at “the now common” 30-year life, the LCOE is cut another 7 percent to $33.50 a MWh.

With 40 years of operating, the LCOE goes down to $30.30 a MWh.

“A longer assumed project life may enhance the expected long-term profitability of a project, assuming any resulting increase in O&M is kept within reasonable bounds,” the study said. The longer life also reduces the annual book depreciation of the project providing a boost to net income in the near term.

The lengthening life of wind farms does come with challenges. Some of the survey respondents noted that turbine-design certifications from manufacturers are often just 20 years, although some turbine makers are beginning to provide certifications of 25 to 40 years.

Similarly, O&M servicing agreements are rarely extended to 25 or 30 years. “Such service agreements may not cover component replacement, and so project owners may still face O&M risk,” the study said.

The growing durability of wind generation is coming from more mature and robust technology, and improved understanding of performance and O&M, according to project developers surveyed.

There are projects built in the 1980s that are still operating. “As older projects have reached their design lifetimes, the industry has found ways to extend those lifetimes,” the study said.

Among those techniques is “partial” repowering where some turbine components are replaced or upgraded.

Another factor pushing the extension of project lives is the economic desire or need to generate more revenue beyond the initial 10 to 20 years, which are usually covered by a power purchase agreement (PPA) between a wind farm operator and a utility or company.

“As terms have tended to shorten over time and competition for those PPAs has strengthened – resulting in lower PPA-derived revenue – an increasing number of projects need to demonstrate some post-PPA value in order for the project to pencil out from an overall return-on-investment perspective,” the study said. “These trends have pushed the industry to more fully investigate longer useful lives.”

The survey found regional variation in the life span of wind projects. Projects in areas with large wholesale markets that accommodate merchant power sales – such as the Midcontinent Independent System Operator or the Electric Reliability Council of Texas – were more likely to have assumed lives of 30 years.

Projects in areas without such markets, such as the Western Electric Coordinating Council, have fewer 30-year projects.

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