By Herman K. Trabish
At a rule-of-thumb 7 cents per kilowatt-hour, wind was looking good until abundant shale gas reserves sent natural gas costs spiraling down to the renewable-energy-busting levels that prevailed in the 1990s.
One of the first things Dennis McKinley did in March of 2010 when he became head of North American Windpower for ABB (NYSE:ABB), the global power and automation technologies giant, was to look for where the cost-cutting opportunities in the wind industry were. “What drives the industry?” he asked himself. “Five key characteristics resonated,” he found, “no matter who I was talking to.”
Talking about an ABB white paper chronicling those five key characteristics, McKinley said the first thing he noticed was that would-be wind builders “work real hard getting ready to develop a wind farm,” taking care of “the power purchase agreements, the PPAs, the environmental approvals, and, once that happens, it’s like a light switch goes off and it’s a crazy, hurry-up-and-get-it-done project.”
McKinley likened it to “just-in-time manufacturing” and said a cost-cutting improvement would be prior planning that makes sure everything from turbine parts to connections and interconnections will be delivered in a timely manner.
As a provider of the power infrastructure from “where the wind comes into the turbine until the time it touches the grid,” ABB is, McKinley said, uniquely positioned to point the way to such “plan-ahead planning.” Customers could get more efficient delivery by pre-scheduling the “several hundred wind-farm activities” in a “clearly plotted critical path.”
Example: developers, McKinley suggested, should put an emphasis on the delivery of the project’s main power transformer and even assign and an engineer to oversee it because its late arrival delays the whole installation’s progress.
Picking the most efficient turbine equipment, made with state-of-the-art materials, is McKinley’s second key profit-producing characteristic. As an example, ABB’s transformer, made with windings from thin steel or aluminum, can improve performance by as much as 70 percent. A wind farm developer might spend $200,000 more for 80 such higher-efficiency transformers, McKinley found, but save $700 per year on each one for twenty years for a cumulative savings of some $1.1 million. Turbine transformers chosen with an accurate assessment of the kind of winds they will be working in could similarly avoid loses of as much as $300,000 per year, or $6 million over the turbines’ twenty-year assessed lifetime.
Reliability and maintenance is a third area crucial to wind farm profit performance. Wind farms are spread over large areas and the 8,000 to 10,000 working parts of each turbine is a long climb up. “What the turbine OEMs look for,” McKinley explained, “is component manufacturers that make a high-quality product that doesn’t require a lot of maintenance or, when it does, it’s on a regularly scheduled interval.”
“The goal of the turbine is to produce electricity,” McKinley said. Predictably planned maintenance at times of low or no wind and no unexpected downtime that allows valuable winds to go uncaptured both make operations and maintenance a lot less costly.
Poor safety practices, the fourth key characteristic that can cost developers their profits, are worse than wind-wasting performance, McKinley said. They can result in equipment destruction or harms, even fatalities, to workers. Falls and arc flashes are the most common safety compromises. Falls can be prevented by training programs that meet federal Occupational Safety and Health Administration (OSHA) standards, as will the enforcement of rules requiring proper use and maintenance of ropes and harnesses.
Arc flashes are especially problematic. Thousands of moving electrical parts in the cramped quarters of a wind turbine’s nacelle, with lots of volatile lubricants and oils, makes for combustible circumstances. Even trained technicians are vulnerable.
“This is beyond a spark,” McKinley said. “This is where the equipment looks like its blowing up.” Once again, choosing the right equipment is a significant part of the solution. “ABB was one of the first companies to come out with arc-resistant switchgears,” McKinley added. Such equipment, though more expensive, is streamlined and has what amount to “high-speed relays” that “take it offline before it does physical damage, in particular to the person.” This is another example where spending money saves money (and, potentially, lives).
Risk management, the fifth and final of McKinley’s profit characteristics, is about reducing “exposure.” After the best equipment and service providers have been chosen and pre-planning has streamlined the construction process, the remaining concern is with the unexpected. An insurance policy can mitigate some such losses. Insurances can cover the on-time delivery of crucial wind farm equipment, as well as the performance of individual components, single turbines or the entire project.
Often, McKinley discovered, the best insurance is having a way to quickly get the wind farm back to work. For example, one project’s transformer, which was insured, failed. The 400 turbines idled by its failure cost the developer a lot more than the $10,000 per day covered by the insurance policy. The real exposure was limited by efficiently getting the transformer repaired and back online.
By keeping wind in the cost race against natural gas, McKinley’s five characteristics together comprise an offer wind farm developers can’t refuse.