Energize Weekly, April 18, 2018
Wind farms across the country are getting a makeover as rising costs, declining production and the spur of tax credits is leading to the repowering of projects built as far back as the 1990s, according to federal data and market studies.
A study by the federal National Renewable Energy Laboratory (NREL), in Golden, Colo., projects that the repowering market could grow to $25 billion a year by 2030, and it is already attracting substantial investment.
Repowering involves replacing turbines, blades and other equipment with newer more efficient versions. General Electric, the largest wind turbine installer in the U.S., says repowering can increase fleet output by 25 percent and add 20 years to turbine life.
About 12 percent of the turbines operating in the U.S. were installed before 2000, yet they account for only 2 percent of all the wind generating capacity, according to the federal Energy Information Administration (EIA).
Full repowering involves decommissioning a wind farm and replacing all key elements. This has been done mostly in California, where installations date back to the 1990s, the EIA said. Partial repowering consist of replacing some components of the system.
In 2017, there were 15 partial repowering projects totaling 2,136 megawatts (MW), according to the American Wind Energy Association. The U.S. wind industry added a total of 7,000 MW in 2017. GE said it has repowered more than 300 turbines.
“Quite a lot of repowering is going on right now, billions of dollars is being invested in repowering by a handful of owner operators,” said Eric Lantz, a senior analyst at NREL. “The vast majority of repowering is being driven by the tax credit.”
The wind Production Tax Credit (PTC) was extended to 2019. It offers incentives to repower projects if at least 80 percent of the equipment is new. Operators get a credit for each kilowatt-hour a qualifying project generates for 10 years. The credit is stepping down annually from 2.4 cents in 2017 to little less than 1 cent in 2019.
Among the projects slated for 2018 is the Sweetwater Wind 2 LLC in Texas. The Windpark Unlimited 1 in California is scheduled for repowering in 2022.
Leeward Renewable Energy announced in March that it will repower its 15-year-old Mendota Hills Wind Farm in Lee County, Illinois. Leeward said it will replace 63 old turbines with 29 new ones and at the same time, boost capacity to 76 MW from 50 MW.
MidAmerican Energy said it plans to spend $1 billion repowering about 700 older turbines across Iowa, and Rocky Mountain Power said it will also repower turbines in Oregon, Washington, and Wyoming. NextEra Energy is planning to repower two wind farms in Texas by the end of this year.
There are a couple of trends underlying repowering. As turbines get older, their operation and maintenance (O&M) costs go up while their generating capacity goes down. A study by IHS Markit, a London-based consulting group, estimated that the difference in O&M costs increase as much as 20 percent between a five-year-old turbine and a 15-year-old turbine reaching as high as $60,000 a MW.
IHS Markit forecasts that the total spending on O&M in the wind energy sector will exceed a total of $40 billion between 2015 and 2025—$4 billion annually. “We see a spike in costs for equipment maintenance at about the five-year mark through to 10 years of operation,” Maxwell Cohen, an IHS Markit senior research analyst, said in a release.
“Along with that, equipment O&M costs are increasing significantly, leading operators to focus on performance optimization and cost management,” Cohen said.
Age also reduces the generating capacity of turbines at about a rate of more than 1 percent a year, according to the federal Lawrence Berkeley National Laboratory’s Electric Policy Market Group.
What is really driving repowering in the short run, however, is the PTC. “This is directing capex [capital expenditures] toward repowering,” Lantz said. “It represents a revenue stream and lower O&M costs.”
An NREL analysis found the optimal time to repower was at 25 years, but “projects coming up on 15 years of operations, are being repowered early because of the PTC,” Lantz said.
