O&M cost cutting considerations: imported talent, currency fluctuations and satellite offices
In an ideal world, new wind farm owners want more accurate estimates of O&M expenses and how to reduce them without undermining performance. We look at how some are cutting costs through currency fluctuations, imported skilled workers and satellite...
By Susan Kraemer
In Australia’s relatively new post-warranty market, some wind farm operators are saving on labour costs by importing O&M services from New Zealand.
A young firm in New Zealand, Greenergy Services, is founded on the idea of offering more cost-effective O&M services to neighbouring Australian wind farm owners.
In the current market, it takes only 82 cents of Australian currency to pay an invoiced dollar in New Zealand currency. And New Zealand wind techs earn between $60,000 and $90,000 a year, while with Australia’s generally higher wages, their Australian colleagues earn an annual $70,000 to $100,000.
By billing from New Zealand where the firm makes its home, and by flying over wind technicians, between both the exchange rate and the reduced staffing costs, a company, such as Greenergy is able to offer charge rates that result in savings of up to 40 per cent, according to Operations Manager Rob Jessop.
Jessop says this means that they are able to offer charge rates of just $80-$100 NZ dollars per hour compared with a typical charge rate of $110-$130 an hour, in Australian currency.
“Our strategy of establishing the head office in New Zealand has reduced overhead costs substantially, which is reflected in the competitive pricing offered in the Australian wind power market,” he explains.
This strategy also makes it possible for New Zealand-based wind technicians to follow a career to do so without having to move to Australia.
“In New Zealand, our wages are quite low - even aside from the exchange rate - compared to Australia,” says General Manager of Generation, Deion Campbell, at one of New Zealand’s largest energy generators, TrustPower; which owns wind farms in both countries.
“If you took the exchange rate into account,” he says, “it would be 40 per cent cheaper to employ staff out of New Zealand, on a per hour basis.”
“You’ve got to pay for accommodation and travel, I suppose,” Campbell adds. “Taxes and so forth are higher in Aussie.”
However, wind technicians would be exempt from Australian taxes if they are flown in and out, he points out.
Imported talent: the cost differentials
According to Greenergy, their wind technicians are flown “across the ditch” for several months at a time and have a subsistence allowance - for all their workers, whether they are New Zealanders or out-of-state Australian wind techs, or any other foreign worker they need to bring in.
But from a US perspective, the salaries for wind techs in New Zealand and Australia are startling for some, namely Outland Energy Services CEO, Steve Scott, who grew the US-based operations and maintenance firm to 120 employees in a short span of time. After its recent acquisition, he is now Regional General Manager at Duke Energy Renewables, d.b.a Outland Energy Services.
Seen from a US vantage-point, these are relatively similar pay rates between $60,000 and $100,000 annually – but notably far higher than rates found in the US industry.
Scott puts it succinctly, in comparing these wind tech salaries to comparable salaries for wind technicians in the US: “When you’ve got labour rates that expensive: that’s a big gap,” he says. “The labour rate in the US, depending on the qualifications is between $18 and $30 an hour for a technician, depending on the end qualifications and education, etc. It’s still a big expense, but in the grand scheme of things - even with the exchange rate - that’s a different animal.”
But appropriate salaries for wind technicians are a matter of perspective. To New Zealand-based TrustPower, it is the US that appears as the outlier. "That’s very low,” Campbell offers. “I think it’s quite low in the US.”
There are also differences between the overall economies that affect all salaries to some extent. Unemployment rates are much lower in both Australia and New Zealand than in the US and jobs are fiercely protected by their governments.
The minimum wage in Australasia is about twice as high as in the United States, averaging over $15 in Australia and almost $13 in New Zealand, versus just over $7 in the US.
Higher costs in a nascent industry
But also, the industry is really just starting up Down Under. By contrast, America’s wind farm O&M industry is relatively mature, and there is an economy of scale that is beginning to lower expenses in the US.
Greenergy Services is New Zealand’s only independent O&M service provider, and experience is difficult to come by, because the country’s wind farms are serviced by the OEMs, such as Vestas and Siemens.
“The US and Australasian industries are not comparable,” Jessop contends, “due to the low rates in the United States, economies of scale, and the limited capability of technicians used as standard in the US for this line of work.”
For American firms, staffing costs are not a big issue. Scott’s cost-cutting focus, for example, is less on staffing issues than concentrating on getting better intelligence out of the turbines.
“On a staffing level, there are things you can do to manage your long-term costs,” says Scott. “But those in my mind are secondary to proactive Condition-Based Monitoring.”
While it can be argued that comparing labour costs between established wind producing markets to burgeoning ones is like comparing oranges to apples, certain cost cutting mechanisms should not be dismissed in regions of the world that have cross-borderworker agreements, such as South East Asia, Latin America or Eastern and Central Europe, since the use of satellite offices, currency fluctuations and imported skills workers is a valuable proposition. It is especially notable for those regions that have lagged on the renewables front, but are now under pressure to meet national clean air targets or feed-in-tariffs that must be adhered to in a relatively short period of time.