“The United State’s regulatory environment remains extremely volatile,” says Dan Shreve, “with the extension of the PTC serving a key negotiating tool in the lame duck Tax Extenders debate, while EPA clean air regulations are under review before the...

By Ritesh Gupta

Wind energy companies have been closely following the “start of construction” guidance for the renewable energy Production Tax Credit (PTC) and Investment Tax Credit (ITC) in the United States.

Even as there continues to be a strong call for re-visiting expiring clean energy tax measures, owners and developers cannot take any chance when it comes to the US regulatory environment.

No doubt the industry is seeking support for these federal tax policies, but no one intends to take any chance with the construction timeline or even O&M programme of projects planned.

Dan Shreve, Partner, MAKE Consulting, offers his insights on the current state of wind energy affairs in the US.

Q: What do you make of the regulatory environment for the wind sector in the US today? What is going to facilitate development and what is hindering the growth?

A: The United State’s regulatory environment remains extremely volatile, with the extension of the PTC serving a key negotiating tool in the lame duck Tax Extenders debate, while EPA clean air regulations are under review before the Supreme court.

Industry stakeholders want policy stability, even if that stability comes with diminished incentive support. Sustainable growth can only be achieved once the policy cycle is stabilised and a firm economic case for wind energy can be made.

Lowering LCOE for wind is the central focus of the entire value chain, but in order to make blades longer, towers taller and squeeze every last ounce of efficiency from the powertrain, industry innovators must be able to show positive returns on investment.

Following the development pertaining to PTC numerous projects rushed to get their contracts in, and next year will see numerous new wind farms in the construction phase.

Q: How do you think developers and owners need to plan for O&M at this juncture?

A: The primary issue for asset owners in this build cycle is ensuring their project economics remain sound amidst the challenges associated with low PPA prices.

In some instances, asset owners are being forced to take bare bones, short term O&M contracts to get projects in the ground, with a mind towards negotiating new service contracts in the near term. This dynamic is not an issue for major asset owners deploying an in-house O&M strategy such as NextEra or Invenergy, however smaller developers without the leverage of their turbine supply agreement may be at a disadvantage when coming back to the negotiating table for a service contract renewal.

Asset owners need to have a long term plan in place, and shifting maintenance strategies requires a well thought out, phased approach with fall back plans in place should fleet availability take a turn for the worst.

Q: What are the critical factors that owners and operators need to look at today while planning for O&M initiatives at this juncture?

A: Cost and performance of operating assets is top of mind for asset owners around the world. The wind services market has matured and competition has promoted the development of hybrid business models that lower the costs of low value added maintenance tasks while still providing the high power diagnostics, parts procurement and product optimisation solutions from turbine OEMs. Asset owners must take stock of their internal capabilities and long term asset strategies to formulate a cohesive plan for who will take care of their turbines, for the first, second and possibly third decade of post COD operations.

Risk tolerance is central to these decisions and provides the vertex from which to balance their cost/ benefit tradeoffs. “Trouble free” maintenance solutions exist for asset owners, but come at a steep price, especially when talking about terms outside of ten years.

Q: What generally are the major challenges pertaining to O&M as project developers rush into the construction phase?

A: The O&M challenges of these boom cycles are wide ranging and depend upon the competencies and scale of the asset owner’s organisation. Geographic expansion can provide issues when smaller wind farms are built away from a central “hub” of operations, stretching supply lines and increasing response times.

New technology deployment can provide challenges, especially when working with new turbine OEMs, as asset owners must be able to navigate the operations groups of multiple turbine OEMs to ensure their fleets issues are being addressed in a timely fashion. The asset owner needs to ensure new construction is not outpacing the expansion of their services organisation or their service partner’s organisational capabilities.

Q: How should entities look at O&M strategy at a pre-contract and pre-construction phase, as well as the construction/ installation phase?

A: Asset owners must ensure that a high level of diligence is being applied to the commissioning activities during this boom cycle. Issues are expected to some degree, but long term quality issues can arise from slipshod work stemming from a rush to get a project in the ground before COD deadlines.