2016 Service Market Survey - AEA-Albania Energy...

11th SKF Wind Farm Management Conference

2016 Service

Market Survey

2 May 2016

Annual global growth in O&M market value is expected to far exceed the growth of new wind power installations. MAKE’s forecast of 9% y-o-y growth1 is supported by the Survey

ISPs are rated most likely to gain market share for scheduled as well as for unplanned and corrective O&M in Europe to 2020. MAKE forecast ISPs to gain 10%-point market share to 2024

Wind turbine OEMs are, however, expected to maintain competitive advantage in the lower frequency but higher value capital repairs and replacement segment

A majority of respondents expect average O&M spend per MW/year to reduce in the next two years consistently with the 2015 Survey. Close to 50% expect a drop between 0-10%

O&M revenue as a proportion of total revenue is expected to continue to increase from 15% in 2014 for European turbine OEMs, however, this year’s Survey results show lowered expectations for growth

Executive summary

2016 Service Market Survey

1 MAKE Global O&M Sector Report, 2015


2016 Service Market Survey2 May 2016

Executive summary (continued)


Service contract length for new turbines in Europe has been increasing as clearly indicated by more than 60% seeing 5+years average length compared to 20% in last years survey

Track record, cost and availability & performance guarantees take pole position as the key O&M service partner selection criteria by far in this year’s Survey, as they did last year

Turbine upgrades are seen as the premier choice for Europe’s ageing turbine fleet followed by life extension programs. Repowering remain a possibility on best sites or when subsidized

Survey results point to gearboxes and electronics as greatest causes of turbine downtime. Bearings this year replace blades on 3rd place.

Improved practices along the value chain, technical innovation as well as consolidation are seen as the main levers for wind power LCOE reduction closely followed by Big Data



Executive summary (continued)


Condition monitoring, application of Big Data and advanced diagnostics are

seen as the key enabler for reducing unplanned maintenance in favour of

moving to lower cost preventive/predictive maintenance to reduce OPEX

Survey results point to sharing of maintenance strategies, best practices as

well as operational data as key knowledge sharing areas with potential to

enhance fleet wide asset performance

On the back of acquisitions, such as Gamesa-B9 and Vestas-Availon,

respondents expect the European O&M space to continue consolidation,

mainly driven by wind turbine OEMs



Methodology Sample demographics The 2016 Service Market Survey has

been conducted in April 2016

The Survey sample consist of O&M professionals and experts attending the 11th SKF Wind Farm Management Conference

Data has been collected anonymously and electronically via individual touch pads provided to attendants

Only one unique opportunity to respond is provided to each attendant

The first Survey was carried out in 2015. Where possible, 2015 results have been included for comparison

Sample size: 135 respondents

2016 Service Market Survey11th SKF Wind Farm Management Conference


20%

19%

5%

43%

7%6% Asset owner/operator

ISP

Turbine OEM

Supplier

Advisor

Other

5%

5%

12%

5%

4%

19%

21%

7% 8%7%

7%

Others

USA

Spain

Sweden

China

Germany

Denmark

Belgium

Poland

UK

France

Q1. The global market for new wind power installations is expected to

contract in 2016 from policy induced peak demand in 2015, and to grow

2.5% y-o-y between 2016-2019. How do you expect the O&M market to

develop in total value during this period? (%)

1. 0 – 5 %

2. 5 – 10 %

3. 10 – 15 %

4. More than 15 %

5. Don’t know

Annual global growth in O&M market value is expected to far exceed the growth of new wind power installations. MAKE’s forecast of 9% y-o-y growth1 is supported by the Survey



18 (46)

24 (30)

12 (4)

40 (16)

7 (3)

Note: Numbers in ( ) are results from the 2015 Service Market Survey for comparison

Q2. Which type of service provider do you think is likely to gain the most

market share for scheduled O&M to 2020? (%)

1. Wind turbine OEM

2. ISP – Independent Service Provider

3. Sub-system or components suppliers

4. In house, self-performing service

5. Hybrid solution

6. Don’t know

ISPs are rated most likely to gain market share for scheduled as well as for unplanned and corrective O&M in Europe to 2020. MAKE forecast ISPs to gain 10%-point market share to 2024



3 (4)

28 (NA)

14 (31)

3 (7)

33 (35)

20 (24)

Note: Numbers in ( ) are results from the 2015 Service Market Survey for comparison. The 2015 Survey did not distinguish between scheduled, unplanned and corrective O&M and capital repairs and replacements, hence last years results are the same for the three.


market share for unplanned and corrective O&M to 2020? (%)

1. Wind turbine OEM




5. Hybrid solution

6. Don’t know

ISPs are rated most likely to gain market share for scheduled as well as for unplanned and corrective O&M to 2020. MAKE forecast ISPs to gain 10%-point market share to 2014



33 (35)

22 (24)

11 (7)

15 (31)

3 (4)

16 (NA)



market share for capital repairs and replacements to 2020? (%)

1. Wind turbine OEM




5. Hybrid solution

6. Don’t know

Wind turbine OEMs are, however, expected to maintain competitive advantage in the lower frequency but higher value capital repairs and replacement segment



29 (35)

34 (24)

12 (NA)

12 (7)

1 (4)

12 (31)


Q5. Average wind turbine O&M spend is estimated in 2015 to be around

28,000 EUR/MW/year in Europe What do you expect the average O&M

spend per MW/year to be in 2017? (%)

1. Drop more than 10 %

2. Drop 5 – 10 %

3. Drop 0 – 5 %

4. Increase 0 – 5 %

5. Increase 5 – 10 %

6. Increase more than 10 %

7. Don’t know


A majority of respondents expect average O&M spend per MW/year to reduce in the next two years consistently with the 2015 Survey. Close to 50% expect a drop between 0-10%



5 (6)

21 (19)

28 (33)

12 (11)

21 (21)

6 (4)

6 (6)

Q6. Wind turbine OEMs are looking to the turbine O&M market as a

source of recurring revenue with stable margins. On average in 2014, 15%

of European turbine vendors total revenues were generated from their

O&M service units. What percentage of total income would you expect

this revenue stream to make up by 2025? (%)

1. Less than 15 %

2. Between 15 and 30 %

3. Between 30 and 50 %

4. Greater than 50 %

5. Don’t know

O&M revenue as a proportion of total revenue is expected to continue to increase from the 15% in 2014 for European turbine OEMs, however, this year’s Survey results lower expectations for growth



12 (25)

63 (46)

3 (12)

4 (4)

17 (13)


Q7. In Europe turbine OEMs are increasingly offering new turbines with

full service packages including main components, materials and

availability guarantees and with increasing average length. What is the

current average length of service packages that major western turbine

manufacturers are offering? (%)

1. < 3 years

2. 3 – 5 years

3. 5 – 10 years

4. 10 – 15 years

5. > 15 years

6. Don’t know

Service contract length for new turbines in Europe have been increasing as clearly indicated by more than 60% seeing 5+years average length compared to 20% in last year’s survey



4

1

25

35

28

7

Note: Results are not fully comparable with 2015 due to changes in response categories

Q8. What is the most important criterion in selecting O&M service

suppliers for wind farms? (%)

1. Cost

2. Reputation & track record

3. Capital parts repair/replacement capability

4. Availability and performance guarantees/incentives

5. Advanced diagnostics

6. Operational and service data availability

7. Spare parts availability and cost

8. Turbine or software upgrades

9. Don’t know

Track record, cost and availability & performance guarantees take pole position as the key O&M service partner selection criteria by far in this years Survey, as they did last year



2

1

6

2

4

20

8

31

25


Q9. Which O&M option is most often being considered for Europe’s

ageing turbine fleet? (%)

1. Turbine performance upgrades

2. Turbine reliability upgrades

3. Life extension programs

4. Run to failure operations

5. Repowering

6. Don’t know

Turbine upgrades are seen as the premier choice for Europe’s ageing turbine fleet followed by life extension programs. Repowering remain a possibility on best sites or when subsidized



11

15

10

26

20

18


Q10. Which three elements in a wind turbine are causing most total

downtime? (%)

1. Blades

2. Gearbox

3. Hydraulics

4. Electronics

5. Generator

6. Bearings

7. Balance of Plant (transformers, cables etc.)

8. Other

Survey results point to gearboxes and electronics as greatest causes of turbine downtime. Bearings this year replace blades on 3rd place.



23 (22)

17 (14)

4 (10)

5 (2)

10 (7)

4 (2)

25 (29)

12 (15)


Q11. What do you consider the top three drivers for lowering LCOE on

wind farms? (%)

1. Consolidation, industrialization and economies of scale

2. Increased competition

3. Improved processes, cooperation and scope of supply (e.g. systems supply)

4. Technical innovation

5. OPEX/MWh reduction

6. Big data and advanced analytics

7. Other parameters

8. Don’t know

Improved practices along the value chain, technical innovation as well as consolidation are seen as the main levers for wind power LCOE reduction closely followed by Big Data



2

3

14

8

21

24

11

16


Q12. What do you consider the top three levers for lowering OPEX/MWh

on wind farms? (%)

1. Cost and performance improvement through OEM FSAs

2. Cost and performance improvement from unbundling of O&M

3. Reduce cost of planned maintenance

4. Reduce cost of unplanned maintenance

5. Reduce cost of spare parts

6. Reduce cost of capital repairs

7. Performance/Reliability upgrades

8. Condition monitoring

9. Big data and advanced diagnostics

10. Other parameters

Condition monitoring, application of Big Data and advanced diagnostics are seen as the key enabler for reducing unplanned maintenance in favour of moving to lower cost preventive/predictive maintenance to reduce OPEX



2

11

19

14

7

6

19

9

8

5


Q13. No universal O&M service model has been successfully applied to

different regions by wind farm operators, but there is knowledge that can

be transferred. What is the most important area worth learning from? (%)

1. Spare parts management

2. O&M cost control management

3. O&M contracting

4. Aged turbine fleet management

5. Operational data sharing with OEMs

6. Maintenance strategy & best practice

7. Other

Survey results point to sharing of maintenance strategies, best practices as well as operational data as key knowledge sharing areas with potential to enhance fleet wide asset performance



1

43

29

10

4

6

7


Q14. Do you expect the European O&M space to consolidate? (%)

1. No

2. Yes, mainly through OEMs acquiring ISPs

3. Yes, mainly through asset owners acquiring ISPs

4. Yes, mainly through ISPs’ driven M&A

5. Yes, mainly from exits

6. Other

7. Don’t know

On the back of acquisitions such as Gamesa-B9 and Vestas-Availon respondents expect the European O&M space to continue consolidation, mainly driven by wind turbine OEMs



8

2

5

19

19

39

7


MAKE’s Global Wind Turbine O&M Report



Looking for more information on the service market?

MAKE’s 2015 Global Wind Turbine Operations and

Maintenance Report provides an in-depth analysis of global

wind power services market and strategies. Key topics

covered include the global O&M market opportunity,

services strategies of leading asset owners, availability

guarantees, pricing and terms of O&M contracts and

regional installed base segmentation. Don’t miss:

50+ pages of global O&M wind industry analysis

80 graphs, illustrations and tables

Analysis of 7 segments of the O&M value chain

Insight into O&M dynamics across 6 major O&M

markets

Get your copy or download a free overview at:

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Order before 1 June 2016 and get the 2015

and 2016 releases for the price of one

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© 2016 MAKE Consulting A/S. All rights reserved. Reproduction or distribution of this report in any form without prior written permission is strictly forbidden.

Violation of the above restrictions will be subjects to legal action under the Danish Arbitration Act. The information herein is taken from sources considered

reliable, but its accuracy and completeness are not warranted, nor are the opinions, analyses and forecasts on which they are based. MAKE Consulting A/S

cannot be held liable for any errors in this report, neither can MAKE Consulting A/S be liable for any financial loss or damage caused by the use of the

information presented in this report.

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2 May 2016

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