Part 1: Setting the foundation
Why read this article?
Too often we see wind farm projects being built without a clear plan for the operational phase. This leads to reactive behaviour and loss of production once the project enters operations. To ensure proactive O&M (Operations and Maintenance), it is key to establish a clear O&M strategy and project planning in the early project stage.
This article is the first in a series focusing on optimal operations and asset management.
Key questions to ask being an investor
Figure 1. Key questions to consider in deploying an operator strategy and plan
Being an active owner in large infrastructure projects, several fundamental operations and asset management topics must be addressed to design a comprehensive operator strategy. Below we have listed the key owner questions that set the boundaries and limitations for the strategy. These should be carefully considered before decisions are taken.
Operator strategy must be defined during development phase
All the issues listed above have one commonality – they need to be addressed in the project development phase (see figure 2). During the development phase, decisions are made such as service contract structure and length. If the project is financed, many decisions are taken at financial close that cannot be changed at a later stage without prior approval by the lenders and their advisers. Without a clear operator strategy in place, the financing process often dictates the chosen setup.
Service contracting must be based on a carefully considered operations strategy
We often see contract structures with 10-15 year, full-scope, service agreements. These contracts are negotiated 2- 3 years prior to project COD (Commercial Operations Date) and often without flexibility for the developer to change the structure at a later stage. This provides business-case certainty at financial close, as the service provisions are “all inclusive”, but, who can foresee if the contract drives long-term profitability?
Questions need to be asked, for instance:
- Will there be a neighbouring windfarm in the future that provides opportunities for synergies?
- Will there be another service provider performing better in the geography of the project in 3, 5 or 10 years?
- Will there be advances in maintenance technology that drives cost significantly lower?
If the project owner wants to pursue long-term value, contract optionality should be carefully considered.
‘Employer Requirements’ secure operational and asset management control
Well-performing EPC (Engineering, Procurement, Construction) and service contracts include elaborating upon the requirements of the suppliers. This encompasses functional requirements of the asset, O&M design requirements, documentation requirements, data access requirements, and reporting requirements. Having set the right standard from the beginning provides the owner flexibility for future strategy changes. Too often we see EPC/ supply contracts that are not considering the subsequent day-to-day processes once the project has been built.
Keep in mind…
- Will there be a neighbouring wind farm in the future that provides opportunities for synergies?
- Will there be another service provider performing better in geography of the project in 3, 5, or 10 years?
- Will there be new maintenance technology advanced that drives cost significantly lower?
Want to learn more about successful operations?
Just reach out to us, we are always happy to get to answer your questions and get into discussions on optimized operations and asset management!
Magdalena Zajonc | Senior Manager of Strategic Consulting | Get in touch |
Lars Conradsen | Founding Partner & Head of Technology | Get in touch |
Read the next part: Successful Operations Management #2 – Securing the Foundation
