A multibillion dollar opportunity – Service for wind farms in China

Operations and maintenance, or O&M, work on China’s huge and growing fleet of wind farms is on course to be a $3bn-a-year market by 2022

Hong Kong and London, 19 October – China is the world’s largest wind market with more than 100GW of wind capacity, equivalent to about 65,000 turbines, and is currently adding more than 30 new turbines per day. Operating and maintaining these turbines costs $500m per year, but this will increase to $3bn per year by 2022, according to research just published by Bloomberg New Energy Finance, an analysis company. In total, it found that $16bn will be spent to operate and maintain China’s wind turbines from 2015 to 2022.

The task of providing O&M for the estimated 250GW of wind capacity that China is forecast to have in 2022 (several times that in any other country) will be a major challenge, creating business opportunities not just for turbine manufacturers but for specialist service providers and other players. It will also create many tens of thousands of jobs.

Justin Wu, head of Asia research for Bloomberg New Energy Finance, said: “This market has not attracted much attention up till now, partly because China’s wind capacity only started to grow at world-leading rates late in the last decade and partly because many of the turbines that have been installed have been working through extended warranty periods. But the next few years will see the birth of a multibillion-dollar O&M business.”

Around the world, turbine manufacturers typically offer 2-3 year warranties on their turbines, after which the wind farm owner must find a new way to run their turbines, either through “self-servicing” them using in-house employees, or by outsourcing to a third-party service provider. But in China, standard warranty periods have been extended, sometimes for years, due to quality concerns about Chinese-made turbines.

In 2014, more than two-thirds of all wind turbines operating in China were still under their original manufacturer warranties. However, Bloomberg New Energy Finance expects the number of turbines coming out of warranty in China to grow dramatically in the coming years, as quality improves and turbines age. It forecasts that 14-18GW of wind capacity to come out of warranty annually in 2014-16, and 26GW and 30GW per annum in 2017 and 2018, respectively. By 2022, a total of 187GW of wind turbines in China will be out of manufacturers’ warranty.

So far, most Chinese owners (75%) have chosen to self-maintain turbines after the end of warranty periods. This compares to an equivalent figure of just 10% in Europe at the moment. This is likely to change over the coming years, as owners’ assets under management grow. In-house O&M management will eventually become unwieldy so large owners will seek to mitigate operational risk through outsourcing. In five years’ time, Bloomberg New Energy Finance expects in-house maintenance to fall to 50% of the total warranty-expired fleet.

To meet this growing demand for outsourced O&M services are more than 90 independent wind farm service providers already operating in China. However, service quality and technical expertise vary significantly between these service providers; more than two thirds did not exist two years ago and many with poor expertise and a lack of strong financial backing are likely to exit the market.

Bloomberg New Energy Finance has conducted the very first wind O&M survey of nearly two dozen market participants in China. Other key findings include:

• A lack of industry standards and regulations, a lack of experienced independent service providers, and a lack of trained technicians are cited as the top three challenges for the industry.

• Cost, quality of service, and an existing relationship with the vendor are the most important criteria for selecting a service provider.

• Blade maintenance is seen as the biggest O&M opportunity, followed by maintenance planning tools and condition monitoring systems.

Finally, a large majority of wind turbine manufacturers (77%) and independent service providers (80%) expect wind farm owners to continue to dominate China’s O&M market, even though outsourcing will grow as turbines leave warranty. Ironically, wind farm owners are less optimistic about their own capabilities, with only 64% believing they will keep maintaining their own assets while the rest believe this will be outsourced.

CONTACT

Noemi Glickman

Bloomberg New Energy Finance

+44 (0)207 392 0575

nglickman@bloomberg.net

ABOUT BLOOMBERG NEW ENERGY FINANCE

Bloomberg New Energy Finance (BNEF) provides unique analysis, tools and data for decision makers driving change in the energy system. BNEF has 200 staff based in 14 offices around the world. BNEF’s sectoral products provide financial, economic and policy analysis, as well as news and the world’s most comprehensive database of assets, investments, companies and equipment in the clean energy space. BNEF’s regional products provide a comprehensive view on the transformation of the energy system by region. For more information: http://about.bnef.com

ABOUT BLOOMBERG

Bloomberg, the global business and financial information and news leader, gives influential decision makers a critical edge by connecting them to a dynamic network of information, people and ideas. The company’s strength – delivering data, news and analytics through innovative technology, quickly and accurately – is at the core of the Bloomberg Professional service, which provides real time financial information to more than 319,000 subscribers globally. Bloomberg’s enterprise solutions build on the company’s core strength, leveraging technology to allow customers to access, integrate, distribute and manage data and information across organizations more efficiently and effectively. Through Bloomberg Government, Bloomberg New Energy Finance and Bloomberg BNA, the company provides data, news and analytics to decision makers in industries beyond finance. And Bloomberg News, delivered through the Bloomberg Professional service, television, radio, mobile, the Internet and three magazines, Bloomberg Businessweek, Bloomberg Markets and Bloomberg Pursuits, covers the world with more than 2,400 news and multimedia professionals at more than 150 bureaus in 73 countries. Headquartered in New York, Bloomberg employs more than 15,500 people in 192 locations around the world. For more information visit www.Bloomberg.com/now/

About BloombergNEF

BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.
 
Sign up for our free monthly newsletter →

Want to learn how we help our clients put it all together? Contact us