When wind farms change owners, detailed expertise is in high demand; the projects may involve specific risks that – although not immediately apparent – may result in higher costs, lower energy production than predicted, or liability issues that affect Returns On Investment and cash flow. It is therefore vital to identify potential risks in advance and minimise them or factor them in appropriately. This article by experts from T‹V S‹D and MVV Windenergie GmbH describes the issues that count in practice.
In recent years, the establishment and expansion of renewable power generation capacities in the onshore wind energy sector has increasingly moved into the focus of many investors, including municipal utility companies. Mannheim-based energy company MVV Energie, for example, invests in measures to enhance energy efficiency, but also in expanding renewable sources of energy – particularly onshore wind farms and biomass and biogas plants.
The company’s wind projects focus on acquiring existing wind farms as well as developing its own projects. It acquired seven wind farms from the Spanish energy company Iberdrola in early 2013, significantly expanding its wind energy capacity. MVV Energie now holds a wind energy portfolio totalling 174 MW of installed capacity.
Comprehensive due diligences were a cornerstone of the acquisition ventures, enabling potential risks to be identified and appropriately considered – an essential step given that unidentified risks can endanger profitability and thus the success of the project.
When existing wind farms are sold or discussed as investments, the same questions often recur. How much energy does the wind farm actually produce? What is the availability of the turbines? Thorough review of the service data and reports is imperative in assessing the performance of an existing wind farm.
By following this approach, shortcomings in operational management or errors in turbine control that reduce energy yield can be identified at an early stage (e.g. insufficient wind direction alignment, capacity reduction in the network, low availability caused by technical defects). Once these flaws are out in the open, turbine operation can frequently be optimised by applying a professional asset management approach.
In the slipstream of neighbouring wind turbines
In many cases, investors fail to consider repowering and erection of additional turbines in the immediate vicinity of the wind farm they seek to purchase. Operation of existing turbines may be significantly impaired if a further wind farm is set up on neighbouring territory or an existing wind farm is expanded.
If the purchaser’s own turbines are later located in the lee of the new wind farm, yields will decrease while stronger turbulence will cause a rise in the operating loads – frequently beyond the design limits. Given this, due diligences should always also estimate the risk of further turbines being erected and take the potential drop in energy yield into consideration.
In the case of existing wind farms, another imperative aspect is a detailed examination of the state of repair of the turbines and their components. The list of potential service-relevant problems is long and includes inadequate servicing and maintenance, makeshift repairs of operational damage, significant defects in foundations, rotor blades, nacelle and/or tower, or frequent failures in network systems – to name but a few.
An on-site inspection will provide a clear picture of the turbine’s actual state of repair. A third-party partner, such as T‹V S‹D, with the expertise to provide reliable assessment of the relevance of the defects plays an important role in this context. Failure to carry out this step may result in additional costs at a later stage of operation.
Successful transition from planning stage to wind farm operation
But even in the planning stage, numerous factors must be considered and weighed against each other. The majority are associated with the application stage of building permits.
A due diligence review primarily depends on the legal requirements – in particular, the German Act on the Prevention of Harmful Effects on the Environment Caused by Air Pollution, Noise, Vibration and Similar Phenomena (Bundes-Immissionsschutzgesetz, BImSchG), which also includes secondary specialist requirements drawn from nature conservation, construction law and other regulations.
For every individual wind farm, the authorities can define certain requirements and conditions that result from the applicable laws before they grant the building permit.
Under certain circumstances, these conditions and requirements may impact on the project schedule (for example, restrictions caused by periods of hatching or forest clearance). Alternatively, they may restrict subsequent operations, thus reducing the energy yield of the wind farm (e.g. night shut-downs during bats’ active season).
Only familiarity with the conditions at the potential wind-farm site can enable solutions and alternatives to be developed and any additional costs and loss of yield to be adequately evaluated.
Subsoil, turbulence and energy yields
In this phase of the project, success also depends on technical aspects. Is the foundation soil suitable for ensuring permanent turbine stability? Do the wind conditions prevailing at the site promise profitable wind-farm operation?
How strong is the turbulence at the site, and how much stress does it impose on the components of the wind energy turbine? The answers to these questions are important in order to establish wind-farm profitability beyond a doubt and match the design of the wind-turbine components to the specific on-site conditions. Validated expert reports and assessments of both site and wind conditions supply the answers that buyers need to minimise any risks that may result in turbine failure and production losses during operation, premature material fatigue or costly operational damage.
Guarantee and warranty
Warranty claims over issues such as turbine output must be clearly regulated. Contracts and agreements must be free from gaps or omissions that could lead to friction after implementation. After all, clear evidence of actual turbine capacity in subsequent operation is coupled to technical methods and international standards. Measurement of output must be carried out on one or more specific wind turbines and/or their sites before the erection of the turbines. The turbines must be suitable for measurement as defined in IEC 61400-12-1:2005, and their site must meet specific criteria.
Failure to consider these requirements at an early stage may mean that turbines already erected are not suitable for measurement. If this is the case, warranties may expire because the claimant is unable to prove that the wind turbines fail to deliver the required energy output. Contracts must therefore be examined in detail to ensure all critical details can be negotiated in good time in advance.
Sailing along instead of battling the elements
The political and social framework conditions, such as funding under Germany’s Renewable Energy Act (EEG), impact heavily on wind-farm income, and thus profitability. However, as current discussions and decisions on the amendment of the Renewable Energy Act show, they develop dynamically. In individual cases, modifications and future developments may affect energy yields and jeopardise the profitability of wind farms that have not yet been placed into service.
Given this, it is important to develop possible scenarios in profitability analyses and examine whether the wind farm can also be operated under changed framework conditions.
Thomas Zirngibl, Team Leader Site Assessment & Technical Due Diligence, T‹V S‹D Industrie Service GmbH
Thomas.Zirngibl@tuev-sued.de
www.tuev-sued.de/windenergie
Bjˆrn Wenzlaff, CEO of MVV Windenergie GmbH
b.wenzlaff@mvv.de
