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Operation & Maintenance Agreements (O&M). 30 October 2012, GIZ Workshop, Ho Chi Minh City, Vietnam. Contents. GL Garrad Hassan. 1. 2. Technical & Commercial O&M Options. 3. Service Agreement Considerations. 4. Summary. Contents. GL Garrad Hassan. 1. 2.

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operation maintenance agreements o m

Operation & Maintenance Agreements (O&M)

30 October 2012, GIZ Workshop, Ho Chi Minh City, Vietnam

contents
Contents

GL Garrad Hassan

1.

2.

Technical & Commercial O&M Options

3.

Service Agreement Considerations

4.

Summary

contents1
Contents

GL Garrad Hassan

1.

2.

Technical & Commercial O&M Options

3.

Service Agreement Considerations

4.

Summary

local understanding forms a global perspective
Local understanding forms a global perspective

Heerenveen

Sint Maarten

Kaiser-Wilhelm- Koog

Glasgow

London

Slough

Copenhagen

Hinnerup

Oldenburg

Hamburg

Warsaw

Bristol

Cork

Beijing

Seoul

Tokyo

Shanghai

Mumbai

Bangkok

Bangalore

Singapore

Newcastle

Wellington

Melbourne

Vancouver

Ottawa

Portland

San Diego

Montreal

Peterborough

Austin

Querétaro

Porto Alegre

Santiago

Paris

Imola

Lisbon

Barcelona

Zaragoza

Madrid

Izmir

Cairo

Cape Town

GL Garrad Hassan: 1,000+ staff, 44 locations, 26 countries

Part of the GL Group: renewables, oil & gas, maritime

gl garrad hassan capabilities
GL Garrad Hassan Capabilities
  • The world’s largest renewable energy consultancy. It offers independent technical and engineering services, products, and training courses to the onshore and offshore wind, wave, tidal and solar sectors.
  • Has been supporting investors in wind farms for over two decades. The detailed technical understanding of its experts provides a solid basis for informing intelligent decisions, regardless of the scale of the project or investment, or the lifecycle stage.
  • Has worked with almost every major manufacturer. It has led the market for manufacturer services for many years and is continuously developing its industry standard turbine design software.
wind experience matters
Wind: Experience Matters

Short-term forecasting

  • over 20% of the world’s operational capacity

Measurements

  • power curve measurements on 500+ turbines
  • load measurements on 100+ turbines
  • founding member of MEASNET
  • first ever load measurements on offshore wind farm

Products / software solutions

  • Industry standard wind turbine design software - Bladed
  • Bladed used to design world’s largest turbine
  • world‘s largest independent SCADA supplier – 6,000 MW

Offshore Wind

  • project management of world’s largest offshore wind farm - Thanet

Energy Assessment

  • analysing 20,000 MW of new projects per year
  • 25% of all projects worldwide
  • 70% of UK installed capacity
  • 75% of Irish installed capacity

Operational Assessment

  • 15% of the world’s installed capacity

Due Diligence

  • over 25% of the world’s project financed wind farms
  • world’s largest wind farm portfolio acquisition
  • world’s first wind energy bond deal

Independent Engineer

  • 45% of US wind farms
  • The world’s five largest wind farm financings
  • The first project financed offshore wind farm
contents2
Contents

GL Garrad Hassan

1.

2.

Technical & Commercial O&M Options

3.

Service Agreement Considerations

4.

Summary

slide8

FINACIAL CLOSE

SITE DISCOVERY

TAKE OVER

DEVELOPMENT PHASE

(0.5 to several years)

DISCONNECTION

CONCLUSION

MEDIUM RISK &

MEDIUM

RETURN

LOW RISK & LOW RETURN

CASH FLOW

MEDIUM

RISK & HIGH

RETURN

HIGH RISK &

HIGH INVESTMENT

MEDIUM RISK &

LOW INVESTMENT

CONSTRUCTION PHASE

(12 to 18 months)

OPERATIONAL PHASE

(20 to 25 years)

DECOMISSIONING PHASE

(3 to 4 months)

BREAK EVEN

(loan repaid)

Wind Farm Project Cashflow

wind farm investment risks
Wind Farm Investment Risks
  • What are some of the key investment risks in a wind farm project?
slide10

- 6

months

- 5

months

- 2

months

- 1

month

+18

months

+ X

years

Detailed Banking

Model, audit & tax

Initial Banking Model

Construction

Draw Down

Operational

Repayments

Basic Feasibility Model

FINACIALCLOSE

Due Diligence

Monitoring

Energy Assessment

Due Diligence

Monitoring

Due Diligence (legal,

technical, insurance)

Term

Sheet

Syndication

Final

Payment

Final

Acceptance

Initial

Proposal

Credit

Approval

Wind Farm Project Financing Timeline

why is an o m agreement required
Why is an O&M agreement required?
  • To ensure that the wind farm assets continue to be cared for and operated in an appropriate and effective manner for as long as possible.
  • To drive an adequate return on investment on the wind farm assets through a contractual framework that incentivises the operating parties to ensure that the wind farm is always technically available to produce power, and converts the wind energy to electrical energy as efficiently as possible.
  • Optimisethe availability and efficiency of the asset so that valuable wind windows are not missed.
o m commercial options
O&M Commercial Options
  • All turbine suppliers will typically provide some form of service agreement to support the owner for a designated period following the capital investment.
  • These contracts are named differently by suppliers and will vary in cost, guarantees etc.:
    • WOM: Warranty, Operations and Maintenance
    • SAA: Service and Availability Agreement
    • AOM: Availability, Operations and Maintenance
    • MSA: Maintenance and Service Agreement
  • Different contract packages are available at different costs depending on the level of insulation the owner is looking for from the operational risks.
o m commercial options1
O&M Commercial Options
  • Three main formats of service agreement:
o m commercial options2
O&M Commercial Options
  • Three main formats of service agreement:
  • Management activities, monitoring and performance guarantees are excludedfrom a Service Only Contract.
  • It is expected that the owner will manage the day to day running of the wind farm, monitor its performance, schedule and coordinate routine and replacement maintenance and manage supply of spares and equipment to site.
  • All scheduled and unscheduled maintenance is at extra cost.
what are the turbine maintenance works
What are the turbine maintenance works?

TURBINES

Un Scheduled

Scheduled

  • Gear box & Generator
  • Blades & pitch system
  • Drives, shafts, gears & brakes
  • Computers and Circuit boards
  • Hoses and cables
  • Fixtures & fittings
  • Lubrication & coolants
  • Lifts & ladders
  • Doors & hatches
  • Safety equipment

The turbine service contractor will typically manage the following maintenance:

contents3
Contents

GL Garrad Hassan

1.

2.

Technical & Commercial O&M Options

3.

Service Agreement Considerations

4.

Summary

what are the strategic considerations

What is the lead time for parts?

TERM &

CONDITIONS

When will parts fail?

PRICE &

SCOPE

WARRANTIES &

DAMAGES

SPARES &

MONITORING

Is a reserve fund needed?

How much do parts cost?

What are the strategic considerations?
other strategic measures
Other Strategic Measures
  • Access of owners and technicians to central experts within the turbine suppliers organisation.
  • Technicians based permanently on site, or at nearby service centres.
  • Dedicated and focused service managers working under efficient organisational structures with proven procedures and work instructions.
  • Motivated, skilled and well equipped service technicians, trained in the best techniques to identify and address turbine faults in a safe and efficient manner
what are the operational warranties
What are the operational warranties?
  • DEFECTS:
  • Replaced
  • parts
  • - 12 months
  • AVAILABILITY:
  • Normally 95% to 97%
  • Often lower in first 3 months
  • Calculation: Total Time – Down time + Allowable events
  • Total Time
  • Allowable events: Scheduled maintenance, FM,
  • no wind, 3rd party stop
  • Damages payable if below warranted level
  • Sometimes bonuses above warranted level

Curtailment

Power Curve / Noise: WOM

warranty omissions exclusions
Warranty Omissions & Exclusions
  • The warranty provider may also define a number of events that are excluded from the warranty cover, thus pushing an element of risk back onto the owner.
    • Safety restrictions under site rules or otherwise.
    • Customer ordered stops not due to the fault of the contractor.
    • Agreed additional services.
    • Operational constraints from customer or 3rd party.
    • Works driven out of changes in Law.
  • In addition, delays or damage caused by those events defined as Employer’s riskcan include:
    • Unauthorised repairs to the turbines;
    • Weather conditions outside of defined operating or design parameters;
    • Yearly grid drop outs above a certain frequency; and
    • Failure of the balance of plant equipment etc.
service agreement costs structures
Service Agreement Costs & Structures
  • Approximately 20% to 25% of overall LCOE to be used to cover all fixed and variable operational costs associated with a typical project.
  • Contract pricing can be approached in two different ways, through fixed and variablepricing.
  • A fixed price contract will entail a specific lump sum which will include a certain defined scope of work.
  • A variable price component is based on a figure calculated retrospectively from the energy generated from an asset.
  • Often additional supplementary (sometimes called variable !!!) costs relating to management, BOP maintenance, land lease fees, utility bills, insurance fees. etc.
how is wind farm operating cost split

Total varies by

  • machine size,
  • age and supplier
  • €20k – 100k / WTG / Year
  • (Plus variable site costs)
  • Offshore is more
  • expensive again
  • Typically 20 -25%
  • of LCOE
How is wind farm operating cost split?

Scheduled &

unscheduled

maintenance services

Taxes, rents, power,

coms, leases,

interest, community funds

& insurance

Coordination,

monitoring &

reporting

wind farm operating costs
Wind Farm Operating Costs
  • Typical wind farm operation and maintenance costs for new projects in 2010:

Source: International Renewable Energy Agency

wind farm operating costs1
Wind Farm Operating Costs
  • Operation and maintenance costs for US projects, 1980 - 2008:

Source: International Renewable Energy Agency

wind farm operating costs2
Wind Farm Operating Costs
  • Operation and maintenance costs for US projects, years since commissioning:

Source: International Renewable Energy Agency

reliability major minor failure rates
Reliability, Major & Minor Failure Rates
  • If not FSC, consideration of major (and minor failure rates if SOC) needs to be considered over the life of the wind farm.

Source: ReliaWind Project

contents4
Contents

GL Garrad Hassan

1.

2.

Technical & Commercial O&M Options

3.

Service Agreement Considerations

4.

Summary

summary
Summary
  • O&M agreements ensure the wind is maintained and operated effectively, to drive an adequate return on investment and to optimise the availability and efficiency of the asset.
  • Different commercial options exist (ie. WOM, FSC, LSC, SOC), each requires careful consideration.
  • Key considerations include spare parts, resourcing, operational warranties (and there omissions and exclusions).
  • O&M pricing is significant, comprises multiple components (ie. fixed, variable, supplementary) and will vary by project and over time.
  • Reliability and failure rates of major (and minor) components is a critical consideration outside FSC.
slide29
Thank-you!Daniel Astbury – Senior Engineer, Business Development Manager – Thailanddaniel.astbury@gl-garradhassan.com