Five Key Factors That Affect Wind Farm Bankability

Five Key Factors That Affect Wind Farm Bankability The levelized cost of energy (LCOE) of wind power is rapidly gaining equilibrium with other energy sources, making it one of the most attractive options for utilities and developers looking to increase the penetration of renewables in their portfolio. However, the LCOE of wind can vary widely from project to project, and developers need to keep a sharp eye on five main factors that influence project profitability: risk, deliverability, efficiency, reliability/maintainability, and safety.


Of all the issues that keep wind farm developers up at night, risk has to be the biggest. From site selection to project development to operations, producing energy from wind is not as easy as it might appear to the general public.

Gunnar Ohras, senior financial advisor at ABB, stresses the importance of controlling risk. "You can't get financing for a potential wind project unless you can prove that the project is bankable. Of course, your financial models must show that the project will be profitable, but obtaining financing is also about showing you have mitigated the risks."

Thankfully, there are ways to reduce the risks inherent in wind development. Whether offshore or onshore, site studies can help developers create profitability models and select the most appropriate location for new wind development. However, the developers must also take into account grid connectivity when considering the suitability of a location. A grid integration analysis can help the developer understand issues such as whether system upgrades will be necessary and what challenges might occur downstream.

Once a project begins, environmental concerns can still delay a project, but advancements in underground cabling can reduce this risk by avoiding overhead transmission lines and minimizing the impact to the region.

Furthermore, every wind farm has its challenges, and additional analysis may be necessary to preserve profitability after commissioning. Sometimes, project owners and developers are more concerned about keeping costs down than they are about ensuring the new wind farm won't cause issues on the grid. A transmission and distribution root-cause analysis can identify trouble spots, such as increased harmonics that affect power quality and stability, and recommend solutions that weren't considered during the initial design.


Of course, once a site is selected, funding is approved and environmental permits are in place, the race is on to develop the wind farm within the scheduled timeframes. For wind farms, this is especially important as developers often rely on pre-negotiated power purchase agreements (PPAs) to secure funding for the project. These agreements specify milestones that must be met in order for the PPA to remain effective.

"The PPA is critical because it sets the date on which the wind farm is to first deliver power to the grid," says Melvin Brown, ABB's manager of substation business development for renewables. "That date is set in stone. If it changes, the entire development suffers because the wind farm owner does not know when, or even if, he will be given a new date. Worse still, if the developer misses the PPA dates, the owner says "goodbye' to [relevant grants and tax incentives]."

Selecting the right supplier is key to ensuring the project is commissioned as scheduled, and global equipment suppliers offer significant advantages. Some power equipment, such as high-voltage transformers, comes with relatively long lead times. Factoring in design, manufacturing and delivery, it can be as long as a year. That time can be cut drastically by working with a supplier that has experience in all aspects of wind farm development. Lead times can be cut even further, often by months, when working with a supplier that can manufacture the equipment regionally.

Wind farm development also benefits from using suppliers whose people live and work in the region. Mainstream Renewable Power Ltd. develops, finances, builds and operates wind farms all over the world. According to Joe Corbett, Mainstream's head of technology, "Regulations governing energy generation vary widely from region to region. A developer with experience in the region is more likely to understand the regulations – those already in place, as well as those coming down the pipe."


According to the U.S. Energy Information Administration, about 7% of energy generated is lost in transmission and distribution. While that may not seem like a lot, it's important to understand the benefits of reducing that loss. According to the American Wind Energy Association, a single 1.67 MW turbine can produce over 5,000 MWh of electricity per year and reduce CO2 emissions by over 3,000 tons.

The greatest losses often come when energy has to be transmitted over long distances. By its very nature, utility-scale wind energy is a long-distance energy source. Offshore development holds great promise for utility-scale projects because of the strength and the reliability of offshore winds. Onshore wind development is often more attractive because of the lower LCOE, but it can entail wrangling with individual groups that object to the development due to noise, a perceived lack of aesthetics or a potential environmental impact.

Technology holds the key to increasing efficiency and addressing environmental concerns. High-voltage direct-current (HVDC) cables are a primary solution for lowering energy losses over long distances. In addition, companies are investing in other technologies to increase the efficiency of wind farms. For example, ABB worked with Areva, a manufacturer of wind turbines for offshore installations, to develop a series of liquid-cooled insulated gate commutated thyristor (IGCT) converters designed to operate in high-stress conditions. The use of medium-voltage technology helps result in lower currents and, therefore, in less space, less cabling and reduced system losses.


Quality of energy is perhaps one of the biggest concerns expressed by utilities looking at increasing the penetration of wind power on the grid. The variable nature of wind energy leads to a highly unstable output that can have a negative impact on grid frequency and voltage, tripping protection relays and leading to blackouts. The benefits of increased renewable penetration can easily be offset by increased reliability concerns unless stability issues are properly addressed.

"As turbines and wind farms get larger and generating capacity increases, grid operators have been forced to establish more stringent grid-connection rules, commonly called "grid codes,' to ensure fluctuations don't disrupt the main grid," explains Michelle Meyer, ABB's senior product manager of Power Conversion. "Wind farm developers need to find a way to compensate for variability."

Variability can be addressed with a series of technology solutions, such as energy storage technologies, as well as backup sources of power, such as the diesel generators used in smaller-scale developments like a microgrid. However, the use of diesel power defeats the goal of the utility or institution looking to increase the penetration of renewables on the grid and decrease CO2 output.

Reliability goes hand in hand with maintainability. As with any power generation, equipment that stands the test of time is key to ensuring profitability. If equipment lasts longer, the wind farm will last longer. Just as importantly, if you design a wind farm using equipment that requires less maintenance, operating expenses can be better controlled.

The variable nature of wind energy makes it especially hard on equipment, but maintenance takes on a uniquely troubling aspect for offshore wind installations. The same technologies that have been used for decades onshore might not apply offshore. The conditions are harsher, the demands are greater, and the costs could be higher if something were to go wrong.

There are three best practices to decrease the maintenance required for wind farm equipment:

1) Failure modes and effects analysis (FMEA) – FMEA starts with the product and technical specifications and looks for potential failures. After assessing the risk of occurrence, FMEA identifies corrective actions that avoid or mitigate the failures.

2) Reliability prediction – Reliability prediction uses commonly accepted standards such as MIL-HDBK-217FN2 and Telcordia to estimate the failure rate of the system or subassembly. This provides feedback to the designer on where the attention should be focused.

3) Root-cause analysis – Any field failures are examined to determine the cause of the failure and provide corrective measures to improve system reliability. Such analysis may go as far as recreating the failure in the laboratory to fully understand the true cause of the failure.


The energy industry is an inherently dangerous business, and wind energy is no exception. Complicating matters, the entire industry is experiencing a shortage of skilled workers as older workers retire and fewer young people choose technical degrees. Many energy companies are turning to technicians with associate-level degrees just to keep up with maintenance.

Companies have to be very careful when working with wind energy, though. There are not only dangers of working with electricity, but also some unusual working conditions such as performing the job on top of a nacelle that is hundreds of feet off the ground or in the middle of the ocean.

One way to promote safety is to reduce the maintenance needed. This can be accomplished by utilizing self-healing solutions and equipment with fewer components. When maintenance is required, however, it's important to minimize the amount of time and number of people it takes to perform it. Therefore, there is less potential for accidents – it's as simple as that.

The future is now

Historically, electric grids have been powered solely by fossil-fuel-based sources, which meant the cost of electricity rose when the cost of the fossil fuel commodity increased. Wind and other renewables offer an alternative to the volatility of commodity pricing.

The future looks bright for wind, but the energy industry is exceptionally fast-paced. New political dynamics, new market opportunities and new technologies can change the opportunity landscape almost overnight.

For wind developers, weathering the ups and downs of the industry requires a sustained focus on those factors that influence profitability. Only then can wind remain on par with other sources and earn its rightful place in meeting the growing needs of an energy-hungry world.

Dennis McKinley is head of wind power at ABB North America. This article was adapted from an ABB white paper.


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