2016 Service Market Survey

8/17/2019 2016 Service Market Survey

1/21

11th SKF Wind Farm Management Conference

2016 Service

Market Survey

2 May 2016


2/21

Annual global growth in O&M market value is expected to far exceed thegrowth of new wind power installations. MAKE’s forecast of 9% y-o-y growth1 issupported by the Survey

ISPs are rated most likely to gain market share for scheduled as well as forunplanned and corrective O&M in Europe to 2020. MAKE forecast ISPs to gain10%-point market share to 2024

Wind turbine OEMs are, however, expected to maintain competitive advantage

in the lower frequency but higher value capital repairs and replacementsegment

A majority of respondents expect average O&M spend per MW/year to reducein the next two years consistently with the 2015 Survey. Close to 50% expect adrop between 0-10%

O&M revenue as a proportion of total revenue is expected to continue to

increase from 15% in 2014 for European turbine OEMs, however, this year’sSurvey results show lowered expectations for growth

Executive summary

2016 Service Market Survey

1 MAKE Global O&M Sector Report, 2015



2 May 2016


3/21

Executive summary (continued)


Service contract length for new turbines in Europe has been increasing asclearly indicated by more than 60% seeing 5+years average length comparedto 20% in last years survey

Track record, cost and availability & performance guarantees take pole positionas the key O&M service partner selection criteria by far in thisyear’s Survey, asthey did last year

Turbine upgrades are seen as the premier choice for Europe’s ageing turbinefleet followed by life extension programs. Repowering remain a possibility onbest sites or when subsidized

Survey results point to gearboxes and electronics as greatest causes of turbinedowntime. Bearings this year replace blades on 3rd place.

Improved practices along the value chain, technical innovation as well as

consolidation are seen as the main levers for wind power LCOE reductionclosely followed by Big Data



2 May 2016


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Executive summary (continued)


Condition monitoring, application of Big Data and advanced diagnostics areseen as the key enabler for reducing unplanned maintenance in favour of

moving to lower cost preventive/predictive maintenance to reduce OPEX

Survey results point to sharing of maintenance strategies, best practices as

well as operational data as key knowledge sharing areas with potential to

enhance fleet wide asset performance

On the back of acquisitions, such as Gamesa-B9 and Vestas-Availon,

respondents expect the European O&M space to continue consolidation,

mainly driven by wind turbine OEMs



2 May 2016


5/21

Methodology Sample demographics

The 2016 Service Market Survey hasbeen conducted in April 2016

The Survey sample consist of O&Mprofessionals and experts attending the11th SKF Wind Farm ManagementConference

Data has been collected anonymouslyand electronically via individual touchpads provided to attendants

Only one unique opportunity torespond is provided to each attendant

The first Survey was carried out in2015. Where possible, 2015 resultshave been included for comparison

Sample size: 135 respondents

2016 Service Market Survey11th SKF Wind Farm Management Conference


2 May 2016

20%

19%

5%

43%

7%6% Asset owner/operator

ISP

Turbine OEM

Supplier

Advisor

Other

5%

5%

12%

5%

4%

19%

21%

7% 8%7%

7%

Others

USA

Spain

Sweden

China

Germany

Denmark

Belgium

Poland

UK

France


6/21

Q1. The global market for new wind power installations is expected to

contract in 2016 from policy induced peak demand in 2015, and to grow2.5% y-o-y between 2016-2019. How do you expect the O&M market to

develop in total value during this period? (%)

1. 0 – 5 %

2. 5 – 10 %

3. 10 – 15 %

4. More than 15 %

5. Don’t know

Annual global growth in O&M market value is expected to far exceed the growth of new windpower installations. MAKE’s forecast of 9% y -o-y growth1 is supported by the Survey



2 May 2016

18 (46)

24 (30)

12 (4)

40 (16)

7 (3)

Note: Numbers in ( ) are results from the 2015 Service Market Survey for comparison


7/21

Q2. Which type of service provider do you think is l ikely to gain the most

market share for scheduled O&M to 2020? (%)

1. Wind turbine OEM

2. ISP – Independent Service Provider

3. Sub-system or components suppliers

4. In house, self-performing service5. Hybrid solution

6. Don’t know

ISPs are rated most likely to gain market share for scheduled as well as for unplanned andcorrective O&M in Europe to 2020. MAKE forecast ISPs to gain 10%-point market share to 2024



2 May 2016

3 (4)

28 (NA)14 (31)

3 (7)

33 (35)

20 (24)

Note: Numbers in ( ) are results from the 2015 Service Market Survey for comparison. The 2015 Survey did not distinguish between scheduled,unplanned and corrective O&M and capital repairs and replacements, hence last years results are the same for the three.


8/21


market share for unplanned and corrective O&M to 2020? (%)

1. Wind turbine OEM




6. Don’t know

ISPs are rated most likely to gain market share for scheduled as well as for unplanned andcorrective O&M to 2020. MAKE forecast ISPs to gain 10%-point market share to 2014



2 May 2016

33 (35)

22 (24)

11 (7)

15 (31)

3 (4)

16 (NA)



9/21


market share for capital repairs and replacements to 2020? (%)

1. Wind turbine OEM




6. Don’t know

Wind turbine OEMs are, however, expected to maintain competitive advantage in the lowerfrequency but higher value capital repairs and replacement segment



2 May 2016

29 (35)

34 (24)

12 (NA)

12 (7)

1 (4)

12 (31)



10/21

Q5. Average wind turbine O&M spend is estimated in 2015 to be around

28,000 EUR/MW/year in Europe What do you expect the average O&Mspend per MW/year to be in 2017? (%)

1. Drop more than 10 %

2. Drop 5 – 10 %

3. Drop 0 – 5 %

4. Increase 0 – 5 %

5. Increase 5 – 10 %

6. Increase more than 10 %

7. Don’t know


A majority of respondents expect average O&M spend per MW/year to reduce in the next two years consistently with the 2015 Survey. Close to 50% expect a drop between 0-10%



2 May 2016

5 (6)

21 (19)

28 (33)

12 (11)

21 (21)

6 (4)

6 (6)


11/21

Q6. Wind turbine OEMs are looking to the turbine O&M market as a

source of recurr ing revenue with stable margins. On average in 2014, 15%of European turbine vendors total revenues were generated from their

O&M service units. What percentage of total income would you expect

this revenue stream to make up by 2025? (%)

1. Less than 15 %

2. Between 15 and 30 %

3. Between 30 and 50 %

4. Greater than 50 %

5. Don’t know

O&M revenue as a proportion of total revenue is expected to continue to increase from the 15% in 2014 forEuropean turbine OEMs, however, this year’s Survey results lower expectations for growth



2 May 2016

12 (25)

63 (46)

3 (12)

4 (4)

17 (13)



12/21

Q7. In Europe turbine OEMs are increasingly offering new turbines wi th

full service packages including main components, materials andavailabil ity guarantees and with increasing average length. What is the

current average length of service packages that major western turbine

manufacturers are offering? (%)

1. < 3 years2. 3 – 5 years

3. 5 – 10 years

4. 10 – 15 years

5. > 15 years

6. Don’t know

Service contract length for new turbines in Europe have been increasing as clearly indicated bymore than 60% seeing 5+years average length compared to 20% in last year’s survey



2 May 2016

4

1

25

35

28

7

Note: Results are not fully comparable with 2015 due to changes in response categories


13/21

Q8. What is the most important criterion in selecting O&M service

suppl iers for wind farms? (%)

1. Cost

2. Reputation & track record

3. Capital parts repair/replacement capability

4. Availability and performance guarantees/incentives

5. Advanced diagnostics6. Operational and service data availability

7. Spare parts availability and cost

8. Turbine or software upgrades

9. Don’t know

Track record, cost and availability & performance guarantees take pole position as the key O&Mservice partner selection criteria by far in this years Survey, as they did last year



2 May 2016

2

1

6

2

4

20

8

31

25



14/21

Q9. Which O&M option is most often being considered for Europe’s

ageing turbine fleet? (%)

1. Turbine performance upgrades

2. Turbine reliability upgrades

3. Life extension programs

4. Run to failure operations

5. Repowering

6. Don’t know

Turbine upgrades are seen as the premier choice for Europe’s ageing turbine fleet followed by lifeextension programs. Repowering remain a possibility on best sites or when subsidized



2 May 2016

11

15

10

26

20

18



15/21

Q10. Which three elements in a wind turbine are causing most total

downtime? (%)

1. Blades

2. Gearbox

3. Hydraulics

4. Electronics

5. Generator

6. Bearings

7. Balance of Plant (transformers, cables etc.)

8. Other

Survey results point to gearboxes and electronics as greatest causes of turbine downtime.Bearings this year replace blades on 3rd place.



2 May 2016

23 (22)

17 (14)

4 (10)

5 (2)

10 (7)

4 (2)

25 (29)

12 (15)



16/21

Q11. What do you consider the top three drivers for lowering LCOE on

wind farms? (%)

1. Consolidation, industrialization and economies of scale

2. Increased competition

3. Improved processes, cooperation and scope of supply (e.g. systems supply)

4. Technical innovation

5. OPEX/MWh reduction

6. Big data and advanced analytics

7. Other parameters

8. Don’t know

Improved practices along the value chain, technical innovation as well as consolidation are seenas the main levers for wind power LCOE reduction closely followed by Big Data



2 May 2016

2

3

14

8

21

24

11

16



17/21

Q12. What do you consider the top three levers for lowering OPEX/MWh

on wind farms? (%)

1. Cost and performance improvement through OEM FSAs

2. Cost and performance improvement from unbundling of O&M

3. Reduce cost of planned maintenance

4. Reduce cost of unplanned maintenance

5. Reduce cost of spare parts

6. Reduce cost of capital repairs

7. Performance/Reliability upgrades

8. Condition monitoring

9. Big data and advanced diagnostics

10. Other parameters

Condition monitoring, application of Big Data and advanced diagnostics are seen as the keyenabler for reducing unplanned maintenance in favour of moving to lower costpreventive/predictive maintenance to reduce OPEX


2016 Service Market Survey2 May 2016

2

11

19

14

7

6

19

9

8

5



18/21

Q13. No universal O&M service model has been successfully applied to

different regions by wind farm operators, but there is knowledge that canbe transferred. What is the most important area worth learning from? (%)

1. Spare parts management

2. O&M cost control management

3. O&M contracting

4. Aged turbine fleet management

5. Operational data sharing with OEMs

6. Maintenance strategy & best practice

7. Other

Survey results point to sharing of maintenance strategies, best practices as well as operationaldata as key knowledge sharing areas with potential to enhance fleet wide asset performance



1

43

29

10

4

6

7



19/21

Q14. Do you expect the European O&M space to consolidate? (%)

1. No

2. Yes, mainly through OEMs acquiring ISPs

3. Yes, mainly through asset owners acquiring ISPs

4. Yes, mainly through ISPs’ driven M&A

5. Yes, mainly from exits

6. Other

7. Don’t know

On the back of acquisitions such as Gamesa-B9 and Vestas-Availon respondents expect theEuropean O&M space to continue consolidation, mainly driven by wind turbine OEMs



8

2

5

19

19

39

7



20/21

MAKE’s Global Wind Turbine O&M Report



Looking for more information on the service market?

MAKE’s 2015 Global Wind Turbine Operations and

Maintenance Report provides an in-depth analysis of globalwind power services market and strategies. Key topics

covered include the global O&M market opportunity,

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regional installed base segmentation. Don’t miss:

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Get your copy or download a free overview at:

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Order before 1 June 2016 and get the 2015

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Contact

consultmake.com

© 2016 MAKE Consulting A/S. All rights reserved. Reproduction or distribution of this report in any form without prior written permission is strictly forbidden.

Violation of the above restrictions will be subjects to legal action under the Danish Arbitration Act. The information herein is taken from sources considered

reliable, but its accuracy and completeness are not warranted, nor are the opinions, analyses and forecasts on which they are based. MAKE Consulting A/S

cannot be held liable for any errors in this report, neither can MAKE Consulting A/S be liable for any financial loss or damage caused by the use of theinformation presented in this report.

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2 May 2016

Documents

2016 Service Market Survey