Warren Buffett owned MidAmerican Energy is upgrading wind turbines in Iowa early in their lifetimes in order to take advantage of the newest innovations in gear boxes and blades. Since only small parts of the already developed wind farms need be upgraded – these moves will increase the profitability of the farms. Wind turbines are evolving at a fast enough pace that waiting for standard end of life (30 years) means leaving money on the table.
I estimate an additional $51M/year in revenue from MidAmerican’s repowering.
John Hensley, deputy director for industry data and analysis at the American Wind Energy Association, says 700MW of wind power has been repowered in the USA. MidAmerican stated that they’re upgrading 1,000MW of their 4,000MW of wind (in Iowa). Their project will take through 2020 to complete.
As the article above notes – Wind projects started before 2017 qualified for the full production tax credit of 2.4 cents per kilowatt hour. The credit falls to 80 percent of that for projects started in 2017; 60 percent for those started in 2018; and 40 percent for those started in 2019. Most of the life of these system upgrades will be long after the wind production credit diminishes.
After refurbishing some of the turbines at the Diablo Winds project in the Altamont Pass in California, researchers found that the fatality rates fell by 54 percent for raptors and 66 percent for all birds.
MidAmerican estimates that repowering the farms would increase output from the turbines by 19-28%. Annually, wind farms lower in output by about 1.7% per year. The lifetime of a wind farm has historically been around 30 years.
With capacity factors around 40% on the newest projects (33% on older projects) – combined with 1,000MW of upgraded hardware – there will be an additional 613 million kWh/year coming from these turbines. The average American home uses about 10,000kWh/year for comparison. If the average price of electricity in Iowa (before taxes) is around .0835¢/kWh, then that’s $51M a year in new revenue. If this 1GW of wind cost $1B to install – that’s an extra 5% return on investment per year after accounting for the cost of upgrades (roughly of course).
This expanding evolution – adding future revenue to projects via strategic plant repowering in an age of fast maturing hardware – changes operations and maintenance in renewable technology giving those building today’s utility-scale power plants an improved tool to lower up front pricing. These towers are being repowered in their 14th to 11th years (plus or minus a few depending on order). There is a spreadsheet inside of MidAmerican which did some calculus to determine when money earning and repowering cost curves intersected – and that intersection was when the new investment was acted on. Thirty years with a constant declining power output will now change to developers signing contracts with large manufacturers at time of original construction to upgrade hardware in 8 to 10 years. These contracts will depend on developers and finance houses trusting that these manufacturers can continue the technological march forward in an aggressive manner.
Repowering is an old concept – but it’s getting more headlines today in renewables because large number of systems are hitting that age and the burning pace of technological innovation.
RAF People’s Choice‘ Image of the Year Contest – 3rd Place, Blowin’ in the Wind – Third place, SAC Nicholas Egan, RAF Halton – Two RAF Mk6 Chinooks transit over North Sea wind farms during a training exercise to prepare pilots and aircrew for contingency operations. The exercise included low-level flight training, troop extractions, evasive maneuvers and tactical formation flying.
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