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28.06.2022 Have you already written off your old turbine?

Many old turbines are currently still connected to the grid – and not just because of a lack of building permits for repowering. Thanks to persistently high electricity market prices and attractive PPA conditions, operators of wind farms are increasingly considering lifetime extension and service contracts with terms and conditions that were previously unthinkable.

One example is Steffen Schwagerus, the Managing Director of several operating companies for community wind farms. He is responsible for the operation of three wind farms equipped with 1.5 and 2 MW turbines that have already reached their 20th year of operation or will soon do so. The expert opinions on lifetime extension showed a good starting position, and this is the most important foundation for the negotiations between Steffen Schwagerus and Lars Schwitters, Head of Customer Management at Deutsche Windtechnik, to design a suitable service contract.

Contract negotiations covered all scenarios
Quite a bit of time went into drafting the contract. “We went through a number of scenarios and weighed the opportunities and risks,” said Lars Schwitters. The expert opinion on lifetime extension predicted that some components, such as rotor blade bolts, would have a shorter service life than the contract term, so a separate contractual agreement needed to be reached on these. The feed-in remuneration, which is no longer a fixed amount defined in the EEG (German Renewable Energy Sources Act) but instead is based on the market price, requires new terms. For example, the amount of remuneration received affects the calculation of compensation in connection with availabilities. In addition, it was necessary to determine what will happen if the remuneration falls below a certain threshold. 

Striking the right balance between flexibility and risk tolerance
In the event of repowering, the contract also contains provisions that allow early termination. Agreements have been made, for example, that include a compensation payment in the amount of the fair value in the case of a major component replacement if a special right of termination is exercised. For Steffen Schwagerus, this means a high degree of flexibility. For Deutsche Windtechnik, it means risk management that makes full maintenance contracts feasible up to the 30th year of operation. Lifetime extension under full maintenance over the next ten years finally emerged as an economically viable solution for both partners.

Price development will determine the direction
Deutsche Windtechnik has already been providing full maintenance for the three wind farms since 2017. “We know the wind farms and the installed components well, so the ten years of lifetime extension are a good planning horizon for us,” said Lars Schwitters. “The exciting question is still: how will electricity trading prices develop in the coming years? Will they remain at a level in the long term at which continued operation remains an easily calculable and economical business? We believe that the current very high prices can be seen as outliers. In the medium to long term, a more moderate price level will settle in, but it will still be high enough to make lifetime extension under full maintenance conditions an economic success.“

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