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Carlos Martin, Filippo Rossi, The wind industry has traditionally believed that value creation is concentrated in manu-
and Nuno Santos facturing and wind farm development: since once a wind farm is up and running, turbine
performance is generally above 93 to 94 percent availability,1 and cash flows will be stable
and predictable.
mance typically varies widely. In practice, The first step for managers is therefore
only one-quarter of wind parks operate to identify the specific local reasons for
above 98.5 percent availability, demon- unavailability. Once such a diagnostic is
strating that such a level of performance is performed across a wind park’s portfolio, it
achievable. More than 40 percent, how- is possible to identify ways to significantly
ever, are below 97 percent and some parks reduce it and increase power output accord-
as low as 92 percent, creating significant ingly. There are a number of different ways
potential for improvement. of optimizing output:
75 components (even less if critical compo- retical performance specified by the OEM .
nents take more than two to three weeks If the two curves do not match, there is
to arrive) already justifies having a specific potential for improvement. Lost production
stock of components that can be delivered in the range of 10 to 20 percent is common
and installed within days (Exhibit 2). in underperforming turbines.
150
100
50
0
0 25 50 75 100 125 150 175 200 225 250
Number of turbines
12 McKinsey on Electric Power and Natural Gas Winter 2008
park, but when total life cycle costs are con- Completely internal O&M , including
sidered, this share falls to about 60 percent— its own teams to conduct all maint-
with O&M accounting for 15 to 20 percent. enance activities.
More important, it is the only driver of costs
that can be addressed after construction of A hybrid model, in which the owner per-
the wind park. forms certain tasks while subcontracting
others to third parties.
Developing the most appropriate O&M
model is critical. Typically when a developer The best model could depend on the size
purchases wind turbines from a manufac- of the wind portfolio, the type of company
turer, the contract usually includes a full (for example, financial players seldom
O&M service agreement that guarantees the have the capabilities to conduct O&M
level of performance for a certain period, internally), and the appetite for risk. In any
typically three to five years. Such a contract case, it is critical to ensure a close collabo-
is important to guarantee the quality of ration between the wind park owner and
the turbines and their installation. After the service provider to ensure a proactive
the period of guarantee expires, the owner approach in addressing underperformance.
needs to decide between the following
different possible models: Some wind owners are opting for the
hybrid model. Depending on the impor-
Renewables
Renewal of the
2008existing full O&M out- tance of the different activities along its
sourcing agreement, ideally with a certain
Wind assets O&M value chain for maximizing turbines
guarantee
Exhibit 3 ofover
3 performance. output and their capabilities, these players
Glance: The impact of vane malfunction on turbine efficiency.
Exhibit title: Title tk
Exhibit 3
900
The impact of inefficiency
Power curve after
800 improvement measures
Deviation from the wind direction means power is were implemented
lost and turbine efficiency reduced. 700
Power generated, kilowatts (KW)
600
300
200
100
–100
0 5 10 15 20 25
Wind speed, meters/second
How to operate
Chinese and maintain
companies wind assets
can succeed abroad 13
choose which activity to insource. In-house cal point of view, the levers themselves are
activities could include O&M intelligence reasonably straightforward. Creating the
(data analysis, failure prioritization, and conditions for a systematic approach to
root cause analysis) and maintenance plan- identifying waste and eliminating it is more
ning (when and in which components to complex, and involves the following:
conduct preventive maintenance). Neither
of these activities requires huge resources Establishing the correct management infor-
but both are critical to maximize output. mation system (MIS). This system requires
ensuring that all data generated by the
Other activities, such as spare-parts man- SCADA system3 is continuously registered,
agement or the dispatching of field crews, that any work conducted in the wind park is
are partially outsourced—but under strict codified and stored in central databases, and
specifications from the owner. Finally, labor- that reports are automatically generated to
intensive field activities, which represent identify underperformance and root causes
a significant level of complexity in people of failure. This process is best conducted
management, are subcontracted. through a remote control center that central-
izes information from and allows real-time
monitoring of turbine alarms so that issues
During the initial phase, it is useful to create a lean team that can then be solved either remotely or by
sending crews onto the field.
is in charge of rolling out the continuous-improvement process
across all the wind parks
Developing a culture focused on O&M
improvement. Companies must create
This is a challenging model because it clearly defined roles so that all elements
requires solid execution, since there is no of the organization work in a coordinated
guarantee on performance, and it is more fashion to identify and resolve issues.
difficult to access an OEM’s resources. But During the initial phase, it is useful to cre-
when the total costs of this new model are ate a lean team that is in charge of rolling
compared against renewal proposals for out the continuous-improvement process
full O&M contracts, they could be 20 to across all the wind parks. This team should
40 percent cheaper. include a number of change agents put in
charge of training wind park managers in
The challenge: lean techniques and in helping them conduct
Continuous improvement an initial performance review. Together with
Capturing the full financial potential of site managers, technical staff, and OEM
improved O&M along the three dimensions personnel, they are also in charge of defining
of availability, efficiency, and costs requires improvement levers. Focus on continuous
applying principles similar to those in lean improvement should go beyond operations
manufacturing. It is especially important and maintenance and should include all areas
to create the appropriate operating and IT of the organization. For example, purchas-
tools that allow continuous performance ing should incorporate input from failure
3 Supervisory control and data tracking, as well as promote a mind-set of analysis to improve turbine specifications
acquisition system. continuous improvement. From a techni- and OEM selection. Additionally, it is
14 McKinsey on Electric Power and Natural Gas Winter 2008
important to ensure the right key perfor- Significant opportunities exist to optimize
mance indicators (KPI) are measured and wind park operations and maintenance, pro-
tracked and that objectives and incentives viding a significant boost to internal rates
reflect them properly. of return. Availability and efficiency can be
improved through a systematic approach
Ensuring appropriate mind-sets and behavior that requires a rigorous analysis of perfor-
is the key success factor in any continuous- mance and the elimination of root causes of
improvement program of this kind. This failures. Although not particularly compli-
objective is likely to be a challenge in a geo- cated or capital intensive, the challenges of
graphically dispersed organization. Factors setting up the right systems and motivat-
that contribute to creating the right attitude ing the organization to sustain continuous-
include ensuring that a clear message is sent improvement in O&M should not be
from top management about the importance underestimated. Establishing a continuous-
of O&M , investing in training staff, and improvement culture requires a very
celebrating and rewarding improvement. proactive attitude and cooperation with key
stakeholders like turbine manufacturers
and O&M suppliers. It is, however, an
opportunity to maximize revenue, reduce
costs, and gain advantage as the industry
becomes increasingly competitive.
The authors would like to thank Paul Kolter, Johannes Lüneborg, and Luis Troyano for their contributions to
this article.
Carlos Martin is an associate principal in McKinsey’s Madrid office, Filippo Rossi is a principal in the
Rome office, and Nuno Santos is a director in the Lisbon office. Copyright © 2008 McKinsey & Company.
All rights reserved.