65GW of European onshore wind turbines need upgrades or replacements by 2028

While upgrading components to extend the life of a turbine - the LTE option - is much cheaper than alternative options available, not all asset owners will choose to implement a LTE solution.

Commenting on the report, 'European Onshore Wind Lifetime Extension Outlook', Daniel Liu, Wood Mackenzie Principal Analyst, said: "The decision to extend the operational lifetime of turbine assets depends on asset owner strategies, project economics and site and turbine operating conditions.

"Distributed sites - those with three or less turbines - are economically less suitable for operating beyond design lifetime with considerable refurbishment and/or upgrade work. Larger sites need to balance regulatory issues, financial risks, technical challenges and operational challenges to make lifetime extensions economically viable.

What options do asset owners have?

According to the Wood Mackenzie report, complete turbine repowering is one of the solutions proposed to maintain the existing capacity of the European onshore wind turbine fleet. This involves the wholesale replacement of old turbines with new technology.

However, the costs of new technology, permitting issues, regulatory hurdles and asset owner resources make repowering a daunting proposition for many operators. LTE is an alternative to decommissioning or complete repowering.

"We have identified 42GW of turbines reaching end-of-life by 2028 that have a commercially available LTE solution” added Mr. Liu.

Regulation key to preserving existing wind capacity

The leading onshore wind markets in Europe - Germany, Spain, UK and France – are unlikely to meet 2020 renewable energy targets. New regulation is needed to prevent wholesale removal of wind generation capacity.

Providing regulatory support for LTE projects is one way to preserve existing capacity.

"Currently, minimal regulatory support is offered for repowered and LTE projects, forcing asset owners to operate in a merchant power market. However, the introduction of the post-2020 Renewable Energy Directive should provide clarity for asset owners to decide on whether to decommission, repower, or extend the lifetime of their onshore wind assets.

Key challenges to implementing LTE solutions

The success of the LTE strategy requires balancing and mitigating a number of risks.

Just under half of LTE-suitable turbines are situated on small or distributed project sites. "Project and supply chain economics mean that small and distributed sites are less ideal candidates for extensive turbine refurbishment and component upgrades as part of the LTE solution. Asset owners can potentially operate these turbines beyond the original design lifetime with minimal upgrades if sufficient operating reserves remain.

"LTE for onshore wind is still in its infancy. Upgrade packages offered for turbine classes are not a one-size-fits-all solution either. It's too early to assess the operational longevity of turbines with an implemented LTE solution. More sophisticated and complex refurbishment, upgrade and operations packages will increase the post end-of-life operational lifetime but need to be balanced against costs.

"Depending on the level of retrofits and upgrades performed on a turbine, LTE solutions can be costly. In addition, older turbines require higher maintenance spending as the risk of capital component failures rise. Insurers will price the risk of running older turbines past design-lifetimes, which could see premiums rise. These costs must be weighed up against the revenues in a merchant power market. Energy trading or corporate PPAs can be implemented to provide cash flow security.

"Capital component failures remain the biggest operational risk and can be costly enough to eliminate the economic impact of running lifetime extended assets. Supply of spare parts may also be a concern for less popular technologies or from defunct OEMs," added Mr. Liu.