The U.S. wind-energy industry survived the latest tax overhaul with its production tax credit in place at least until the end of 2019, and construction continues apace on new turbine capacity. However, wind-facility owners and are taking a second look at operations a decade or more old to see what gains could be made by “repowering” those turbines up to present-day performance standards.
A continuing bull market in new wind-turbine construction can be seen in the American Wind Energy Association’s Third Quarter 2017 Market Report, which documents more than 29,000 megawatts (MW) of new capacity either under construction or in advanced development at the end of 2017’s third quarter. This represents a 27 percent year-over-year increase, according to the report.
Though it represents a fraction of this activity, repowering of existing capacity is a growing niche. MidAmerican Energy Co., the Iowa-based utility owned by Warren Buffett’s Berkshire Hathaway, announced in October a plan to repower 1,000 MW of its 4,000 MW of wind-generation capacity. MidAmerican’s statement comes on the heels of an announcement by merchant power supplier NextEra Energy that it was repowering two of its wind farms in Texas, totaling 327 MW of capacity.
Operators can see a big bump in generation following a repowering project. GE, a leader in providing such services, estimates production can jump up to 25 percent, and MidAmerican estimated its repowered turbines will produce between 19 percent and 28 percent more electricity. The scope of these efforts can vary from replacing turbines’ blades and nacelles (the housing at the turbine’s hub that incorporates the generator, gearbox and drivetrain) to a full replacement of the tower.
In addition to the resulting revenue boost from sales, repowering can offer significant tax advantages for owners. The 2015 extension of the production tax credit (PTC) offered to wind developers also included owners of existing wind farms that had aged out of the PTC’s 10-year limit. Investing at least 80 percent of a facility’s current value into repowering can requalify it for PTC eligibility.
“I would say it’s primarily driven by the PTC,” said Eric Lantz, a project leader with the National Renewable Energy Laboratory, who has researched the economics of wind-turbine repowering. “To date, in all the repowering in the last 12 to 18 months, it’s a significant driver.”
Repowering makes more sense on its own, minus any tax advantages, as turbines reach the end of their second decade of operation. A 2014 study by the United Kingdom’s Energy and Physical Sciences Research Council found that, on average, a wind turbine’s output declines by 1.6 percent every year of operation. At the Golden Hills site in California’s Altamont Pass, 48 new 2.3-MW turbines will meet or exceed the 86 MW produced by the 775 turbines they are replacing. These are some of the nation’s oldest turbines, dating back 30 years or more and with capacities between 100 kilowatts (kW) and 370 kW.
“The technology is really out of date, and there’s an opportunity to really improve the output,” Lentz said.
He helped lead a research effort several years ago that sought to identify when the financial return, minus tax incentives, makes repowering a more attractive investment than a new greenfield wind farm. That investigation found, at 20–25 years, the likely improvement in generation capacity paired with rising maintenance costs would make repowering a better financial move than, say, expanding into adjacent land with new turbine installations.
The PTC currently is being stepped down on its way toward a total phase-out. Projects begun before 2017 received the full 2.4 cents per kilowatt-hour (kWh), and those begun during 2017 received 80 percent of that amount. Projects begun in 2018 and 2019 will see the credit drop to 60 percent and 40 percent, respectively, before the incentive ends at the conclusion of 2019. This shifting timeline, plus other project particulars, means a decision to repower requires close analysis even with the PTC.
“Each project looks at the repowering question individually,” Lentz said. “In some cases, they might be replacing the nacelle but keeping the existing tower.”
In some markets, the added performance of today’s turbines can make decisions easier.
“If you look at projects 12 to 15 years old, the equipment you can buy today is significantly better,” he said.
While there could be a drop-off in repowering investment following the end of the PTC, it likely will pick up again by the mid-2020s, as those projects reach retirement age. Lentz, among others, sees a growing need for repowering expertise as wind becomes a more permanent part of the nation’s generating resources.
“Over the long-term, you would expect the repowering market to become as significant as new-build,” he said. “These facilities will need to be replaced over time. Eventually, repowering, servicing and operations and maintenance will become significant contributors to the industry.”