About Francesco Miceli

Hello! My name is Francesco and I'm a civil engineer specialized in EPC (that is, "turnkey") wind farms projects. I'm currently based in Hamburg, Germany and I'm developing several interesting project all around the world - southern Europe, LATAM and various other countries. If you want to contact me please don't leave a comment in the blog (I don't check them very often) - you can use the contact form. You can write me in English, Spanish and Italian. To find a (somewhat concise) description of my non-wind business activities you can visit my webpage - www.francescomiceli.com If you want to know more about my work, here you can download my CV - www.windfarmbop.com/CV_Francesco_Miceli.pdf Hope you like the blog! Francesco

The new playing filed: multi-brand wind turbines service

Yesterday I had the pleasure to meet my friend J. here in Hamburg.

J. works for V., a very big Danish wind turbine manufacture. Specifically he works in what looks like the new battle field for our industry – multi brand wind turbine operation and maintenance (O&M).

Basically it means that V. is offering not only Service for its own wind turbine models – it’s providing it also for competitors models, like Siemens/Gamesa, GE and the like.

There are several good reasons to do that - for instance:

  • Operational synergies. If you have wind farms already under maintenance in a specific area adding MW under maintenance will have a lower marginal cost.
  • Knowledge of the business already accumulated. iI you have thousands of WTGs under maintenance you should have a very clear idea of what could go wrong next during the life of the turbine. This  also include more in house knowledge to propose to the customer solutions like “fix it, don’t buy a new one”.
  • Scale factor in procurement: cheaper spare parts due to a very robust supply chain.

Additionally, customers could find interesting the “one stop shop” solution – for instance big utilities owning wind farms with several wind turbines brands might like the idea of having a single counterparts taking care of all the portfolio.

What strikes me the most is the possibility to implement technical retrofits solutions such us the vortex generators on competitors' WTG models. This basically means that when a wind turbine manufacturer discover a new technique to get more energy out of a turbine it could be able (in some cases) to apply this solution to the turbines of competitors.

I suspect that the market will probably move to a consolidation in the Service business arena, were several small to medium companies are operating locally

V. gave a clear example of it purchasing 2 O&M companies, UpWind Solutions in the US and Availon in Europe.

I also believe that sooner or later a war on intellectual property infringement will start, as several components are “tailor made” (that is, fabricated for a specific wind turbine manufacturer).

For sure you can reverse engineer them, but build them again could lead to legal problem. The same apply to the software of the WTG: many improvements are due to new algorithms and control system, and if you want to implement them you will probably need to put your hands on the software of the competitors.

Readers' questions: may I use an anchor cage somewhere else?

I’ve just received this question from a reader. As I believe it’s an interesting topic I’ve decided to answer with a post instead of an email or in the comment section.

“I'm custom broker and I have to classify under HS Code an anchor cage. I have consulted to Classification Office of Argentine Customs Service and they ask me if the anchor cages are designed to be used exclusively in the construction of wind generators, or if they could be used in other constructions, for instance an antenna tower.
I would appreciate if you could help me on this matter.
Kind regards.”

The answer is no – they can’t  be used somewhere else.

There are several applications for foundation cages: power transmission pylons, light poles, mobile phone antennas and other type of towers.

However, anchor cage are dimensioned to fit a specific type of tower. For instance, different wind turbine models have different anchor cages (both the number of bolts and their diameter might vary). You can’t take a generic anchor cage and put it below another tower: the number of bolts, diameter of the tower and size of the bolt would not match.

Some years ago there has been a famous mistake in a wind farm in Brazil – the wrong anchor cages have been shipped (and embedded in the concrete of the foundations). The mismatch between tower bottom and anchor cage was millimetric, so the installation crew tried to install the towers for hours before discovering the mistake. It was the anchor cage for a different model of tower for that specific wind turbine model.

It’s interesting to note that at least a wind turbine manufacturer offer a range of anchor cages with different bolt lengths compatible with a specific wind turbine model. This allow for a greater customization of the foundation and savings in material.

Peikko rock adaptor foundation

I've been asked by a reader of this website why there are no references to the various technical solutions available for wind turbines on rock.

The truth is that I’m not a specialist on this topic. However I’m learning, due to the fact that I’m currently working at several projects in northern Europe where it can be applicable.

To solve the problem I’ve decided to start with a video, that can be better than a 1000 words.

It’s an example of foundation on rock without anchor cage – one of several possible technical alternatives when the turbines are above shallow, unfractured rock.

Basically the tower rest on a steel “adapter” plate on top of a reinforced concrete block, and the turbine is fastened to the ground with dozens of post-tensioned anchors several methers long (figures above 9 or 10 meters are not unusual).

There are some very clear benefits with this solution if the geology is favourable: for instance less excavation, almost no blasting and lesser use of materials.

This video has been done by Peikko, a Finnish company specialized in steel elements. They have an interesting, unusual business model, as they do the engineering for the foundation and provide the steel but not the concrete or the manpower – therefore the foundation has to be built by another company.

Here a screenshot with the main elements of this solution:

One more video (possibly more detailed) on this technical solution here:

There is always a second time: wind farm repowering

At the beginning of the year I’ve had the pleasure to work at my first repowering EPC – Vergao, in Portugal, together with Generg (a big local player).

This is supposed to be one of the many projects that should materialize during the next years. My former manager Luis Miguel thinks that repowering is “the next big thing” in wind energy.

I agree with him that sooner or later it will kick off. In theory, wind turbines are designed for a life of 20-25 years. Through heavy maintenance and substitution of the main components (e.g. gearbox) it can be probably extended a bit more. This practice is called life extension or retrofitting.

However, at the end of the day the question is: does it make sense to keep running old turbines? Or it’s more cost effective to install new WTGs?

Older wind farms are usually in incredibly windy site (class I, according to the IEC classification) and are probably using turbines of less than 1 MW.

Therefore it will be possible to reduce the number of installed turbines (a ratio of 3 old for 1 new would not surprise me) and even so increase the total production.

What can sometime hinder the repowering is not the availability of a better technical solution – and it’s often not even a problem of financing. What can complicate the picture are difficult legal frameworks, low social acceptance, environmental constraints , etc.

In theory, there are scenarios where the best solution will be to dismantle the wind turbines and scrap them (or sell them to third world countries).

Coming back to my personal experience, working at a repowering has been a very interesting professional experience.

There are quite a lot of unusual challenges, as the existing WTGs have to be dismantled while in parallel new ones are erected. This makes the time schedule more complicate than usual, and bring new health and safety challenges due to the many teams working at the same time.

I’ve also had the opportunity to look into new topics, like the possibility to “recycle” the existing foundation incorporating it in the new one (yes, you can do it), the market price of used turbines or the environmental requirements linked to the dismantling and scrapping of wind turbines.

BoltShield® anchor bolts rust protector cap

Some weeks ago I’ve been contacted by a company developing an interesting product – a tailor made protector cap for anchor bolts.

I’ve notices that in some wind farms corrosion of the exposed side of the anchor bolt can be a problem. For instance, it’s not unusual to observe this phenomenon in areas with high salinity (e.g. Chile, or near the sea in the Netherlands).

If rusty, the bolt need to be cleaned before being tensioned. In theory this solution could improve the situation.

The solution, called Boltshield, is a metal cover cap available in several materials like aluminium and carbon coated steel (other similar products are made of plastic).

This cap should protect the upper part of the bolt, the nut and the washer from possible damages.

Additionally, coupled with paste or corrosion inhibitor, should prevent corrosion.

It’s a specific product line for the wind energy sector and apparently is already used in wind farms in  several countries (Italy, Finland, Scotland, Lithuania).

They claim that the market response is particularly interesting for the innovative screw-on system that allows an easy and safe screwing on the tie rod.

I didn’t had the opportunity to test this product (and obviously I’m not affiliated or compensated by them) so I can’t assure you that it delivers what promise. If you do have experience please drop me a line.

Invest in wind energy option #1 – buy wind turbines

This is the first of several post that I’d like to write in the next weeks about investing in wind energy.

There are several possible alternatives to invest in wind energy, or more broadly in renewables: stocks, managed funds, ETFs or even direct investment in the development of a project.

The option described in this post (buy your own turbines) is probably the most extreme but it’s not unseen. I’ve been personally involved in several projects owned not by utilities, mega corporations or professional developers but by private investors or small companies willing to pay out of their balance sheet.

Additionally, it has to be considered that the banks are usually willing to finance a relevant portion of projects. The percentage that can be financed is somewhere around 60% to 70%, in some cases even more.

The capital cost of wind projects are dominated by the cost of the turbine. In this blog you will find quite a lot of post detailing the other costs associated with the project, usually called “Balance of Plant” (BoP).

As a rule of thumb I would say that the turbines, fully installed and operational (that is, including transportation, installation and commissioning costs) will be somewhere between 60% to 80% of the total investment.

How much does an industrial, multi megawatt wind turbine cost?

It’s obviously not easy to answer this question as it’s dependant on several variables such as number of turbines purchased, transportation costs (marine and overland), financing, insurance and warranties, etc. Actually is so critical that companies in the wind business have usually specialized departments devoted to the gentle art of Pricing.

However several reliable sources (Bloomberg in primis - they are the source for the image above) are concordant on the fact that the cost per megawatt is steadily decreasing.

When I joined the wind industry (2010) a MW was somewhere around 1.4 to 1.6 million dollars -  that is, you could expect to pay around 3 ML$ for a 2 MW wind turbine.

Today (end of 2018) prices have dropped dramatically. Buying a turbine today, with delivery at the end of the next year, will probably cost around 1 M$ per MW.

There are several reasons behind this price drop. I believe that the main 2 are scale factor (today, 3 to 4 MW wind turbines are the norm while in the past the standard was 1.5 to 2 MW) and market pressure in the majority of developed markets (USA and Europe).

To summarize, to invest in wind energy building your own small wind farm (1 turbine around 3MW, no substation or other substantial BoP costs) you would need probably between 0.5 and 1 ML$. This very rough estimate consider a total cost of the project between 3.5 and 4 ML$, with the banks financing around 70%.

 

Invest in wind energy option #2 – stocks and ETFs

A second alternative to invest in wind energy is given by stocks and ETFs of companies in the energy.

There are many “renewable energies” ETF and a bunch of solar ETFs.

However the choice for wind ETF is much more limited.

There used to be one ETF form Invesco (PWND) specialized in pure wind players but it has been delisted due to very low trading. Yes, that is not a good sign.

So, as far as I know today (2018) the only wind ETF is First Trust ISE Global Wind Energy Index Fund (FAN – a very appropriate name).

Not all the companies in this ETD are 100% wind: for instance, the biggest share (almost  10%) is Ørsted (or Dong, if you prefer the old name like me: Dansk Olie og Naturgas).

You will, however, find the big players, including  Longyuan Power (probably the biggest wind power producer in Asia) and all the usual suspects such as Vestas, Siemens Gamesa, etc.

What you will buy is very high volatility today, but probably also long term growth.

An alternative is to do some cherry picking and select the stocks one by one. Almost all players are traded (with some exceptions, for instance Enercon).

Wind Energy in Finland

One of the things I enjoy more in my job is that it gives me the possibility to work in several  different countries.

In  the last months I've had the pleasure to visit several time Finland for a project developed by Neoen (the French developer that it's about to launch its IPO) and Prokon.

It's a 81 MW project called "Hedet". 18 Nordex/Acciona N149 4.0-4.5 MW turbines will be installed under a full EPC contract in an area near Närpiö (a low - medium wind site in West Finland).

It will be built in 2019, bust some preliminary works for roads and tree cutting have already been started.

The energy will be used to power a Google data center (see my other post on this topic).

It’s interesting to note that this is a private, unsubsidized PPA – meaning that it is a transaction between companies, not a “classic” setup where the electricity is sold by the developer to an utility for public consumption.
I believe that this kind of deal will increase in the next years given the sharp decrease of solar and wind plants.

In addition to Hedet there is a second group of wind farm that will be built in Finland in 2019, a portfolio of 107 MW divided in 4 different projects, all of them with the N149/4.0-4.5 MW.

These project are developed by Ox2 (a big player in Northern Europe) and not EPC (they are "Clean Sell", to use a regrettable expression I've heard to define a Supply and Installation project).

The Ox2 projects are founded by IKEA - now you know were your money end when you buy the "Billy" bookcase (I think I bought like 5 of them when I was young).

Wind energy use is growing in Finland – the country started somehow late (in 2010 they had less than 200 MW installed) to accelerate strongly in the last few years. The country has over 2 GW installed now, covering about 5% of consumption.

I would like to thank our colleagues in Finland and all the subcontractor we’ve worked with in the last months. Thank you for your hospitality!

Wind farm construction steps: generic timeline infographic

One of the pleasures of fatherhood is the fact that you have quite a lot of extra times during the night – if your kids do not sleep.

Yesterday night has been exceptionally short due to a son diving out of the bed and hitting his head and another who decided that at 6 AM the night was ended.

Therefore I’ve used this extra time to create a timeline with a very generic overview of a small wind farm construction steps.

They can (and do) vary a lot between a project and another. However it should give you a rough order of magnitude of the key steps and the time needed for each of them.

The editable PPT file is available on demand. It’s based on a free template made available by Hubspot (thank you guys!).

Enjoy!

Target Price for BoP: a basic introduction to a complex topic

There is an old joke that say something like “What happens when you put 10 economists in a room? You'll get 11 opinions.”

My experience with Target Price is similar: I’ve heard many opinions in favour and against it and probably in general it’s not “right” or “wrong", but it's a strategy that, depending on the context, can be more or less appropriate.

Basically, the idea is to share with the subcontractors the price level that they are supposed to reach – or if you want to see it the other way around how much you can afford to pay to build the wind farm.

On a smaller scale the idea is not new. It is what happen when you ask someone if they can meet a certain budget, for instance asking to an artist “Can you do me a portrait for 100$?”. The answer could be for instance something like “Yes, but the dimensions will be 20x20 cm”

There are indeed some arguments I can see in favour of it:

  • BoP is (partially) a custom service with certain technical specifications that in some cases can be changed.

The implication is that the input of the subcontractor can be requested to hit the target, or some initial requirements can be changed. A classic example is the level of redundancy of the substation: fail proof solutions are not cheap.

  • Material costs can be clearly identified (in some cases).

This is for instance the case when items like medium voltage cables are purchased - a key driver in the cost of cables is the spot price of the raw materials (copper, steel, aluminium) so it’s relatively easy to calculate how much you should pay.

However, it’s also easy to find arguments against it:

  • To give a target price, the buyer should understands the cost structure.

This is not so easy as sit might seem: people dealing with BoP are usually operating in different markets, interacting with companies of different sizes and with different business models. Therefore having a clear view of the seller costs structure can be a daunting task.

  • Price volatility should be low.

This is true in certain markets where it’s easy to find a steady supply of bidders. However, overheated markets with several competing projects executed at the same time can create price volatility: basically, the resources that you need to build the wind farm (for instance the crane, or the mobile batching plant) will go to another project – another wind farm nearby, or possibly something totally different.