Gusty Future: Lockton s Competitive Advantage for Wind Power Clients

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1 Gusty Future: Lockton s Competitive Advantage for Wind Power Clients May 2017 Lockton Companies Wind energy is now the top renewable energy source for installed capacity in the U.S. with more than 82 Gigawatts (GWs) not including the 10 GW under construction. Land-based wind energy accounted for 41% of all new generation capacity installed CHRIS BLACK Risk Control Consultant Loss Control cblack@lockton.com in the U.S. in 2015, according to the Department of Energy. Driven by competition and the uncertainty of future renewable project financing in America, this industry will accelerate innovation and incorporate more emerging technologies. This leaves our wind industry clients subject to wind turbines that may be considered unproven with uncertain long-term performance. Insurance costs are often the largest single expense on a balance sheet for a renewable energy plant owner. This paper will discuss past and According to the US Department of energy, land-based wind energy accounted for 41 percent of all new generation capacity installed in the US in current wind turbine failure trends, future industry developments, and how this information can improve our client s business. 1. Reuters Article: L O C K T O N C O M P A N I E S

2 The Past Wind Turbine Generators (WTGs ) have been plagued with failures in the gearboxes, generators, blades, pitch systems, electrical systems, and control systems since the beginning. These types of failures still occur, but with less frequency. In the early generation, there were many different parts designed for major components, which failed often and became obsolete. This Darwinian process drove the OEMs to use the most reliable and cost effective designs, which reduced the variability in performance across the industry. Components most often contributing to WTG failures and downtime from 2003 to 2011 were the pitch system, frequency converter, generator, yaw system, and gearbox. Past ( ) Present ( ) Future Hub height of 40-80m Hub height of m *taller than the Statue of Liberty Hub height of 125m m blade diameters m blade diameters 150m+ blade diameters MW output 5 MW+ 2

3 May 2017 Lockton Companies Major Failure Mechanisms Gearbox, Generator, Blades, and Pitch System The gearbox has a high failure rate because it is subject mechanism is lightning strikes. Early technology could to transient wind loading, pitch system response times, not detect strikes besides routine blade inspections and contains several moving parts. Many different which were infrequent. designs were used during this generation in an attempt to achieve the optimal bearing loading, reliability, size, Pitch systems are another major contributor to losses and weight. Information provided by the National for this generation. This system includes the physical Renewable Energy Laboratory (NREL) Gearbox Failure pitch components which constantly adjust to provide Database tracks eleven different gearbox components the optimal amount of blade rotation based on the wind leading to failure. In 2014, bearings accounted for speed and direction. Unreliable heavy components, approximately 64% of failures, while gears accounted undersized actuation mechanisms, and slow control for 25% 1. Bearings are designed to handle specific systems were often the cause of pitch system failures. loading, which is rarely the case with the dynamic forces Electrohydraulic pitch systems were the popular design experienced by the bearings in WTGs resulting in for the early WTGs. This design is still used by about accelerated breakdown. Once a bearing has exceeded its 50% of the OEMs and use a pressurized hydraulic fluid tolerances, misalignment occurs leading to downstream to move the actuator in the cylinder like a piston. bearing and gear damage. Of all the systems discussed, electrical and control Generator failures are either mechanical (bearings), systems account for the most frequent failures in this or electrical (insulation breakdown, electrical shorts). generation, although their downtime was substantially Overheating and contamination are the major causes less than the mechanical components. Failures in of insulation breakdown. Air filtration, closed cooling the pitch and electrical systems typically fell below systems, and climate controlled nacelles are examples of deductibles or occurred during warranty periods, so systems that were developed in this previous generation most of the failure information was collected from to extend the lifetime of internal components, especially operational outage data. the generator. The bearings of the generator are susceptible to the same misalignment Wind Turbine Generator Components issues as the gearbox. Online monitoring of generator temperatures and vibrations were not common in the earlier generation which contributed to the largest losses and downtimes associated with reactionary repairs. Blades are another key component where losses and downtime are significant, but difficult to predict since the driving loss 1. Sheng, Report on Wind Turbine Subsystem Reliability A Survey of Various Databases Source: US Bureau of Labor Statistics 3

4 The Present How have design improvements reduced failures and downtime? Improvements in design, electrical systems, manufacturing processes, operations, and maintenance have reduced the number of failures and downtime associated with the modern generation. Improvements include: Up-tower electrical components such as the converter and transformer were moved to the base to make the nacelle lighter and facilitate maintenance and replacement. Blade failures traced to manufacturing defects have been drastically reduced by improved automated construction methods and quality control. Greater understanding of lightning protection and inspection has led to reduced catastrophic failures from operating damaged blades. WTG electronics have also improved, drastically reducing the number of electrical outages uptower. Updated control systems have improved the pitch system s ability to react to wind changes and reduced cross wind exposure to the blades. Present Generation Failure Mechanisms According to an international study performed by WindStats that compares these generations of WTGs, the gearbox is still the component responsible for the most downtime hours followed by the electrical system, rotor, and generator. The study revealed that main shaft and main bearing downtimes increased, which coincides with the size increases of the WTGs. WindStats concluded that the electrical systems, gearbox, hydraulics, and generators are the most frequent failures. The ReliaWind study performed from 2008 to 2011 stated that the culprits responsible for the most frequent failures and downtime were the pitch system, frequency converter, generator, yaw system, and gearbox. Although these studies may indicate different components as failing the most, the overwhelming trend has been that all the components are failing less frequently. The overwhelming trend has been that all the components are failing less frequently. 4

5 May 2017 Lockton Companies WTG Component Loss Rates According to the WTG study performed by DNV-KEMA and GL Garrad Hassan based on SCADA reports, 5% of gearboxes fail over a 10 year operation period (.50%/year). This represents one of the top drivers of WTG outages and the leading component for downtime. Internal analytics uncovered a gearbox loss rate resulting in claims of 0.64% a year, with the mean time to failure at five years of operation (peak age for gearbox failure) resulting in an average total cost of $200k per claim. Generators fail at a 3.5% rate over 10 years (.35%/year) according to the same DNV study. Lockton s internal claims analysis discovered that generator claims were occurring at a rate of.08% a year with a mean time to failure of six years of operation for a total average cost of $163k per claim. As seen in the table below, many of the outages and failures do not warrant a claim due to deductible limits, brief downtimes, or warranties. Past (failure/ turbine/ year) 1 Present (failure/ turbine/ year) 2 Internal Data (failure/turbine/ year) 3 Present Comparison to Claims Analysis Gearbox For every gearbox claim, 22 other failures occur that don t result in a claim Generator For every generator claim, 125 other failures occur that don t result in a claim Blade For every blade claim, 8 other failures occur that don t result in a claim Pitch System Electronic System For every pitch system claim, 31 other failures occur that don t result in a claim Past data is referenced from WMEP & LWK survey that is included in the component reliability presentation from NREL (Sheng, Report on Wind Turbine Subsystem Reliability - A Survey of Various Databases) 2 Present data is referenced from the WindStats survey included in the component reliability presentation from NREL (Sheng, Report on Wind Turbine Subsystem Reliability - A Survey of Various Databases) 3 Based on Lockton analysis of claims data. What Happens as a WTG Ages? Downtime typically increases when a turbine reaches 15 years of service. Uncommon failure mechanisms lead to more expensive and time consuming repairs. Often these components are not designed for easy replacement and the parts can be difficult to obtain as the aged technology becomes obsolete. Long-term lubrication breakdown can also occur if the system is not properly maintained, resulting in damage to the rotating components. Minor discrepancies such as bearing wear, gear wear, blade micro-cracks, and material fatigue continue to grow over time at an increasing rate, which can lead to catastrophic failures unless identified and repaired. 5 The bathtub curve above is a basic representation of failure rates The bathtub curve at right is a basic representation of failure rates over time.1 over time. 1 Sheng, Report on Wind Turbine Subsystem Reliability A Survey of Various Databases

6 The Future Increases in demand for clean energy has pushed the industry to adopt new and exciting technologies. WTGs will continue to be built taller and wider, allowing them to take advantage of a greater range of wind velocities. Electronic components will advance in reliability and continue to shrink in size. Maintenance operations continue to modernize with Continuous Monitoring Systems driving predictive maintenance which could be performed by robots and drones. Manufacturing continues to evolve to improve quality and supply chain resiliency. Specific advances in the development of lightning strike detection via a lightning sensor can provide real-time strike alerts, greatly reducing the cost and time associated with project wide inspections. Offline oil filtering is another technology that is becoming more common to improve the quality and lifetime of the oil. Pitch systems have evolved from basic hydraulic systems to Electromechanical Actuation which reduces the size and weight of the unit, thus improving reliability and ease of maintenance. Gearbox designs have been improved in almost every generation of design. The most recent gearbox design trend allows for up tower repairs and gear replacement, greatly reducing downtime and costs when compared to the traditional design which requires the gearbox to be craned out of the tower and replaced. Some manufacturers are now producing Permanent Magnet Generator (PMG) variants which remove the need for a gearbox but require a larger converter. The early PMG technology performed poorly compared to the traditional designs, but the reduction in moving components provides a significant reliability and maintenance benefit which is being realized as the technology matures. The expansion of the industry has also led to a substantial development of a capable third party repair industry. Many of these workers were trained by the OEMs and offer comparable services creating competition and driving down repair costs. Even with these advances, it is likely claims will increase from the previous generations as the past generation ( ) WTGs reach end of life (~20 years) and the present generation ( ) enters unknown operating territory where uncommon failures are more likely to occur. WTG retrofits and upgrades are likely to become more prominent to prolong lifetime or increase power. Commitments from various governments across the world will continue to support this growing industry. 6

7 May 2017 Lockton Companies How Does Lockton Make Our Clients Business Better? Lockton s understanding of the wind energy industry and ability to perform analytics provides our clients with a significant competitive advantage by impacting both their financials and operations. Financial Insight into future loss expectancies gives us knowledge on where to set effective deductibles that fit our client s financial goals. This may result in premium savings. Predictive knowledge of loss drivers allows us to consult on critical spares, replacement, and contingency plans, greatly reducing business interruption and premium costs. Communicating with lenders to overcome their concerns with technology risk. Leveraging our analytics and engineering resources further enables our clients to gain or retain financing for emerging WTG technologies. The analytics partnered with Lockton engineering resources can develop accurate Maximum Foreseeable Loss and Probable Maximum Loss scenarios, which are considered by the insurance carrier when setting premium pricing and deductibles. Lockton engineers can provide assistance in methods to reduce these loss scenarios. Operational Lockton understands common failure modes and components allowing for improved consultation on maintenance practices reducing downtime and potentially increasing revenue. Integration with Lockton engineering resources to reduce losses and create a competitive market for a good risk further reducing the premium and improving terms. Diligence Understanding loss trends allows Lockton engineers to advise on resilience of proposed technologies for a new development or current technologies that are under consideration for purchase. In Conclusion Companies that own wind turbines operate in a dynamic and demanding industry with risk existing seemingly everywhere. Aging fleets, unpredictable weather phenomena, emerging technology, market dynamics, governmental mandates, and limited financing options are just some of the challenges this industry faces. Lockton s industry experience and use of analytic methods partnered with industry studies can relieve some of that uncertainty. Predictive fleet knowledge can give clients the power to align their budget and operations to maximize margin, minimize downtime, and increase bottom line earnings. Industry comparison data was collected from numerous studies in Europe and the US. The data is based on SCADA (Supervisory Control and Data Acquisition) information which records all faults and outages from the Wind Turbine Generator (WTG) systems. The vast majority of these faults or outages never reach the level that would trigger a claim or they are covered by a standard two year warranty under the Turbine Supply Agreement (TSA) or an extended warranty as part of a Service Maintenance Agreement (SMA). The claims data provided is based on an internal analysis of 135 claims that occurred over a three to six year period in North America. These claims were generated from several wind farms totaling 2,960 WTGs sized between 1.5 and 3.0 MW some of which began operation 11 years ago. 86% of the total WTGs were manufactured by U.S. based companies while the remaining 14% have European OEMs. Bibliography Donohoo-Vallett, Paul. The Future Arrives for Five Clean Energy Technologies Update Sheng, Shuangwen. Gearbox Reliabilty Database: Yesterday, Today, and Tomorrow. Wind Turbine Tribology Seminar. Chicago, Presentation. Report on Wind Turbine Subsystem Reliability A Survey of Various Databases. Presentation

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