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Romax “Hybrid” Strategic Consulting:
De-risking Investment in the Renewable Sector
through hybrid consulting
Global Wind Power Finance & Investment Conference
26th June 2012
Yann Rageul – Head of European Sales & Strategic Consulting
CONFIDENTIAL@ Copyright 2012
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Business Facts• Established in 1989
• Private Equity Fidelity (1.5Trillion USD) invested in 2012 in Romax
• Technology-led solutions provider
• Active across a range of sectors
o Automotive, Off-highway, Marine, Aerospace…
o Wind energy
• Head office in Nottingham, UK
• Overseas offices in the US, Germany, France, Japan, Korea, China and India
• 200 employees globally, with 120 in UK
Selected clients from the wind industry Selected clients from other industries: Automotive, Off-highway, Marine, Aerospace …
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
ROMAX “Hybrid” Strategic Consulting offering:
Traditional Engineering Services
Technology
Traditional Strategic Consulting Strategic perspective and depth of detail
Technical / Engineering Consulting
Perspective
Commercial/Strategic
(Senior Management)
Depth of knowledge and Delivery Capability
Issues: Market trend using wrong technical assumption = recommendation technical not
possible to implement
Issues: First class technical solution without market = no understanding of the market drivers
Solutions: Unique combination of Strategic and Technical knowledge in the Renewable Sector
� Wind Industry knowledge
� Product solutions
� Technical solutions
� Benchmarks
� Best practises
� Market Analysis
� Business strategy
� Product strategy
� Merging & Acquisition target definition
� Product life cycle management
� Due diligence
ROMAX “Hybrid” Strategic Consulting: � Wind turbine design assessment� Market Entry Strategy� Technology roadmap� Technical Due diligence� Supply Chain Analysis� Design to cost� Risk Analysis of Wind Turbine
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Agenda
• Wind turbine market technology trend and cost models
• De-risking the investment in renewable energy: Wind, Tidal and Wave
• New wind turbine design benchmark for risk and cost mitigation
• O&M risk
• Return-on-investment
• Wind Farm Asset Management to increase return on investment
• Condition monitoring benefit for Off-shore wind farm
• Prognostics tools to reduce Off-shore maintenance cost: £17.6m Saving
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
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UK
USA
Wind Turbine Size: Onshore vs. OffshoreAverage sizes of wind turbines installed increases each year:
UK is a typical offshore turbine market while USA is a typical onshore turbine market
Source: EWEA ‘UpWind’ report, March 2010
2010: global average size = 1,650 kW
Existing onshore technology2 MW, 90m rotor
Current Offshore technology3 to 6 MW
Future offshore10 MW? 200m rotor?
Future onshore technology2.5/3 MW, 120+? rotor
Expected Offshore average 4MW with range 3 to 6MW in 2015
Expected Onshore average 2.5MW with range 1.5 to 3MW
in 2015
Projected average turbine size
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Conventional High Speed Geared Drivetrain
Medium Speed Geared Drivetrain
Direct Drive
1MW 2MW 3MW 4MW 5MW 6MW 7MW 8MW 9MW 10MW
Onshore vs. offshore: Medium vs. High Speed
• Three most dominant drivetrain technologies in the market:
Offshore 6MW expected by 2015
3MW 6MW
Gamesa
Vestas
Doosan
Siemens
Vestas
DoosanMinyang
WinWind
Siemens
Siemens
Nordex
Alstom
REpower
SinovelMinyang
Gamesa
REpower
BARD
XEMC Darwind
Areva
Sinovel
GE
Sinovel Sh.Electric
EnerconEnercon
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Wind Turbine Drivetrain Cost Model
• Cost model development:
o Cost of energy (COE) is a fundamental design driver for drivetrain concept development
o A full cost model has been developed by Romax – this includes capital costs (e.g. drivetrain) and operational costs (O&M)
Example cost study for a 7.5 MW drivetrain
0%
20%
40%
60%
80%
100%
120%
On-shore High
speed drivetrain
Off-shore High
speed drivetrain
Generator CAPEX
Generator O&M
Gearbox CAPEX
Gearbox O&M
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Medium Speed (2 stage)
Offshore Drivetrain
Annual Cost of Energy
Generator
capex
16%
Generator
O&M
37%
Gearbox
capex
14%
Gearbox
O&M
33%
Annual Cost of Energy
Direct Drive Medium Speed
(1 stage)
Medium Speed
(2 stage)
High Speed
Co
stHigh Speed
Offshore Drivetrain
Annual Cost of Energy
Gearbox
O&M
59%
Gearbox
capex
11%
Generator
O&M
24%
Generator
capex
6%
6.xMW Drivetrain Cost Model
Off-shore Results (Romax R&D)
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Agenda
• Wind turbine market technology trend and cost models
• De-risking the investment in renewable energy: Wind, Tidal and Wave
• New wind turbine design benchmark for risk and cost mitigation
• O&M risk
• Return-on-investment
• Wind Farm Asset Management to increase return on investment
• Condition monitoring benefit for Off-shore wind farm
• Prognostics tools to reduce Off-shore maintenance cost: £17.6m Saving
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Renewable Investment Risks:
Main risks in renewable investment
Operational risk of the project
Romax expertise
Operational risk of the project
International market risk Market analysis, Power Purchase Agreement (PPA) review
Foreign exchange risk
Policy/regulatory riskPolicy review, Romax database on worldwide Health &
Safety requirement
Renewable Resource availability risk
Technology riskTechnical Due Diligence, Technology assessment,
Benchmarking, Reliability assessment
Construction risk
O&M riskO&M strategy, Condition monitoring expertise and
software
Transmission grid risk
Output (revenue covering debt) riskCost models for turbine, return on investment
calculation
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CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Technology Risk: Wind Turbine Drivetrain Failure
• Consequences of failure are very severe and resulting costs are extremely high:
o Maintenance costs, replacement gearbox cost, refurbishment, crane or vessel costs, lost revenue…
-> All these costs are financial RISK during the warranty period!
Scenario:
• What if drivetrain system-level interactions cause the gearbox failure rate to double?
• Cost analysis for a 6 MW offshore turbine:
Conclusions:
• The additional financial risk is approx. £81,000 per turbine per year
• For a 5 year warranty on 100 turbines the extra
financial risk is estimated at £40,500,000
1
Source: …
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Case studies – what can go wrong?
Case study 1 Case study 2 Case study 3 Case study 4
2MW conventional turbine design
2MW conventional turbine design
2MW conventional turbine design
5MW offshore turbine design
Gearbox package space within the nacelle was insufficient
Gearbox purchase specifications poorly defined
Turbine and gearbox maintenance not adequately considered at the concept phase
System level drivetrain interactions result in failure modes that do not occur at component level
1 month delay for re-work. Cost of gearbox increased.
Gearbox was heavier and more expensive than necessary. Project delays caused by extra design loops due to incorrect and unclear specifications.
Poor access to the turbine for maintenance. Compromises on the drivetrain assembly resulting in increased downtime due to misalignement
Bedplate deflections caused loads to be transferred to the gearbox and the generator.Potential future failures
1
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Technology Due Diligence
• Step 1: Turbine market and product analysis including wind turbine OEM capability (manufacturing, installation and Operation & Maintenance)
• Step 2: Detailed technical review –benchmark (serviceability, maintainability, reliability…) turbine technology with competitors in given market, review certification level (GL, IEC, DNV) and identify risks
Independent Validation of turbine choice for wind farm development
Independent validation of decision for M&A
Evaluate hidden cost (i.e. to bring the manufacturing capability to the correct standard, true design capabilities, etc….)
Benefit
WTG Technology due diligence
Output from RCG Cost models
Drivetrain layout assessment
Romax database
1
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Turbine Technology Due Diligence for Improved RoI
Step1: Drivetrain subcomponents and connections defined
Step2: Cost of energy calculated for each turbine
Step3: Technology benchmarking (cost, maintainability…)
Romax analysis uses the following key criteria:
• Cost
• Technology Risk
• Manufacturability
• Transportation / Assembly
• Scheduled Maintenance
• Unscheduled Maintenance
• Overall turbine design (size, tower clearance)
Breakdown of Annual Costs by Component
Gearbox
Oil Change
Mainshaft to Mainframe
Mainshaft to Gearbox Housing
Mainshaft to S1 Carrier
Carrier to Gearbox Housing
Gearbox Housing to Mainframe
Generator Support
Braking System
Slip Coupling
Generator Connecting Housing
Generator Connecting Shaft
Sun Hub/Brake Carrier
Sun Hub Bearing
Cost
CapEx, incl. financing
Unplanned Maintenance
Planned Maintenance
183 fLayout:
1
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
O&M strategy: De-risking
O&M strategy importance in project profitability:
O&M cost estimation:
-1% operational costs: £20k cost reduction per year
+1% availability: £213k revenue increase per year
Increasing availability is 10.65 time more important
than reducing operational cost
O&M strategy for improvement process:
1. Review client O&M strategy and SCADA analysis to understand overall wind farm health
2. Analyse wind data to schedule maintenance for minimum energy production penalty
3. Implement advanced warning system based on Romax unique industry expertise and EOH (Equivalent Operating Hours) model
4. Implement optimised strategy
2
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Reliability modelling based on field experience and failure data
0
50,000
100,000
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PL-PL-PA PL-PL PL
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st,£ Generator O&M
Generator capex
Gearbox O&M
Gearbox capex
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Norminal rating (MW)
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lure
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/tu
rbin
e/y
ear
O&M cost breakdowns for the whole wind turbine and subcomponents
Full cost of energy modelsincluding CAPEX and OPEX
Technology selection for lowest cost of energy
O&M cost of gearbox
Equipment
55%
Revenue loss
17%
Labour
12%
Material
16%
Cost models & Return-on-Investment3
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Case Study: Romax technology de-risk through technical assessment and
cost analysis
Cost analysis and generator selection
Background:
Company developing a 1MW tidal turbine. Romax was charged to
create a business case for the project by analysis the technology cost
and risk.
Project Outcome:
Romax delivered an optimum drivetrain solution, related cost
estimation of the tidal turbine and return on investment. This made the
investor decision much more accurate while de-risking the technology.
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Agenda
• Wind turbine market technology trend and cost models
• De-risking the investment in renewable energy: Wind, Tidal and Wave
• New wind turbine design benchmark for risk and cost mitigation
• O&M risk
• Return-on-investment
• Wind Farm Asset Management to increase return on investment
• Condition monitoring benefit for Off-shore wind farm
• Prognostics tools to reduce Off-shore maintenance cost: £17.6m Saving
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Case Study 1: Asian Customer, 1.5MW model
Primary failureSun gear tooth breakage causedFailed part price : € 7,000
Operator did not detect the failure Wind turbine kept running
2nd Failure Failure expanded to planet and ring gear
Failed part price : + € 43,000
Wind turbine still operating
3rd Failure Metal particles from failed gear
caused damage to LS and HS gearsFailed part price : gear € 30,547
bearing € 25,000
Project Case Study
Benefits: Second and third failure could have been avoided if faults
detected by CMS earlier, and thus saving up to Euro 98,547 for spares
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
• All generators changed and
more than 25
gearboxes changed
lead to 1500 visits –
• £ 7.5 million cost
Before Romax O&M Service
• £1.5 million revenue loss for
downtime and bad power
curve for 6 months
• Plus up to £ 1 million per
gearbox change
Wind Farm Asset Management: Offshore Business Case Study
Source: E-On, Wind Power Monthly Legend:Red = Turbine not performing as expectedBlue = Turbine performing inline with power curve
Time
Turbine
Gearbox replacement
Maintenance record
Power curve deviation
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Wind Farm Asset Management: Offshore Business Case Study
1500 reactive maintenance (nearly 20 per year per turbine)
Reactive maintenance after failure occurred with expensive
secondary failure followed
Large volume, scattered but little understood data
Condition based maintenance with
part and crane an year advance planned
Clear Insight about farm health status
2 scheduled maintenance per year per turbine
when wind is not high and electricity is cheap
Multi-million pounds saved and availability improved more than 2%
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
• E.ON’s Scroby Sands offshore wind farm
• Romax end-of-warranty inspections ensured E.ON did not take on additional risk
Wind Farm Asset Management:
End of Warranty Inspection
Romax delivered software tools for O&M optimisation –allowing EON to make a
£17.6m saving in operations
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Executive Summary
� Risk management through strategic & technical expertise: – Reducing design risk through “system interaction” and save on an estimated liability:
40,500,000GBP* for a 6MW offshore turbine
� Saving opportunity: 585,000GBP/Turbine /Year in Offshore O&M
� ROMAX is the industry leader in turn-key integrated drivetrain design with state-of-the-art process and simulation tools (RomaxWind)
– Largest track record in wind turbine drivetrain design (20+ design)
– Complete drivetrain platform design expertise
– Over 1.4GW of gearbox shipped designed by Romax (as of Q4 2011)
� Cost & Quality Benefits of working with ROMAX Consulting Group– Unique combination of technical and strategic consulting for investment risk reduction
– Fast response to your strategic problem enabling accurate CEO/Board level decision making
* Crane hire not included, assuming 100 wind turbine, 5 year warranty, pitch system cost 2.7% of total WTG
� ROMAX Consulting Group offers a unique combination of strategic consulting with deep engineering know-how
– Technical due diligence (turbine, manufacturing, serviceability, maintainability…)
– De-risking investment through knowledge of the turbine failure mode
– Cost modelling for OPEX and CAPEX
– O&M strategy to improve return-on-investment
CONFIDENTIAL@ Copyright 2012SHARING INNOVATION IN BEARING, GEARBOX & DRIVELINE
Yann Rageul
Head of European Sales & Strategic Consulting
Romax Technology Limited
Rutherford House, Nottingham Science Park
Nottingham, NG7 2PZ, United Kingdom
T: +44 (0)115 951 8839 | F: +44 (0)115 951 8801
M: +44 (0)7581 194679
www.romaxtech.com
Contact details