WindQuest Advisors on Repowering and Rising O&M Costs

Dan Fesenmeyer, Managing Partner at WindQuest Advisors, joins to discuss the repowering rush and the FAA permitting stall, rising O&M costs on larger turbines, tariff pass-throughs, and AI data center demand. Sign up now for Uptime Tech News, our weekly newsletter on all things wind technology. This episode is sponsored by Weather Guard Lightning Tech. Learn more about Weather Guard's StrikeTape Wind Turbine LPS retrofit. Follow the show on YouTube, Linkedin and visit Weather Guard on the web. And subscribe to Rosemary's "Engineering with Rosie" YouTube channel here. Have a question we can answer on the show? Email us! Welcome to Uptime Spotlight, shining light on wind energy's brightest innovators. This is the progress powering tomorrow Allen Hall: Dan, welcome back to the podcast.  Dan Fesenmeyer: It's great to be here. Great to see you again.  Allen Hall: There is so much happening in your particular area. Your name pops up quite a bit within Weather Guard because, uh, we're dealing with a lot of operators and- A number of times we'll ask them, "Have you read your turbine supply agreement?" "No." "Have you read your full service agreement?" "No." "Well, maybe you should do that." And then we say, "Have you talked to Dan? You should call Dan, 'cause he can help you understand what you have signed." Mm-hmm. "Oh, that's probably a good idea." So now that you're here, WindQuest Advisors, of course, obviously is your company. Mm-hmm. And you're talking to a number of operators. The, the big hurdle at the minute, the nearest short-term hurdle, is repowering. There's just a lot of [00:01:00] repowering efforts going on- Mm-hmm ... trying to get turbines in, start a project. There's a July 4th deadline and an end of the year deadline. There's a couple deadlines after that. What are you seeing right now from operators i- in terms of repowering? What's the effort happening?  Dan Fesenmeyer: Well, there was a ton of effort to start physical work. That window's obviously closing-  Allen Hall: Yes ...  Dan Fesenmeyer: very quickly, but it's still open. Uh, and then once you're past that window, my understanding is if you get your repower completed by the end of '27, you didn't really need to have started physical work. But I think most folks, start physical work is kind of the insurance piece of it-  Allen Hall: Sure ...  Dan Fesenmeyer: if things take longer. Uh, another thing that's popped up is obviously FAA and other permitting.  Allen Hall: On the permitting side, from the federal's, uh, standpoint, is that stopped? Or, or are projects able to continue putting turbines in the ground, or what's the status? Dan Fesenmeyer: My- From what I've seen, I think on the opening session here at [00:02:00] ACP, it was said, they said that there's, like, 130 projects that are-  Allen Hall: At least ...  Dan Fesenmeyer: caught. Yes. And I'm, I'm involved with some of them, and I have a fairly small shop, and there's just no FAA variances or permits or- They're not issuing- ... mitigation studies. Everything seems to have stopped.  Allen Hall: So they're not even reviewing the documentation that's been submitted by the operators at all?  Dan Fesenmeyer: That's what it seems, yes. Yeah.  Allen Hall: Is that legal? Uh, uh, usually those federal requirements have a timeline which they're able to review those permits and get them approved or disapproved them. You're s- Right ... I think what I'm hearing is, what you're saying is they're not even looking at them.  Dan Fesenmeyer: That's correct. That's what I've heard and seen.  Allen Hall: Okay.  Dan Fesenmeyer: Yeah. Yeah.  Allen Hall: So what is an operator to do then? How does this, how do they meet some of these deadlines if they can't get the permit?  Dan Fesenmeyer: Well, I mean, it stalled a lot of projects 'cause of the associated risk with it. Although I've seen some, uh, you know, some repower folks think, "Well, you know, I'm just repair- repowering like for like, or I'm not changing much." [00:03:00] But if your, if your rotor's changing or pad location's changing, you need to update those permits.  Allen Hall: So the, the groups and the operators that are repowering the existing turbines are putting basically the same turbine in the same hole. Dan Fesenmeyer: Well,  Allen Hall: I- Would that be okay?  Dan Fesenmeyer: I would say originally- The initial push on repower was kind of your larger rotors- Sure ... new drivetrain, et cetera. Yes. The market seemed to shift more towards, "Hey, let's do smaller upgrades, component exchanges."  Allen Hall: Okay.  Dan Fesenmeyer: Getting more towards the minimal investment, so to speak.  Allen Hall: The 80% investment portion. Dan Fesenmeyer: Yes.  Allen Hall: Right.  Dan Fesenmeyer: Yeah. And less about, you know, a big new machine head, for example.  Allen Hall: Well, if that gets you through and gets you the, the, uh, tax credit started back up again, which is the whole point- Right ... there would be a reason to do that.  Dan Fesenmeyer: That's right.  Allen Hall: Is there a marketplace then for those components if you're gonna repower a GE 1.5 machine, which there's a lot of them- Mm-hmm in the United States? Are you seeing a big emphasis to go get a new gearbox, [00:04:00] to upgrade the blades- Yeah, and, and- ... kind of  Dan Fesenmeyer: thing? Or just do maybe a drivetrain and s- Okay ... and leave the rotor or, or-  Allen Hall: So do a gearbox and-  Dan Fesenmeyer: Yeah. Gear or just full drivetrain- Or generator ... or yeah, s- things like that. And, um- Wow people are comfortable doing it, and then it's e- it's easier, obviously.  Allen Hall: Sure. It's faster.  Dan Fesenmeyer: And faster, and you don't necessarily have to touch permits or, yeah.  Allen Hall: And is part of that repowering, I know one of the questions- Mm-hmm ... that's been bandied about quite a bit is, do I have to buy a, a new generator or a new gearbox, or is a refurbished gearbox enough to check the box in terms of upgrading or putting 80% of the value back into the turbine to qualify for those tax credits? Dan Fesenmeyer: I'm not a tax expert, but I've seen people do both.  Allen Hall: Okay. Well, that'll tell you.  Dan Fesenmeyer: Yeah. Yeah.  Allen Hall: They've obviously talked to- Right ... tax advisors about that.  Dan Fesenmeyer: It's, it's their level of risk and whether they have outside tax money or whether- ... they're kind of balance sheet or taking it themselves. It's, it's- Yeah ... more of a risk profile that [00:05:00] everybody's different on. Allen Hall: Okay. So that has changed the landscape quite a bit. So now it's, once this window of opportunity passes by, we're into brave new world. Mm-hmm. And operating turbines now not really 10 years, operating till end of life, which could be 20, 25 years. Have operators started thinking about that and starting to address some of the, the, especially the contracts around that? Are they starting to rethink contracts? Are they starting to approach full service agreements differently? Is, is the marketplace changing in the US?  Dan Fesenmeyer: Yeah, I think so. I mean, it, it, depending what you have and what you're doing, whether you have an existing agreement or you need a new one, and whether it's a renewal or if you're doing, let's say, a drivetrain or new machine head, then there's usually a service contract that's going to come with it- Sure 'cause it's essentially a new machine. Largely a new machine. Largely,  Allen Hall: yeah.  Dan Fesenmeyer: But in the case of a gearbox, right, you're probably out of your longterm O&M agreement anyway, and, uh, whether you're... And you probably [00:06:00] have, you don't have the unplanned coverage anymore. Right. So it's really, you're on, you're kind of on your own risk. Allen Hall: Okay, so that's the repower scenario. Mm-hmm. What's happening new turbine-wise? It seems like the, a lot of the operators are choosing six megawatt, seven megawatt, eight megawatt machines tends to be the, the, the band of opportunity for a lot of operators. What are they working on right now in terms of, uh, TSAs, full service agreements? What are you seeing out on the landscape US-wise?  Dan Fesenmeyer: Well, I think, um, the TSAs haven't changed much.  Allen Hall: Okay.  Dan Fesenmeyer: But the- The, the scope and the risk has changed a bit, and the, the OEMs are, you know, holding their cards closer, and it's hard to get to certain terms that-- harder than it used to be.  Allen Hall: So let's, let's talk about that for a minute because, uh, there's been some recent reports speaking to the O&M costs for larger machines. And so the, the goal was if I went from a [00:07:00] two-megawatt machine to a six-megawatt machine, my O&M cost may be 3x because of the size of the turbine, but ideally they drop. That, uh, the same amount of effort into a larger, m- newer machine, uh, so, uh, my spend wouldn't go up that much. In, in some places on the planet that I've seen feedback about that is that the O&M costs are not 3x, they're 5x. So the, the cost to operate the turbine, the six and eight megawatt machines, is higher than it would be proportionally to a two-megawatt machine. I think operators are just trying to start to figure that out. Are the OEMs already knowledgeable of that fact and are s- trying- I, in, in- ... to phrase the conversation I  Dan Fesenmeyer: mean, in the pricing that you get from the OEMs for the full scope agreements, that's largely in there already.  Allen Hall: Yes.  Dan Fesenmeyer: And I always tell people look at it on a dollar per kWh or dollar per megawatt hour- Ah ... basis versus a dollar per turbine, and you- Sure ... you'll see a different number.  Allen Hall: Different calculation done. Dan Fesenmeyer: Right....