Green Economy Journal Issue 57

ENERGY
ENERGY
In times of uncertain supply, setting up an even closer supplier
relationship – a strategic partnership – can be very attractive for both
parties (see figure 2). The utility company commits to equipping a large
share of its pipeline with wind turbines from one OEM. In return, the
utility receives preferential access to turbines, extended transparency
on costs and technical specifications, and most importantly, the OEM’s
support in the development phase to optimise the project.
Although there is no silver bullet and the contracting method
will need to fit the unique needs of the business, leading industry
players with broad pipelines have been turning to more collaborative
approaches. The goal is to establish successful long-term partnerships
to shift the dynamic to a more balanced and mutually-beneficial relation.
HOW TO WIN
Setting up a successful strategic partnership is not straightforward and
requires sound preparation. In our experience, there are three main
elements to sustainable win-win outcomes:
Securing a reliable and resilient project delivery. Enhancing the
reliability and resiliency of project delivery requires trust and extensive
two-way transparency between the utility and the OEM. Greater
visibility on the utility’s pipeline lengthens the planning horizon for
the OEM, which can consequently profit from enhanced operational
and strategic optimisation leeway. The utility, on the other hand,
can count on timely turbine deliveries and execute projects better
on time and on budget. In addition, extended transparency on
OEM-proprietary technical data, especially for upcoming turbine
types, can benefit both parties for joint first projects with the new
turbine generation.
Collaboratively optimising projects to enlarge the value pool.
By jointly optimising projects in early development phases, the OEM
and the utility can unlock value pools that would not be achievable
for the utility alone. Tackling the full envelope of cost and yield can
reduce LCOE by up to 30%. Without fair sharing of the additionally
generated value, the OEM would not optimise projects to their
full potential, but only to the point it is profitable for the OEM (for
example, up to a certain threshold value, such as target LCOE).
Important elements of joint optimisation include:
• Comprehensive optimisation of turbine selection and layout
in iterative workshops across the OEM’s and utility’s turbine,
electrical, and civil engineering. Configuration decisions and
power curve customisation are made on a component level,
based on net present value and LCOE impact.
• Transparent, bottom-up planning of operations and maintenance
costs over asset lifetime, leveraging OEM data and best practices.
• Lifetime operations and maintenance cost and yield optimisation,
enabled by access to anonymised turbine data beyond the own
fleet, such as historical failure rates.
Going beyond traditional partnerships. Best-in-class partnerships
go beyond joint LCOE reduction and supply security – pushing the
potential to create value even further.
Successful extended partnerships in the market include:
• Joint M&A activity. Combined market knowledge to identify
opportunities and exclusivity for a first call in M&A opportunities.
• Asset and liability pooling. Pooling assets and liabilities across
projects to enable portfolio-level benefits.
• Joint market-entry strategies. Entering new markets with
combined power and aligned interests.
• Equity stakes. Perfectly aligning long-term incentives, such as
with a joint venture or acquisition of an equity stake in a partner.
THE WAY FORWARD
So how can you find out if closer OEM collaboration and a
partnership approach are the right strategies for you? We suggest
starting with three steps:
• Review your project development approach and identify
the most pressing issues.
• Assess the robustness of your current procurement strategy
and your collaboration model with OEMs.
• Analyse your portfolio fit for a partnership and quantify the
potential joint value creation.
*Article written by Hanjo Arms, partner, Oskar Schmidt, principal and Jan Weber, consultant.
Framework agreements create
value by standardising procurement
processes across projects and by capturing
scale advantages for large pipelines.
Figure 2. Utilities and turbine suppliers can create win-win partnerships.
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