Unsubsidized renewables have become the cheapest source of power -by far- in many countries, turning wind and solar into major asset classes and probably the fastest growing service market in the world -in the process changing or displacing other installed bases. Of course, this affects size, growth rate and structure of associated service and maintenance industry.
According to a new report from the United Nations and Bloomberg New Energy Finance, the cost for (new) solar generation dropped by 17%, for onshore wind by 18% and for offshore wind by a stunning 28% -over a one year period. New capacity added in 2016 was 138.5 GW, which not only beat the previous record of 127.5 GW (2015), but cost 23% less in terms of investment. GLOBAL TRENDS IN RENEWABLE ENERGY INVESTMENT 2017.
The Financial Times has a story titled: “The Big Green Bang: How renewable energy became unstoppable”explaining how falling costs in solar, wind and, particularly, batteries and electric cars are driving a tectonic shift towards renewables. Interestingly, oil and gas companies as well as major energy service providers are shifting to renewables to drive down energy costs: “France’s Engie, for example, aims to create “zero-emissions power plants” that generate electricity for “the Rio Tinto price” — the price that the metals and mining company seeks when deciding where to build a new smelter, anywhere in the world.
Offshore wind is currently creating huge market buzz: The planet’s biggest and most powerful wind turbines have begun generating electricity off the Liverpool (UK) coast. Installed by Danish company Dong Energy, the 32 turbines are 195 m tall, with blades longer than nine London buses. Each turbine has more than twice the power capacity of those in the neighbouring wind farm completed only a decade ago. And in Germany, the regulator (BNetzA) granted power purchase agreements for 1,490 megawatts of wind farms to be built in the North Sea. The developer (again Dong) will supply power from the facilities at a record-low weighted average of 4.40 euros ($4.67) a megawatt-hour, less than a tenth of the previous offshore wind deal. The bids were “far below any expectations,” (BNetzA) and well beneath the market price for power in Germany, which has fallen 3.8 percent this year to 30.10 euros a megawatt-hour (Bloomberg). The massive drop in offshore wind power costs is mainly due to better technology, operational learning effects and scale (as well as cyclical factors such as declining steel prices and low interest rates). And as the technology is still new further drops are to be expected. Nevertheless, as novelty wears off it will fall on operations and maintenance to ensure on-going cost sustainability and competitiveness of the technology – in similar fashion than an ecosystem/cluster of knowhow, logistics and operational/maintenance technology ensured sustainability of north sea oil industry for decades. Watch our blog for an upcoming article on this topic.
EDF Renewable Services reports 10 GW of windpower under service contracts in North America. Fast growing wind service company Deutsche Windtechnik expands through contracts in Sweden, France, and UK. It also acquired a 70% stake in OutSmart, a Dutch offshore operations management provider with expertise in asset management (offshore wind parks), remote monitoring and data analytics. In the meantime, Suzlon Energy explores the listing of its service and maintenance business (Suzlon Global Services) to reduce debt.
INDUSTRIAL AND ENERGY
Wärtsilä introduces guarantees for reliability and availability of power plants for self-operating customers – i.e. power plants not operated or maintained by Wärtsilä. Performance targets and KPIs are determined together with customers based on metrics and Wärtsilä guarantees that targets are reached and the achieved levels maintained. The company relies on an onsite support engineer, remote monitoring, data analytics and a fast response capability. And in another move, it acquired energy storage software platform provider Greensmith Energy, aiming to become a global energy systems integrator through the acquisition.
Amec Foster Wheeler announces a big loss prior to its acquisition by Wood Group highlighting difficulties in oil and gas services sector due to low oil prices. Nevertheless, Halliburton expects to be able to raise prices for its diverse services by 10-20% this year – possibly consolidation and restructuring has increased service providers pricing power?
ABB and Sulzer announce UK service partnership for rotating machinery.
Siemens signs long-term service and maintenance contracts for two major power plants in Argentina and Wärtsilä does the same in Pakistan – full O&M on a performance basis.
The business benefits for service vendors of IoT enabled predictive maintenance as laid out by Forbes. Meanwhile, GE signs agreement with Invenergy to install its IoT solution Predix on 13 gas turbines in 6 power plants in US and explains how the oil and gas industry can learn from Tesla. Honeywell launches an analytics hub to “listen” to smart buildings and Siemens launches “Siemens Digital Rail Services”, a business unit with a stated goal of “digitalizing” the U.S. rail industry. First app, Railigent™, Siemens’ cloud-based industrial data analytics platform, which uses real-time monitoring to provide insight on a train’s condition and location. In addition, Railigent employs data analytics to perform root cause analysis and remote vehicle and infrastructure diagnostics. It is connected to Mindsphere, the company’s Internet of Things (IoT) operating system (and rival to GE’s Predix).
Industrial / Technology partnerships for IOT solutions – identify problems before they happen: ABB with IBMand SKF with Honeywell plus ABB buys Austrian industrial automation company Bernecker & Rainer, a move that aims to challenge Siemens for leadership in factory automation. Also Voith, a German engineering company (in a somewhat unorthodox move) acquires 60% of Ray Sono, a German digital communications and user experience agency – to develop digital products and services for the industrial sector – though it’s legitimate to wonder whether this is putting cart before the horse in some ways.
Our article Drones in industry and services covers development in this space, while “Drones go to Work” in Harvard Business Review provides some more background and explains the economics of using drones in some applications like construction. In the meantime, oil and gas company ENI awards drone-based industrial inspection service provider Sky-Futures a three-year contract to inspect all its facilities worldwide using drones and SkySpecs drones inspect 1500 wind blades in one month.
The mobility paradigm is changing and servitizing fast -from car ownership to mobility services with virtually all auto manufacturers investing in ridesharing. Uber’s valuation now rivals or exceeds the market cap of GM. We wrote about this already in June 2016 “Technology is servitizing the world: Auto industry”. Now the Financial Times are reporting that ride-sharing and on-demand taxi apps were considered a viable alternative to ownership by 34 per cent of people, up from 29 per cent a year earlier, in a global Capgemini survey of 8,000 people in eight countries. The survey showed a spread in attitudes towards transport services between developed nations and emerging markets. While 80 per cent of respondents in China said they were likely or very likely to use “mobility on demand” services, the figure was 39 per cent in the US, 29 per cent in Germany and just 18 per cent in the UK. The numbers in China were “very scary” for carmakers. And to illustrate how tech is clashing with engineering, Forbes says that Google is racking up more patents than most automakers on connected and self-driving cars
Finally, 3D printing is reaching an economic tipping point for legacy spare parts (which will upend business models) through new technologies. We wrote a more general introduction two years ago (3D Printing will disrupt the spare parts market) and development is faster than we anticipated. Singapore is fast becoming a 3D printing technology and services hub.
Nick Frank has this to say about the future of field service and Titos Anastassacos says that digitization will dematerialize the economy, drive down prices and make life difficult for many manufacturers and their service businesses
For those in the UK, don’t forget the next Service Community event on 24th May at Oracle’s Reading officeswith presentations by Mark King of Pitney Bowes, Dave Gibson of Oracle, Kris Oldland of Field Service News and Ian Cockett of Bosch. If you need further info please contact email@example.com
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