Friday, December 16, 2011
What is the “useful life” of a wind turbine?
A critical part of any wind energy project is a Power Purchase Agreement (PPA), which is a contract between a developer and a utility for the purchase and sale of the electricity generated by a wind turbine. The PPA generally has a term between 20 and 30 years. A PPA from an established utility is generally considered “bankable” meaning that professional advisors such as bankers, accountants and lawyers have analysed the risk and agreed to provide or structure financing for the wind project based on a “useful life” of 20 to 30 years. Lease agreements with landowners may have provisions providing for a lease of 20 to 30 years with additional 5 year options to renew. Some developers take the view that the “useful life” of a wind turbine may be indefinite if properly operated, maintained and refurbished. When drafting contracts and agreements given that most PPAs are for 25 years I use this as a guideline for the “useful life” of a wind turbine.