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Wind Turbine Industry Steps Up to Global Demand

Wednesday, June 25, 2008 Source: Spain
Posted in Renewable Energy Sustainability | Tagged Renewable Energy, Sustainability

Barcelona - The wind turbine industry finds itself in a crucial transition period as it races to catch up with booming global demand for wind power, which surged to nearly 20 GW in annual installations during 2007, and is on track to more than double within a decade led by rapid growth in the US and China. Emerging Energy Research, a leading research and advisory firm analyzing clean and renewable energy markets, expects global installed wind base to grow more than fivefold from its 2007 total of 94 GW to more than 576 GW by 2020.”The bottom line is that while entrenched market leaders Vestas, GE, Gamesa, Enercon, Suzlon, and Siemens have sought to build on relative strong positions in their home regions, several mid-sized and smaller players have sought to exploit this new level of demand in driving the industry to a new scale,” says Hays. “The beneficiaries have been turbine suppliers strongly established in high-growth markets, including Acciona Windpower and Goldwind, as well as mid-sized European players expanding globally, such as REpower, Nordex, and Alstom-Ecotecnia.”

As a result of this booming demand, competition for wind turbine orders has moved from project-driven, national agreements to multi-year frame agreements spanning several regions. These orders increasingly focus on supply of multi-megawatt turbines as the global wind market has made a steady shift toward 1.5 MW and larger turbines, encouraging a number of new suppliers to enter, according to EER’s just-released market study, Global Wind Turbine Markets and Strategies 2008-2020.

“In this high growth environment, competitive positioning among wind turbine suppliers is increasingly dependent on supply chain management,” according to EER Research Director Keith Hays. “At the same time, to remain competitive, players across the supply chain–from bearings to blade suppliers–must rapidly scale up to meet this growing demand.”

EER anticipates the current seller’s market for wind turbines will continue in the short term while the industry builds out for a new phase of stable, global growth, stimulating the market to surpass US$55 billion by 2015. According to EER’s forecasts, global wind demand will continue to boom, going from nearly 20,000 MW in 2007, to just under 50,000 MW in annual installations by 2020 and requiring massive investments in turbine supply.

Larger Projects, Turbine Size Reflect Wind’s Move into Mainstream

The global wind turbine market has seen rapid shifts in scale and product sophistication on the back of booming global demand for wind power, according to EER. This has meant an increase in turbine size and project size as mature markets look to tap lower wind speed sites, while developing markets scale up their total installed wind plant for a greater contribution to the generation mix.

The global turbine market will see increasing turbine size in mature markets that require larger rotors, balanced against steady demand in developing countries for smaller, older product models that are well-received based on cost and proven performance, according to EER. With an increase in average turbine size from just under 1 MW to nearly 1.5 MW in the past six years, EER anticipates global demand for multi-megawatt machines will continue to rise.

EER expects larger projects, particularly over 50 MW, will increase their share in the future. Projects 100 MW and larger will nearly double their contribution to global MW added through 2020 from 24% to over 40%, according to EER.

Smaller Suppliers Challenge Leading Wind Turbine Vendors Market Share

North American and European markets will begin to see increased competition with several players increasing US manufacturing capacity and vying for orders in this booming market, according to EER.

The turbine market has seen increased fragmentation as the top six players have surrendered around 10% of the market to smaller players. “The bottom line is that while entrenched market leaders Vestas, GE, Gamesa, Enercon, Suzlon, and Siemens have sought to build on relative strong positions in their home regions, several mid-sized and smaller players have sought to exploit this new level of demand in driving the industry to a new scale,” says Hays. “The beneficiaries have been turbine suppliers strongly established in high-growth markets, including Acciona Windpower and Goldwind, as well as mid-sized European players expanding globally, such as REpower, Nordex, and Alstom-Ecotecnia.”

Increasing global competition between top suppliers and smaller expanding players will intensify post-2010, according to EER. As multiple experienced players challenge the dominance of GE and Vestas, price competition will heat up. With increasing demand for turbines, customers that can provide high volume, long-term, firm orders that offer strategic market share positions to turbine suppliers are likely to figure more prominently in suppliers’ order books, according to Hays. This trend will mark more sophisticated strategic account management targeting multinational utilities and IPPs, according to Hays.

Manufacturing Reflects Globalization of the Wind Industry

The wind turbine industry continues to globalize. Europe’s manufacturing pioneers have begun to penetrate North America and Asia. A growing presence of Asian manufacturers in Europe and North America will become more pronounced in the years ahead. Additionally, wind turbine sales and supply chain strategies will take on a more international dimension as shipment volumes increase, according to EER.

With the globalization of the wind industry, supply chain management has become a key competitive driver. “The relationships between OEMs and their component suppliers have become increasingly crucial, and have come under increasing stress in the past three years as soaring demand has required faster ramp-up times, larger investments, and greater agility to capture value in a rapidly growing sector,” says Hays. Manufacturers have sought to strike the most sustainable, competitive balance between vertical integration of component supply, versus full component outsourcing to fit their turbine designs.

Component suppliers will continue to play a critical role in scaling the wind industry as they take their businesses globally in step with the turbine suppliers they provide. Due to the diverse issues facing each component supplier, when deciding whether to increase production capacity or not, the wind industry has struggled to move as a unified whole, able to meet booming demand. Greater collaboration across the supply chain, spurred on by shortages but also turbine performance, is already leading to better coordination that will improve the industry’s ability to deliver, according to Hays.

The surge in global MW added observed over the past three years has served to stabilize demand for long-term, higher volume investments in adding new capacity. EER expects this surge to produce sustained growth through 2015 that will surpass US$55 billion installed annually as the wind industry moves into a new phase of more secure growth in the mainstream power mix.

ABOUT EER’S WIND TURBINE MARKET STUDY

EER’s market study, Global Wind Turbine Markets and Strategies 2008-2020, was released in June 2008. This study provides extensive analysis of wind turbine markets including the strategies of leading wind turbine manufacturers and their component suppliers, the competitive positioning of these players in the global market, and the challenges they face going forward. Follow this link for the study’s Table of Contents and List of Exhibits.

ABOUT EMERGING ENERGY RESEARCH

Emerging Energy Research is a leading advisory and consulting firm analyzing clean and renewable energy markets on a global basis. EER is based in Cambridge, Massachusetts and Barcelona, Spain. Our clients - which include many of the world’s largest energy companies, utilities, technology vendors, and financial institutions - seek our informed, objective view and advice on these fast developing markets. For more information visit www.emerging-energy.com