Global Opportunities in Wind Power

2,903 views

Published on

2012 will become a tough year for wind OEMs as a decline in wind turbine prices is likely, mainly due to overcapacity in turbine production
Chinese players especially may be subject to declined profitability through falling ASPs. The wind turbine manufacturing in China is likely to become consolidated. Even top 10 producers may be reshuffled.

Published in: Technology, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
2,903
On SlideShare
0
From Embeds
0
Number of Embeds
8
Actions
Shares
0
Downloads
68
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Global Opportunities in Wind Power

  1. 1. Frost & Sullivan Wind Power – Overview and Opportunities Helping Our Clients Accelerate Growth Through Best Practices in Growth, Innovation and Leadership February , 2012
  2. 2. Table of Contents <ul><li>Introduction to global wind power industry </li></ul><ul><li>Drivers and recent changes </li></ul><ul><li>Competitive landscape: recent changes and 2012 -2013 predictions </li></ul><ul><li>Value chain and adjacent markets </li></ul><ul><li>Major technology developments </li></ul><ul><li>Concluding remarks </li></ul>
  3. 3. Asia, mainly, China has become #1 region for new installations and will continue to increase its capacity Italy 360 <ul><li>Frost & Sullivan Conclusion: </li></ul><ul><li>Aggressive growth in installed capacity during last few years made China #1 market for new installations, the government goals and plans will continue to drive new additions </li></ul><ul><li>The US is a “stop-and-go” market due to the policy mechanisms </li></ul><ul><li>Europe is still an important region for off-shore wind power development, leading the global industry in number of installations and technology development </li></ul>New annual installed capacity in MW, 2003-2010 Source: GWEA, 2011 2003 2005 2008 2010 5,440 6,339 8,641 18,956 2,608 2,424 8,351 9,307 1,685 1,799 6,298 5,021 1,372 1,765 1,737 2,140 408 1,430 1,655 1,527 99 502 1,595 1,438
  4. 4. Major market drivers for wind energy: long-term need is intact… Italy 360 <ul><li>Frost & Sullivan Conclusion: </li></ul><ul><li>The long-term demand for renewable energy is likely to stay on the political agenda, thus giving at least some certainty to investors and the industry </li></ul><ul><li>Wind power as the most mature large-scale renewable energy technology has a good chance to withstand the current headwinds. More so, the cost of wind electricity is nearly on par with conventional power </li></ul>Wind energy market: key drivers and restraints, 2011-2012 Availability of grid infrastructure enables integration of wind power in the European power system Demand and supply imbalance of energy is driving effort for energy independence EU 2020 target to meet 20 per cent of energy needs from renewable sources by 2020 Wind power generation technology advancement Growth Drivers Market Restraints Lack of expertise in offshore wind technology Weaker demand for wind energy leading to overcapacity in the market Financial crisis has resulted in stricter lending terms, causing project financing issues Planning and bureaucratic issues delay project permits and executions Source: Frost & Sullivan, 2011
  5. 5. … short-term: declining macro environment - the cost of funding has increased Italy 360 Strained national budgets; widening debt crisis in Europe ASP pressure from ongoing supply/demand mismatch Fiscal constraints Demand is shifting globally from Europe to Asia Growth is slowing down Factors of Influence New Market Trends Heightened emphasis on bankable, qualified products and capacity 4 1 2 3 Revisions of renewable energy subsidies Rising finance costs Emergence of new players: “buy Chinese, borrow Chinese”, corporations Exit of lower-tier players, consolidation of industry Access to R&D and latest technology becomes vital Frost & Sullivan Conclusion: While the new capacity additions will be curtailed in the near term (2011-2013), we still see significant longer term opportunities for wind energy worldwide based on country targets for clean energy and long-term demand. At near term, fiscal tightening aimed at alleviating the EU sovereign debt levels could impact subsidies at the time when the private sector is only starting to emerge as a source of funding. Source: Frost & Sullivan, 2011
  6. 6. Current policy developments increasingly put risk on subsidies Italy 360 Key Wind Markets, Annual Installations MW, 2011-2012 Neutral Negative Positive India 1,460 2,900 Europe USA 5,000 6,000 4,000 China 2011 2012 Annual installations, MW 9,300 9,600 Frost & Sullivan Conclusion: The market conditions are putting extra pressure on the wind OEMs to reduce prices and bring wind power on par with conventional electricity Note: The graph is not drawn to scale Note: All figures are rounded. Source: Frost & Sullivan, 2011 19,000 17,000 Country Policy Development Impact on Wind France Wind support hasn’t been changed, contrary to solar Spain Proposal to cut FIT by 35%, plus other measures translating into insufficient returns UK New system based on long-term fixed contracts is proposed, which may reduce return for wind farms. Germany Solar FIT reduced, proposal to cap the market, Wind still supported. US Fed cash grant expires in Dec, Fed budget for clean energy programmes cut by the US Senate.
  7. 7. Competition is fierce, the Chinese has got global ambitions Italy 360 Cumulative installed capacity by manufacturer, 2010 <ul><li>Frost & Sullivan Conclusion: </li></ul><ul><li>Having inundated domestic market and running from the upcoming industry consolidation, the biggest Chinese wind OEM announced plans for global expansion </li></ul><ul><li>While they managed to win a few contracts lately, it’s early to talk about the upcoming Chinese dominance similar to the solar industry </li></ul><ul><li>Expansion by buying approved site for wind power development is more likely than large-scale sales of equipment in the near term </li></ul>Four largest Chinese wind OEMs
  8. 8. Will the Chinese conquer the global wind manufacturing? Italy 360 Wind project developer/owner priorities, 2011 <ul><li>Frost & Sullivan Verdict: </li></ul><ul><li>An entire offer including on-the-ground servicing teams and support has to be taken into account when comparing incumbent and Chinese turbine producers. While smaller developers, constrained by cost of capital, may be tempted to “buy Chinese, borrow Chinese”, we don’t anticipate utilities and large corporate investors choosing Chinese products in the near-medium term. </li></ul><ul><li>One reason is that reputational risks from accidents with wind turbines are high, which hasn’t been discussed lately, in contract with cost advantages Chinese equipment can deliver. </li></ul><ul><li>Technology improvement along with proven track record of faultless operations are the key pre-requisites, which Chinese manufacturers will still have to attain. </li></ul>Reducing equipment, construction/operation costs Increasing reliability of proven technology More stable cash flows from geographic diversification Bankable equipment Access to low-cost finance 4 1 2 3 5 <ul><li>In order to capitalize on these trends, successful wind turbine manufacturer will have to: </li></ul><ul><ul><li>Optimize inventory/plant utilization levels </li></ul></ul><ul><ul><li>Own proprietary and reliable turbine technology </li></ul></ul><ul><ul><li>Balance cost cuts and warranty extension </li></ul></ul><ul><ul><li>Offer a range of equipment </li></ul></ul><ul><li>Can Chinese leading wind turbine producers deliver it? </li></ul><ul><li>Or will increased concerns with wind turbine’s quality present a chance for international players to re-gain market share in China? </li></ul>Source: Frost & Sullivan, 2011
  9. 9. Weather warning: headwinds for wind industry in 2012-2013 Italy 360 Major market developments in 2012-2013 Uncertainty of demand Raising financing costs cutting out smaller developers Intensifying competition in equipment segment Strong buyer’s market 4 1 2 3 <ul><li>Frost & Sullivan Conclusion: </li></ul><ul><li>2012 will become a tough year for wind OEMs as a decline in wind turbine prices is likely, mainly due to overcapacity in turbine production </li></ul><ul><li>Chinese players especially may be subject to declined profitability through falling ASPs. The wind turbine manufacturing in China is likely to become consolidated. Even top 10 producers may be reshuffled </li></ul>Source: Frost & Sullivan, 2011
  10. 10. Tables of Contents <ul><li>Introduction to global wind power industry </li></ul><ul><li>Drivers and recent changes </li></ul><ul><li>Competitive landscape: recent changes and 2012 -2013 predictions </li></ul><ul><li>Value chain and adjacent markets </li></ul><ul><li>Major technology developments </li></ul><ul><li>Concluding remarks </li></ul>
  11. 11. Looking for investment opportunities… equipment production segment hardly presents any opportunities Equipment Manufacturers: 1 1 <ul><li>Concentrated market with 10-15 major players globally. Examples: Vestas, GE Energy, Gamesa, Enercon, Suzlon, Siemens Wind, Nordex </li></ul><ul><li>Opportunities: </li></ul><ul><ul><li>Not abundant as the equipment supply is concentrated and dominated by large multi-discipline industrial powerhouses </li></ul></ul><ul><ul><li>Offshore wind power presents some opportunities but the competitions is fierce </li></ul></ul><ul><ul><li>A potential market segment to look into: pure – play offshore wind technology developers : Bard Engineering, Multibrid (Areva Wind since June 2010), DarWinD, Scanwind, Clipper, DeWind (Daewoo) etc. </li></ul></ul><ul><ul><li>Long-term opportunity - floating wind technology developers </li></ul></ul>X X Source: Frost & Sullivan, 2011 Equipment Manufacturers Production Equipment Suppliers Project Developers/ Owners Component Suppliers Planning and Construction Service Providers Traditional Approach to Value Chain Extended Value Chain
  12. 12. Looking for investment opportunities… project development may have a few hidden gems, but still risky Project development : 2 2 <ul><li>Overall, this segment is in a slightly better position than OEMs , and is likely to benefit from ASP reduction and intensified competition among turbine producers </li></ul><ul><li>However, uncertainty about the future of the government support in the short term may make it risky </li></ul><ul><li>Market structure is less concentrated but utilities form a major force. However, there is a fair number of smaller developers </li></ul><ul><li>Opportunities: </li></ul><ul><ul><li>Mid-size and small size on-shore wind project developers finding it difficult to finance their projects at present conditions </li></ul></ul><ul><ul><li>Offshore wind development is dominated by utilities due to high Capex </li></ul></ul>X X Source: Frost & Sullivan, 2011 Equipment Manufacturers Production Equipment Suppliers Project Developers/ Owners Component Suppliers Planning and Construction Service Providers Traditional Approach to Value Chain Extended Value Chain
  13. 13. Looking for investment opportunities… components are plenty but many major parts have been vertically integrated into wind OEMs Component manufacturers : 3 3 <ul><li>Thousands of suppliers are present, with all critical components having been vertically integrated into wind OEMs </li></ul><ul><li>Offshore wind could present opportunities in Europe, however, critical components tend to be manufactured by industrial powerhouses </li></ul><ul><li>Opportunities: </li></ul><ul><ul><li>HVDC cables may come in short supply as offshore wind segment picks up in Europe. Major suppliers: ABB, Siemens, Nexans, Prysmian </li></ul></ul><ul><ul><li>Off-shore installation vessels : A2Sea (49% bought by Siemens in 2010) </li></ul></ul><ul><ul><li>Foundations: Burntisland Fabrications, BiFab, WeserWind </li></ul></ul>X X Source: Frost & Sullivan, 2011 Equipment Manufacturers Production Equipment Suppliers Project Developers/ Owners Component Suppliers Planning and Construction Service Providers Traditional Approach to Value Chain Extended Value Chain
  14. 14. Looking for investment opportunities… scouting other components markets is worth a try … Source: EWEA & Frost & Sullivan Wind Energy Market: Main Cost Components of a Wind Turbine (Europe), 2009 Wind Energy Market: Major Components of a Wind Turbine (Europe), 2009 1 2 3 Wind Energy Market: Main Components of a Wind Turbine (Europe), 2009 4 5 Component Onshore Offshore 6 Tower Control System Gearbox Blades 7 8 9 Relevant Irrelevant Pitch Rotor Blades Wind direction Brake Low-speed shaft Gear box Generator Controller Tower Yaw drive Yaw motor High-speed shaft Nacelle Anemometer Wind Vane Component % onshore % offshore Tower 26 40 Rotor Blades 22 25 Gearbox 13 19 Power Converter 5 5 Others 34 15 Foundation Bearings Generator Transformer Power Converter
  15. 15. Looking for investment opportunities… however, procurement practices have to be taken into account … <ul><li>It is by virtue of the complexity of the technology, long-term agreements with turbine manufacturers and the utmost focus on quality that makes most wind turbine component markets difficult to enter, with the exception of towers. </li></ul><ul><li>From the analysis, it can be seen that as the onshore wind energy market has been maturing, the components market has become more consolidated either through companies dropping out or through mergers and acquisitions. </li></ul><ul><li>The opportunity for new entrants lies in the growing offshore wind energy market as well as component markets such as towers that do not require complex technology. </li></ul>Wind Energy Market: Summary of Market Attractiveness of Wind Energy Components (Europe), 2009 Source: Frost & Sullivan, 2011 Component Technological complexity Competitive structure Procurement practices Barriers to entry Supply-demand gap Bearings High Consolidated Outsourced Very high Shortening Blades Moderate Consolidated Trend towards in-house High Low Control System Moderate Consolidated In-house High Very low Foundation (offshore) Moderate Consolidated Outsourced Moderate Very low Gearbox High Consolidated Outsourced Very high Shortening Tower Low Fragmented Trend towards in-house Low Very low
  16. 16. Looking for investment opportunities… vibrant wind services industry is set to flourish as wind plant owners strive to max output Service providers: 4 4 <ul><li>Traditionally dominated by wind OEMs, the service industry is changing as ISPs are increasingly active and see their market share rising (28% in 2009) </li></ul><ul><li>OEMs form alliances with ISPs to outsource certain jobs </li></ul><ul><li>Key independent service providers in EU: GES, B9 Energy, Voith Industrial Services Wind </li></ul><ul><li>Opportunities: </li></ul><ul><ul><li>Regional ISPs having good relations with OEMs and servicing a number of wind farms. Usually started by engineers, such companies can benefit from a private equity investor’s growth oriented mindset </li></ul></ul><ul><ul><li>Offshore wind services is a growing sector as evidenced by a few O&G services Cos diversifying into it </li></ul></ul>X X Source: Frost & Sullivan, 2011 Equipment Manufacturers Production Equipment Suppliers Project Developers/ Owners Component Suppliers Planning and Construction Service Providers Traditional Approach to Value Chain Extended Value Chain
  17. 17. Looking for investment opportunities… vibrant wind services industry is set to flourish as wind plant owners strive to max output Service providers: 4 4 <ul><li>Traditionally dominated by wind OEMs, the service industry is changing as ISPs are increasingly active and see their market share rising (28% in 2009) </li></ul><ul><li>OEMs form alliances with ISPs to outsource certain jobs </li></ul><ul><li>Key service providers: GES, B9 Energy, Voith Industrial Services Wind </li></ul><ul><li>Opportunities: </li></ul><ul><ul><li>Regional ISPs having good relations with OEMs and servicing a number of wind farms. Usually started by engineers, such companies can benefit from a private equity investor’s growth oriented mindset </li></ul></ul><ul><ul><li>Offshore wind services is a growing sector as evidenced by a few O&G services Cos diversifying into it </li></ul></ul>X X Source: Frost & Sullivan, 2011 Equipment Manufacturers Production Equipment Suppliers Project Developers/ Owners Component Suppliers Planning and Construction Service Providers Traditional Approach to Value Chain Extended Value Chain
  18. 18. Research is focussed on cost-reduction technologies and offshore turbines Compared to offshore wind, onshore wind is considered mature. Many established turbine manufacturers are operating in this market. Barriers to entry are very high giving leeway only for breakthrough technologies either in turbine technologies or in turbine components. Offshore Technologies Offshore wind is the future of wind energy in Europe. Considering the strong head start they have compared to other regions, they are likely to lead the market. Onshore Technologies Gearbox Generators Turbines Towers Blades Planetary gear solutions, gearless turbines. Permanent magnet generators, high-temperature superconducting generator. Multi-megawatt power rated turbines, individual pitch control turbines. Taller towers moving close to hub heights up to 150 mts. Longer blades, stall-regulated blades, variable pitch blades, carbon fiber to replace fiberglass. Energy Storage Technologies Pumped Hydro Storage CAES Flywheels Battery Storage (Lithium-ion) Stage of Development Developed Nascent Source: Frost & Sullivan Deepwater Turbines Floating wind turbine generators, higher rotor speeds, lower torque, downward facing turbines.
  19. 19. Leaders in research and development are primarily large wind OEMs and component manufacturers Planetary gearing and medium speed generators Emerging Technologies Companies Operating in this Sphere Direct drive permanent magnet generator High-temperature superconducting generator Advanced converters (higher wind speed cut-offs) (Areva’s Multibrid GmbH) Deepwater wind turbines Blade designs (alternative to fiber glass) Source: Frost & Sullivan Wind Energy Market: Companies Involved in Emerging Technologies (Europe), 2009 Converteam acquired by GE in September, 2011.
  20. 20. Contact Details “ The Growth Partnership Company” Frost & Sullivan www.frost.com Alina Bakhareva Research Manager – Renewable Energy, Energy & Power Supplies Tel: +44 207 915 7829 Email: alina.bakhareva@frost.com Rachel Hutchinson Director, Business Development Tel: +44 207 343 8344 Email: rachel.hutchinson@frost.com

×