09.15.09Keith Hays, Research Director, Emerging Energy Research

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The global wind turbine supply chain faces the challenging task of bridging the gap between the high level of growth and the bottlenecks of 2008, and the resumption of high growth expected in 2010. Although some capacity investments have been frozen and new market entries postponed, 2009 has offered the industry a breather to retool its strategy for longer-term, sustained growth as demand becomes more consolidated globally. The global wind turbine component supply market will be shaped by the following key trends in the near term as the industry looks forward to the next economic cycle, including:

• Global wind turbine demand will likely rebound by the end of 2010 to levels equal to or above those seen in 2008. Global cumulative installed wind power capacity is expected to jump from 122 GW to over 227 GW between 2008 and 2011.
• Outsourcing opportunities are increasing as OEMs seek expansion. While specific components such as control systems and blades are often manufactured in-house, OEMs are honing their supply chains to optimize product quality by relying on outsourcing.
• Product size is becoming a key strategic differentiator for component suppliers. As turbines scale to 3 MW and larger, logistical issues require component suppliers to adapt to OEM needs with new product dimensions -- and not all existing players are prepared to make those investments.
• Investment levels will reach new heights, with the blade, tower, generator, gearbox, and bearing markets combined totaling nearly US$30 billion per annum by 2020, led by towers and blades.

Global Demand Forecasts, 2009-2020: Rebounding Toward Steady Growth

The global wind industry saw expansive growth in 2008, topping 120 GW installed worldwide with an annual increase of 23 percent. In the long term, Emerging Energy Research anticipates this figure will rise steadily to over 600 GW installed by 2020. However, the industry finds itself in the midst of a global recession in which project postponements, order cancellations, and company downsizings have become commonplace. Framed within the long-term context of cumulative megawatts installed through 2020, EER anticipates a compound annual growth rate of 18 percent between 2009 and 2020. Key assumptions behind these forecasts include:

• Long-term policy is favorable.
• Wind's position improving in the generation mix.
• Utility participation is increasing.
• Grid issues persist, but are gradually addressed.
• Offshore evolves as a key contributor.

Table 1: Global Wind Power Cumulative MW Installed by Region: 2000-2020

Source: Emerging Energy Research

Competitive Trends in Component Supply

The onset of the 2006-2008 turbine shortage, followed by the current recession, has begun to reshape the competitive structure of wind turbine component segments. The number of new entrants has proliferated across the supply chain: more in towers, while less new entrants in gearboxes, bearings, and generators in most markets. At the same time, blade suppliers continue to compete with internal production. Key trends observed in these segments include:

• Blade suppliers weighing investments, positioning versus in-house supply. In 2009, wind turbine blade suppliers face increasing competition at a time when demand has faced a short-term dip. Forced with choosing between waiting out the market to invest, or plowing ahead with heavy CAPEX commitments, players have had to define themselves as global or local players able to act as product development partners and relevant options for localized cost reduction. While OEM in-house supply continues to play a key part in the market, at an estimated 40 percent of total supply, independent blade suppliers have opportunities to position themselves based on targeted sales for turbine models in specific markets.
• Gearbox suppliers steadily diversifying as market expands globally. Trends in gearbox supply indicate a steady shift in terms of the globalization and scale of the segment. Segmentation of the competitive landscape by product portfolio and delivery volume presents a market dominated by three key players; however, scaling regional players in China and Europe promise more intense competition in the next three to five years.
• Full portfolio, integrated bearings suppliers lead; pitch and yaw providers entering. The global bearings supply industry can be split between players with global reach and a full suite of products for wind turbines, and smaller niche players serving specific markets with one or two bearings types. Recent explosive growth of the wind industry has welcomed many new firms, often from large companies supplying several sectors, to diversify their sales into wind energy.
• Local tower supply booming, bursting with market slowdown. The global tower supply market remains a collection of local and regional markets driven by competition among nearby suppliers for a share of OEM demand. This dynamic is reflected in the competitive structure of the market, in which most players remain contained to their region serving a select group of OEMs. This trend continued in 2008 and 2009 as tower suppliers seek to entrench themselves, leveraging local presence, and, in some cases, expanding service offerings, though the current market slowdown has complicated capacity increases.
• Generator supply increasingly competitive as turbine size scales, markets become more diverse. The competitive structure of the generator market remains relatively uneven, with a split between leading global suppliers such as ABB and Converteam, followed by mid-sized regional manufacturers and smaller start-up operations spread between Asia, Europe, and North America. Generally mid-sized players can be seen gaining new clients as expanding OEMs diversify, while smaller OEM start-ups have formed partnerships with single suppliers in efforts to launch their products.

Table 2: Competitive Market Structure Overview, Wind Turbine Component Segments

Note: Bubble size indicates relative market value
Source: Emerging Energy Research

This article is an excerpt from EER's market study, Wind Turbine Supply Chain Strategies 2009-2020, released in July 2009. The full study is available for purchase at emerging-energy.com.

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Reader's Comments

Date	Comment
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