Supply Chain Bottlenecks Could Trip Up Wind Sector's Sprint
- January 11, 2019
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Consulting group Wood Mackenzie Power & Renewables is warning players all across the wind energy sector that as many as one of every four projects slated for development over the next two years could be at risk due to unprecedented supply chain bottlenecks.
More than 23 gigawatts of new wind energy capacity is forecast to be built in the US over the next two years, much of it driven by the expected end of federal Production Tax Credits. But supply chain bottlenecks could lead to project cancellations and postponements, a new study says.
Dan Shreve, head of global wind research at Wood Mackenzie Power & Renewables, warns in the report that increased demand for transportation capacity due to growth in partial repowering activity, logistics requirements, and competition from other industrial sectors could "severely hamper" the transportation segment’s ability to ship components.
The possible supply chain constraints may increase risks all across the wind energy sector, and increase the likelihood of higher costs, missed deadlines, lost production, and fewer federal tax breaks if projects can’t be commissioned in time.
The report estimates that if these supply chain constraint issues are not addressed, roughly 23% of the wind energy capacity installations expected in 2019-2020 could be delayed or canceled altogether.
Turbine installations could decline by 1.1 GW of capacity representing a potential loss of more than $800 million in turbine sales over the next two years. Tax credit impacts could represent lost revenue of up to $1.3 billion over the typical 10-year tax credit period.
The consulting firm says that that although demand surges have put pressure on transportation capacity in the past, the total level of effort required from logistics providers in the coming months will be "substantially higher" than during past peaks.
New turbine technology means that components are larger and heavier. That alone increases requirements for highway escorts, leading to reduced transportation equipment cycle times, and increased demand for larger construction cranes.
The consulting firm outlined five strategies that may help to ease the expected supply chain crunch:
- Shift installation schedules and transport deliveries to minimize quarterly peaks
- Establish forward storage sites to pre-position component inventories near wind farms
- Prepare transload and wind farm sites to accept early deliveries
- Prioritize shipments to the most efficient sites and wind farms
- Communicate these findings and develop action plans now.
The report warns that "aggressive increases in equipment transportation turnaround times" along with efforts to spread out demand to increase equipment use during off-peak periods will likely be required.
The report was commissioned by the Wind Energy Logistics Group, which is made up of 16 companies from across the wind energy supply chain.