The next dimension The amount of wind power installed annually has reached a high level. Projects have become ever-bigger and require a joining of forces. Wind power companies are merging and energy companies are now moving into the market. The worldwide wind power market has grown by many hundred percent in the last ten years. The annually installed power grew from 1,290 MW (1995) to 8,154 MW (2004) 1. This market growth resulted in a concentration of the industry in two phases (1997 to 1998 and 2002 to 2004, see diagram, page 104). The ongoing consolidation and wind industry reshaping process is expected to result in a new status quo with a couple of major global players, smaller regional contenders, and remaining niche market suppliers taking what is left. A class of its own: The Top Five Vestas: Boosted by record US sales Vestas projects a 2005 turnover of 2.5 2.7 billion. The 32.7 % market share of the world s number one in 2004 was 2.2 % higher than the combined share held with NEG Micon in 2003. Vestas is currently also the undisputed offshore market leader. In the period 2000 2004 several offshore projects were completed, all with 2 MW turbines. In 2005 the V90-3MW model has been used for the first time in two 90 MW UK offshore wind farms: Kentish 1 source for all market statistics in this article: International Wind Energy Development. World Market Update 2004. BTM Consult, www.btm.dk Flats and Barrow. Key features of the V90-3MW are a trend-setting top head mass (nacelle + rotor) of only 111 tonnes, and a compact drive train concept whereby the main shaft has been replaced by a giant ring bearing. The concept represents a technological leap forward for Vestas, aimed at lower manufacturing costs, along with lighter, cheaper towers and foundations. New for Vestas are a V100-3MW and the offshore design V120-4.5 MW, completing the product range from 850 kw 4.5 MW. The booming North American market is served with fixed speed (former NEG Micon) V82-1.65 MW machines or the Optislip type V80-1.8MW. General Electric s so-called variable speed patent, valid until 2010 or 2011, so far prevents competitors from entering the North American market with such products. It could also potentially give patent holder GE a competitive edge in the emerging US offshore market. Now Vestas is probably going to buy the German generator manufacturer Weier Electric, which has been a supplier to Vestas for many years. Weier initially developed a semi-variable speed system for Vestas, which the latter further developed into the once widely used Optislip technology. Weier continued selling the technology to third parties like Gamesa and Fuhrländer under its own trade name Rotor Current Control (RCC). In 2000 100
Vestas became strong through exports and is today active in more countries than any other manufacturer. The photos show two wind turbines in Igrea Nova (Portugal). Photos (5): Jan Oelker Top 10 list of the largest wind turbine manufacturers (2004). The figures are based on company statements. The sum calculated from installation figures is approx. 4% smaller (8,154 MW). Vestas made a switch to variable speed operation for the 850 kw V52, 1,750 kw V66, and 2.0 MW V80 series. A 1.8 MW Optislip version of the V80 is currently being sold on the North American market, as this technology does not violate General Electric s variable speed patent. By buying Weier, Vestas could make life difficult for some of its main contenders on the US market, as the patent issue still applies for all parties wanting to sell variable speed turbines, except Enercon, which solved the issue on a one-to-one basis with General Electric in 2004. Gamesa Eólica of Spain is the wind turbine manufacturing arm of Gamesa Corporación Technológica. Additional activities in the field include aeronautics, and the development of wind farms through its sister company Gamesa Energía. Gamesa jumped from fourth place in 2003 to second place in 2004 by installing 1,474 MW, representing 17.3 % of total world installations. In the second half of 2003 Made Tecnologías Renouvelables was acquired and integrated into the wind arm. The key volume product is the 2 MW variable speed pitch-regulated turbine series made up of four models and the largest model is the G90-2.0 MW, with a 90- metre rotor. Gamesa is a typical vertical integration supplier which designs and manufactures its full demand for rotor blades, computer control software, and towers in-house. Percentages for gearboxes, generators and power electronics range between 40 50 %. Gamesa commenced with the manufacture of wind turbines only in 1994 under a technology transfer license agreement with Vestas that extended to the initial V80/G80 model. The formal cooperation ended in December 2001 after Vestas sold its Manufacturers MW Share % Vestas 2,783 32.7 Gamesa 1,474 17.3 Enercon 1,288 15.1 GE Energy 918 10.8 Siemens 507 6.0 Suzlon 322 3.8 Repower 276 3.2 Mitsubishi 214 2.5 Ecotècnica 214 2.5 Nordex 186 2.2 Others 326 3.8 Total 8,508 100.0 40 % shareholding in Gamesa Eólica to the parent company. Gamesa is now filling the gap in the new m u l t i - m e g a w a t t class with a turbine of at least 4 MW, to be ready in 2006. Product development takes place under the umbrella of Gamesa Wind Engineering based in Silkeborg, Denmark. Enercon of Germany is the only remaining privately owned large supplier after the Bonus takeover. Enercon reached position three in 2004, and has dominated the direct drive market segment unchallenged since 1992. At the April 2005 Hanover industrial fair, the company reported that its fourth E-112 direct drive near-shore prototype at Emden has been fully tested at 6 MW output. This is a 33 % rise compared to the initial 4.5 MW prototype power rating. Next year an E- xxx prototype will be put up with a new larger rotor than the current 114 metres, featuring the efficient rotor blade shape already known from the latest 330 kw E-33, 800 kw E-48, and 2.0 MW E-70 series. Another envisaged result of evolutionary product development is that the output of the E-xxx is expected to rise by at least 35 %. In addition, a 2 MW E-82 prototype with an 82-metre rotor will be erected in the autumn, with production planned for the middle of 2006. Like Vestas and Gamesa, the Aurich-based German market leader is a typical vertical integration company, which Enercon has so far stayed independent thanks also to the many inventions which have made the company strong. The photo shows the erection of a mast made of prefabricated concrete sections. This makes an especially high hub height possible (113 m). manufactures among others, its full demand for rotor blades, ring generators, inverters and computer controls. But unlike the majority of its competitors Enercon is also a leading pioneer in advanced integrated decentralised power systems. A key example is the world s first full-scale autonomous, renewable energy supply system based on wind power and hydrogen. The project, a joint venture between Enercon and the Norwegian hydrogen specialist Hydro, became operational in 2004 and serves as a model for future commercial systems. Additional decentralised power systems under development include wind-water desalination, winddiesel, and wind-small hydro. Storage systems comprise among others, of flywheels and super capacitors. The variable speed patent dispute between GE and Enercon The Wind Tech-400 Micro Turbine is the first 3 phase turbine being introduced into the UK market exclusively by Powertech Solar Ltd. 21 Haviland Road Ferndown Industrial Estate Dorset, BH21 7RZ Phone: +44/8707/300111 Fax: +44/8707/300222 www.powertech-solar.com 101
was resolved in 2004, but the latter does not sell turbines in the US. Enercon s future wind market success and therefore relative growth perspectives will to a large extent depend on its capacity to increase its export share. GE Energy is a giant its turnover in 2004 amounted to about 14.4 billion. The renewable energy activities comprise of photovoltaic systems, wind energy and hydropower. Based in Atlanta, Georgia (USA), GE Energy provides equipment, service and management solutions in the fields of power generation, oil and gas, transmission and distribution, distributed power and energy rental industries. In 2004 wind activities yielded 10.8 % of the world market. The key 2005 volume model is the proven variable speed 1.5 MW series (the prototype was erected in 1996), with about 3,000 of these turbines operational worldwide by early 2005. Another 1,600 1.5 MW machines will probably be added this year. GE holds a strong position in the US market where it hopes to erect 1,100 units (1,650 MW) before the end of the year. A new move is that the 3.6 MW model has been upgraded to the GE 3.6sl Offshore, featuring, among others, a 111-metre rotor diameter (was 104m). The GE 3.6s has been used offshore at Arklow Bank in the Irish Sea, a project developed and financed by GE. The GE 3.6sl Offshore may be applied first in the 108 MW UK Gunfleet Sands project. Delivery of the first batches of 2.X series (2.3 and 2.5 MW) turbines will commence in autumn 2005 from Germany, ending a period when GE offered only one volume model. Siemens: Siemens Power Generation (PG), the Group that bought what used to be Bonus Energy, has a workforce of over 30,000 employees worldwide, and an annual turnover in the 7 billion range. By adding wind technology, Siemens PG expanded its power generation product portfolio comprising of conventional coal, lignite, and gas-fired power plants. Additional interests include hydropower, geothermal energy, biomass, solid fuel cells, and nuclear energy. PG s Danish-based Brande (wind turbines) and Aalborg (rotor blades) plants constitute the core of Siemens Wind Power. Siemens manufactures a full 100 % of its demand for rotor blades with the aid of a novel patented One-shot method (in one piece, no seams). Over the past few years Bonus had continuously lost market share to its competitors. In 2004 the company s global market share was only 6.0%. But that fifth place ranking is expected to improve, as Siemens aims to double its turbine sales volume over the next six years. The product range now includes turbines from 600 kw 3.6 MW. What was once Bonus is one of the two offshore wind market leaders, with the much praised Nysted project (72 x 2.3 MW) as part of its track record. Variable speed operation was first introduced as an option for the 2.3 MW fixed speed Combistall volume model. The range of fixed-speed turbines can be sold in the US, as they do not violate GE s variablespeed patent. A prototype variable-speed pitch-controlled 3.6 MW unit with a 107-metre rotor was erected in late September 2004 in Hovsøre, West Jutland. The turbine type will be scaled up to the 5 MW class in the next few years. About six months after acquiring Bonus, Siemens bought Flender Holding, the parent company of leading wind turbine drive systems supplier Winergy. The latter controls around 40 % of the world market for wind turbine gearboxes; among its main clients are some of the leading wind turbine suppliers. The chances of the regional players In 2004 the top-3 manufacturers, Vestas, Gamesa and Enercon, together accounted for 5,545 MW or 65.2 % of the world market, and the top-5 for 6,970 MW (81.9 %). Manufacturers in positions 6 to 10 are sometimes rightly or wrongly described as regional players, in a reference to the limited number of countries and regions they typically serve. The biggest of the smaller players is Suzlon of India (322 MW), followed by Repower of Germany (276 MW), Mitsubishi of Japan and Ecotècnia of Spain (both 214 MW), and Nordex of Germany (186 MW) in tenth place. Each has the potential to grow using its own specific survival and expansion strategy. Suzlon, for instance can benefit from the potentially big home market of India and a low local wage structure, while new wind technology is developed in countries like Germany (turbines) and the Netherlands (rotor blades).
power plants increasingly being built in expanding international markets. This trend has to be set against relatively small regionally based wind projects with a couple of turbines that were typical of the past decades. However, while in absolute numbers smaller size projects may be losing ground, the total world market keeps on expanding and not all regions automatically favour large-scale projects. It could well be, that for those specific circumstances and projects requiring a personal touch and direct customer commitment, that specialized regional market players could play a lasting structural and mutually beneficial role. Portugal has become one of the most important wind power countries in recent years. Bonus installed the wind farm Mingarrinhos there. Utilities on the move Repower s giant 5 MW offshore wind turbine has, at a stroke, turned the medium-sized company into a respected technology leader. And being a market frontrunner could give Repower a competitive edge over much larger competitors with a longer time-to-market for a similar product. Additionally, the Hamburg-based company is trying to improve its global position by issuing licenses and forming strategic joint ventures and partnerships in different wind markets. Mitsubishi forms part of the huge Mitsubishi Heavy Industries and is widely seen as a potential top-5 entrant, including an offshore position based on its broad manufacturing base. Ecotècnia in the past year grew much faster than the market, reports BTM Consult in its annual report. The company even quadrupled its sales, indicating considerable growth potential. Nordex is finally getting on its feet again, after successful balance sheet refinancing earlier this year is already said to be leading to a substantially increased order intake. Sufficient financial leverage appears, therefore, to be a crucial precondition for surviving and prospering, besides having the right technology and an essential portion of luck, especially for regional market players. Mobilizing the resources Finally, the size of individual companies differs a lot. Long-time wind market leader Vestas Wind Systems of Denmark, for instance, employed about 9,500 employees at the end of 2004, with wind turbines constituting its core business. GE and Siemens, by comparison, each have about 400,000 staff on the payroll, with a company involvement in multiple specialized groups and divisions. The shear size of Siemens and GE in terms of turnover implies a capability to mobilise almost endless financial, human and physical resources. This by itself is considered an essential precondition to successfully engage in large-scale projects. That entails the full backing of banks, investors, and insurance companies, and includes those ventures with a high-risk profile. These capabilities suit a continuing trend towards large wind As a trend, utilities and independent power producers (IPPs) are on the move to capture their share of the fastgrowing global wind energy business. Well-known company strategies to establish or strengthen a market position are either to buy already installed wind capacity (quick route) or to invest in newly developed projects. Utilities in particular are using their significant financial strength to acquire and own wind development and operating companies. Utility and IPP ownership of wind plants was up from just 9,500 MW (23 %) in 2003, to 30 % (14,450 MW) of the world s 48,000 MW cumulative capacity by the end of 2004. Book your stand now! WindEnergy International Trade Fair Hamburg 16 19 May 2006 www.windenergy.de Prestige project in the Irish Sea: the offshore wind farm Arklow Bank installed by GE Energy. 103
Growth through concentration? Iberdrola of Spain is a typical example, expanding its wind energy capacity by 921 MW to 2,943 MW in 2004 (see page 105). E.on and RWE of Germany are active in the offshore business, especially in the UK. Essent of the Netherlands bought wind farm developer Winkra of Germany in 2003. It is often claimed that large companies prefer to do business with other big market players, with energy utilities and large wind farm developers being no exception to this rule. One of their shared capabilities is sufficient financial leverage and additional capabilities to handle orders for large complex projects that are becoming that more and more commonplace. Typical project sizes in markets like the US are growing with turbine size and are now in the range of 50 200 MW and above; several projected offshore wind farms are even bigger, with 500 1,000 MW. In return, utilities and IPPs demand from their wind industry equipment suppliers proof of sufficient (financial) strength to prefinance, and increasingly also co-manage, production of mature products delivered on time at a competitive price. Additional demands include hard (operational) guaranties for a twenty-year wind farm maintenance period. Huge wind industry newcomers like Siemens As the diagram shows, the deciding steps in market concentration occurred in the years 1997 to 1998 and 2002 to 2004. The global player General Electric entered the wind power sector in 2002; its competitor Siemens did so two years later. Only the German market leader Enercon continues to go about its business without the slightest hint of a takeover. 1997 The Danish manufacturers Nordtank and Micon merge to form NEG Micon. The gas trading company Enron (USA) buys Tacke Windtechnik (Germany). 1998 The new company NEG Micon buys up several manufacturers and suppliers, including the manufacturers Windworld (Denmark) and Nedwind (Netherlands) as well the suppliers Taywood Aerolaminates (rotor blades, UK) and Dancontrol Engineering (control technology, Denmark). 2002 General Electric (USA) buys Enron Wind and merges it into the power station arm GE Energy. 2003 The Spanish market leader Gamesa Eólica acquires its strongest inland rival Made Tecnologías Renouvelables. Before the end of the year the biggest takeover in the wind energy sector is announced: market leader Vestas is to swallow up NEG Micon through a share exchange deal. 2004 The takeover of NEG Micon by Vestas is completed in March. In October, Siemens (Germany) acquires the Danish manufacturer Bonus Energy. Figure: Eilers-Media and GE Energy are said to possess all the multiple inhouse skills required to manage the entire wind process chain of such large projects, including risk management and financial engineering. Spreading the market risks From a wind technology development point of view, large wind industry players, by comparison, have more resources at their disposal for a systematic product development strategy. This includes sufficient financial reserves to cope with unforeseen problems and multiple risks involved when developing new products and especially introducing new technologies. And if required for strategic reasons in general, only big players have the means to build, own and operate new»high-risk«projects, by drawing necessary funds from their own resource base. Such action speeds up the development, testing and optimisation process. A typical example of such far-reaching manufacturer involvement is the 25.2 MW Arklow Bank offshore project comprising of seven 3.6 MW GE Energy turbines that were developed, built and have been operated since commissioning by the US giant, who still today also acts as the wind farm owner. Large top-5 manufacturers tend to be globally active as a strategy to optimise growth perspectives and to spread market fluctuation risks. But becoming active in many markets results in a need to build and maintain a professional service organisation, activities that both require considerable effort and resources. And in order to maintain a viable service organisation a certain minimum sales volume is essential, which is in a sense a typical»chicken and egg«situation for the parties involved. Finally, the chances for current regional players to grow into global players are always present, but increasingly difficult. These smaller players have limited resources to pre-finance increasingly large projects and at the same time provide the necessary long-term guarantees. One of their best options to grow faster than the market (accelerated growth) is currently to find a large financial partner. A second growth strategy is to create a unique market niche or benefit at the same time from unique market opportunities. Neither are easy in practice. Enercon is a typical example of a company that created its own unique market segment with the direct drive technology. Much smaller Suzlon of India can benefit from a strong home market position and from producing in a low-wage environment. Gamesa Eólica of Spain s amazing growth record is perhaps the best example of how a small player could, in only eleven years, grow into the world s number 2 in 2004. It inherited state-of-the-art technology from Vestas of Denmark, and enjoys a very strong position in the Spanish home market. The company in addition offers competitive product prices, has a substantial sales outlet for its products through its sister company Gamesa Energía, and combines this with the ambition to become number one in the world. Eize de Vries 104