The global wind power supply chain faces a future characterized by stagnating global economic growth, low profit margins and waning government policy support. In the face of such headwinds market consolidation and/or contraction in the industry becomes ever more important, argues MAKE Consulting’s latest Global Wind Turbine Supply Chain report.
Globally, heightened competition and reduced profitability among wind turbine and component OEMs have resulted in a challenging market environment for investors, prompting a decline of market capitalization across many pure-play wind market participants.
Western and Chinese turbine vendors alike are experiencing profit pressure with many posting negative profit margins in FY2011. As a consequence, the march to shed lower value production assets is in full swing, with factory closures already materializing in China and the United States.
A realignment of the wind power supply chain is overdue, as a failure to evolve the supply chain landscape will result in industry setbacks, especially if strong global competitors leave the market for lack of profitability, or strong multinational industrials stay out of the wind market for the same reason.
Similarly, the evolution of mainstream turbine technology is reaching a point of diminishing return, and disruptive technologies that require significant supply chain restructuring are imperative for achieving the next phase of industry maturation.
However, restructuring requires investment, and substantial capital expenditures may be difficult to justify given the current market climate.
The road ahead will be difficult to be sure. MAKE expects nacelle, blade and tower facilities to be hit the hardest in the downturn, due to their widespread production footprints. A shift towards increased outsourcing of blade manufacture by vertically integrated turbine OEMs may aid in keeping some facilities active, and seems a logical course of action as turbine OEMs seek to reduce overhead.
Aftermarket services and raw material innovation will be industry wide focal points in the near term. Doing less with more is most readily achievable through the adoption of advanced materials, though the cost-benefit equation must strongly favor a reduction in overall LCOE to be a viable course of action.
Events need to occur quickly. A prolonged market contraction, whereby turbine and component OEMs exit international markets and subsequently linger in smaller regional markets, hampers the evolution of the industry and lessens its ability to finally go head to head with fossil-fueled generation.
Global Wind Turbine Supply Chain 2012 is a 140 page report that delves into key issues and factors that shape current and future dynamics of the global wind turbine supply chain. Key insights include – the outlook for supply and demand of strategic components at a global and regional level, potential global sourcing strategies adopted by and production footprints of the leading wind turbine OEMs, and the future role of disruptive technologies.
[mappress]
Offshore WIND staff, July 4, 2012