According to IntelStor, an advisory company set up by Philip Totaro, the industry is facing fewer original equipment manufacturers (OEMs) and a smaller supply chain as the pressure on prices forces more merger and acquisition activity in the early part of the next decade.
The research from IntelStor’s Global Wind Energy Innovation Trends report found that from a high of 200 wind turbine manufacturers in the world, today there are just 37 — of which only 18 have a “track record for a positive return on capital for at least one of their products sold”.
Additionally, of the 1,200 turbine models offered for sale in the past 40 years, only 11.6% (around 140) have achieved a net positive return on capital.
IntelStor calculated most OEMs have “a less than 50% net positive return on capital out of every product sold”.
“Increasing Capex costs for new product development are introducing a competitive pressure and facilitating the M&A deals between OEMs.
“The net cost for bringing a 10kW turbine to market is significantly less than a 5MW turbine.
“Therefore, not every turbine manufacturing company is well capitalised and has the balance sheet strength to be able to compete by bringing new products to market as a result,” the report claimed.
IntelStor estimated between $120-150 million was required to develop a new 4-5MW onshore wind turbine “from a clean sheet of paper”, including R&D, testing and supply chain build-up.
Therefore, between 340-450 units need to be sold in order to achieve a return on capital above parity.
“The unit sales can be difficult to achieve if companies do not have a globally focused sales strategy for that product model,” according to the report.
“The desire to offer a product globally needs to be met with practical action for deciding on development partners, targeting project sites, and understanding the competitive landscape.
“This process involves first gaining visibility to the current market landscape. You need to be able to answer the question about whether you have the product range which would be capable of competing in the market,” it added.
There has been a flurry of merger and acquisition activity at the OEM level in the middle of this decade, with Siemens and Gamesa joining forces, GE’s buyout of Alstom’s power business, Nordex and Acciona Wind Power combining portfolios, and Enercon’s takeover of Lagerwey.
Additionally, GE acquired LM Wind Power and Blade Dynamics; Nordex bought Danish blade designer SSP Technology; Vestas purchased Availon, Utopus Insights, and UpWind Solutions; and Senvion took on blade manufacturing firm Euros Group.
Nearly all of the major OEMs have reported a fall in wind turbine values over the past 18 months, with the average selling price of onshore machines falling 20% and revenues down 30%.
This will have further effects down the supply chain, as the battle to make wind power competitive with other forms of generation, and the removal of subsidies, damages profitability.
