Wind Turbine Demand Drops 5% on Changing Market and Policy Conditions

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The global wind turbine market is undergoing changes shaped by governments' policy changes, adjustment to subsidies, and declining and growing demand for wind power installations in different regions of the world.

For the first time since 2004, global wind turbine demand is expected to contract this year. Growth could fall off by as much as 5%, with a major factor being declining demand in the U.S., Spain and Italy, according to a study by MAKE renewable consultants (Aarhus, Denmark). These countries historically are key wind energy markets with extensive local supply chains.

The decline has created the need for capacity adjustments, while growth opportunities in new and emerging markets and the growing demand for larger wind turbines require additional investment, due to local content requirement or logistics.

Changes in support policies, power demand projections and overriding macroeconomic factors are causing substantial capacity adjustment in traditional wind power supply chain manufacturing hubs.

Unstable support policies in key wind markets, such as the U.S. and Spain, have already resulted in significant redundancies and facility closures in the past 12 months, having a major impact on the supply chain.

Turbine original equipment manufacturers (OEMs) have begun to withdraw production capacity from secondary markets and instead concentrate production in core markets with higher volumes to take advantage of economies of scale.

At the same time, the study says, a need for expansion and new investments in the supply chain is created partly by growth opportunities in new and emerging markets associated with localization policies, as in Brazil and South Africa, and partly by the continued drive toward large offshore and onshore wind turbines that require the supply chain to produce longer-blade, taller-tower, larger-diameter bearing, and more complex castings. Increasing competition and low capacity utilization result in lower margins.

These factors are putting turbine OEMs and suppliers and long-held sourcing strategies under pressure in combination with volatility in demand and shortened demand visibility. However, says MAKE, this opens a window of opportunity for innovation and new business models in the global wind power supply chain.

Vertically integrated wind turbine OEMs are contemplating divestitures of in-house supply chain activities; hybrid sourcing strategies; and partnerships designed at striking a balance between cost, cash flow, security of supply, quality, control of proprietary technology and market access. Suppliers are diversifying their business areas to reduce dependency on new wind turbine demand and new suppliers, and partners are entering the wind industry while others exit, the report notes.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.