Clean Power

Published on January 15th, 2015 | by Guest Contributor

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Policy Uncertainty Drives 25% Of Wind Industry Suppliers Out Of Business

January 15th, 2015 by  



Originally published on EnergyPost.
By Karel Beckman

More than 120 suppliers have collapsed or stayed out of the wind business in the past two years, including 88 from Asia, 23 from Europe and 18 from North America, as the result of a “prolonged market contraction”. That is the major conclusion to come out of the 2015 edition of the annual Global Wind Supply Chain Update published by FTI Consulting. 

The report examines the supply chain situation for 12 key components (350+ suppliers) and three key materials (150+ suppliers), which account for more than 95 percent of a wind turbine’s total cost. In addition to the specific components and materials, it also includes an assessment of offshore wind farm balance of plants, a summary of supply chain strategies for the world’s top 15 turbine OEMs (original equipment manufacturers), and FTI-CL Energy experts’ demand forecast for global wind market growth through 2018.

The report notes that “a prolonged market contraction has forced major turbine OEMs to divest in-house non-core production assets and opt for extensive outsourcing in order to insulate from market fluctuations while remaining profitable.” The 120 suppliers that went out of business represented a quarter of the world’s total.

“The wind industry has been in the process of transformation since 2011 and the global wind supply chain is not matured yet,” explained Feng Zhao, Director at FTI Consulting and Head of Wind Energy within the FTI-CL Energy practice. “The exit/ non-participation of so many suppliers delivers a dangerous signal to governments. To bring wind towards a position where it can compete head-to-head with conventional energy sources, it is imperative to find a balance between maintaining attractive and certain policy and reducing the burden on governments and consumers caused by paying renewable energy subsidy.”

“The challenging economic and political climate has forced large wind turbine vendors to shed low value assets and to opt for outsourcing” says Aris Karcanias, Managing Director at FTI Consulting and Co-Lead of the Company’s FTI-CL Clean Tech practice in Europe. “Large turbine OEMs have adopted lean organization models from other industries to deal with market instability and increase flexibility and capacity utilisation.”

Other major findings from the FTI report:

  • Most key components and materials are still facing overcapacity, but the regional distribution for key materials such as rare earth elements and forgings is extremely uneven and bottlenecks are expected on ultra-large tapered roller bearings (“TRB”) as these have gained popularity in China with almost all direct drive designs.”
  • Competition is now taking place not only on product quality and price, but also requires suppliers to provide value-added products and services to assist turbine OEMs and the end users to bring down the LCOE in order to compete with conventional energy sources.
  • The uncertainty around the PTC (Federal Production Tax Credit) leads FTI-CL Energy’s experts to conclude that the industry setback is most likely to continue in the U.S., and more Tier 2 and Tier 3 suppliers are likely to disappear in the next two to three years due to the expected collapse of Tier 3 turbine OEMs in China.
  • There is a delicate balance in the offshore wind supply chain at present, but challenges remain in the medium-term. One third of the cost reduction of offshore wind energy partially relies on supply chain industrialization for disruptive technologies and key elements including the offshore wind balance of plant. This ambitious target is, however, unlikely to be achieved without long-term market stability.
  • The OEM market provides relatively clear market visibility going forward and many key components suppliers are entering into this segment, so heightened competition is expected.

For more information see www.fti-intelligence.com.

Supply versus demand for wind turbine components and materials in 2015 and 2018

FTI-wind-industry-report-graphic

Reprinted with permission.





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  • JamesWimberley

    Whoa. The post offers no evidence for the headline, beyond a single paragraph about the US wind PTC. You really can’t attribute much of the setbacks of wind energy to policy uncertainty, as opposed to policy changes and market developments. The major manufacturers are not tied to single countries (except for the Chinese), and over the whole globe winners tend to cancel out losers.

    • Iluvyou

      I agree with you. Lots of automobile companies went bankrupt early on and it was not because of policy uncertainty, although if we had as many journalists as we do today it would have been blamed on policy uncertainty.

  • RobMF

    The US would do much better without the Republican Party monkey on its back. With a few noted exceptions, they’ve fought to kill everything renewable and promote everything harmful (fossil fuels). Just yesterday a bill passed the republican house undermining the clean water act. People need to wake up and these guys need to go.

    • Iluvyou

      Yes the US would be better with a single party and dictator. Only if everyone felt exactly as you, then the world would be perfect. Hmmm, I think that was Pol Pots political philosophy.

      • RobMF

        We’ve had party dissolutions in this country before and new parties emerged to fill the void. That’s kind of the way democracy works. But since the current Republican Party is little more than a marketing engine for a few corporate special interests and is clearly incapable of understanding basic scientific realities, yes, I think it’s about time for an implosion.

        And yes, since republicans are so against anything regarding government and public responsibility, they can take their crappy corporate serving ideology and go to a place where there is no government and where tribal memes are confused for facts. A place where authoritarians dictate and everyone endlessly repeats what they say verbatim. Republican utopia, you could call it.

  • Martin

    Yes, a lot of politicians do not get it that RE power creates more jobs.

    • Iluvyou

      Except for in Spain where a study found that for every 1 “green” job, two “dirty” jobs were lost.

  • Will E

    USA lagging behind in all renewables. USA petrol slavery in the land of the free. Germany Denmark Switserland China ao heading upfront in renewables and going strong on local jobs and state finance.

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