Navigant Research Blog

Wind Turbine Manufacturer Trends in the US Market in 2016

— April 28, 2017

The data for year 2016 wind installations has been published in Navigant Research’s annual World Wind Energy Market Update report. There are an endless number of observations, trends, and key data points, but this blog focuses on one area: wind turbine manufacturer market share trends in the US market.

How Did Vestas Manage to Overtake GE Energy in Its Domestic Home Market?

Of the 8.2 GW built and connected in 2016 in the United States, Denmark-based Vestas surpassed US-based GE Energy for the first time in the era of the modern wind industry. Vestas took 45% market share to GE Energy’s 41%. This is somewhat surprising given GE Energy’s long-standing domestic advantage over its foreign competitors. One reason for Vestas’ success in the United States is that it has made major investments in localizing its manufacturing and supply chain in the country. From a domestic content perspective, Vestas is now comparable to GE—if not stronger—since GE has shifted in recent years to importing gearboxes from China while Vestas sources primarily from a supplier manufacturing in the state of Georgia.

Vestas also centralized its blade and tower manufacturing and nacelle assembly in Colorado, which is in the middle of the windy central plains corridor of the United States. GE outsources blades and towers to manufacturers located throughout the central plains. However, its nacelle assembly for the United States is primarily done in Pensacola, Florida, requiring higher transportation costs to get the nacelles to the central plains states of the United States, where most wind capacity is being added. In a cutthroat competitive turbine pricing environment, the additional costs of transport can win or lose contracts.

Why Are Other European Wind Turbine Manufacturers Not Getting Higher Market Share in the United States?

The remaining market share left to other foreign manufacturers is minimal, with Siemens at 9%, Gamesa at 3.5%, and a catchall “others” category that primarily represents Nordex at 1.4%. Siemens’ market share has dropped, even though it has made significant manufacturing and supply chain commitments to the United States. Yet, there is a view among corners of the wind industry that Siemens has not made enough investments in its geared onshore turbine platform to remain competitive, leading to fewer onshore sales—especially in the United States, where there is a preference for geared turbines.

Some of the numbers bear this out. In 2016, Siemens’ 805 MW installed in the United States represented 8.9% market share. By contrast, in 2012, Siemens installed 2,628 MW in the United States and captured 23% market share—ahead of Vestas with 11% share, according to Navigant Research’s wind capacity database. This strong share was primarily from sales of the SWT2.3-108 machine. Four years later and 100% of installed capacity in the United States was from the same SWT2.3-108 unit.

For the others, such as Nordex, Senvion, and Gamesa, those companies have not had as much localized manufacturing and supply chain activity as Vestas, GE, and Siemens, which makes it more difficult to compete on cost. Gamesa initially localized its supply chain in Pennsylvania, and it should be lauded for its efforts to revitalize blue collar and unionized factory jobs in that state. However, it may not have been a strategically wise decision to locate far away from the higher growth markets of the US central plains.

For a wealth of global and country-level wind market data and analysis, see this year’s annual World Wind Energy Market Update report from Navigant Research.


Home Energy Management Is the Tip of the Home Automation Spear

— April 27, 2017

Anyone who has recently swiped through the App Store could tell you that home energy management (HEM) apps have become as ubiquitous as instant messenger apps. While these energy saving apps can’t put your face on a cute dancing dog (and Millennials may not be as interested), they do have the ability to monitor, schedule, and reduce appliance energy consumption. Mobile solutions for HEM are continuously evolving and companies are trying to expand to new niches of the fledgling industry. But HEM is really only the tip of the larger home automation spear.

Power to the People

One of the core tenets of Navigant Research’s Energy Cloud framework is that the electricity industry of the future needs to be customer centric—which means access to data at any time from any device. The market for these applications has grown as customers have become increasingly aware of the capabilities, convenience, and savings the apps can provide. The global market for residential HEM systems has grown nearly 1300% since 2011, up to $2.3 billion in 2016.

Energy Management Giants Are Acquiring HEM Startups

But few companies are solely focused on HEM. Many smart home/home automation/security companies offer some energy management solution. It is increasingly common for small startups focused on HEM to be quickly acquired by larger companies looking to expand their reach across the Internet of Things (IoT) market. Devices such as smart thermostats are increasingly being bundled as connected home solutions, and as these solutions become more affordable and mainstream, energy management is expected to see increased uptake. Take, for example, the recent activity among several HEM companies:

  • Comcast recently completed its acquisition of iControl Networks, an IoT technologies and connected home security company. Comcast specifically went after the Converge business whose platform powers Xfinity Home.
  • As covered by my colleague Paige Leuschner, Google, Apple, and Samsung have all launched forays into devices that will give them a window into HEM and the full home energy automation market.
  • Startups are also getting involved in the energy app space. Eyedro, a software and electronics design company based in Ontario, Canada, offers an electricity monitor that provides real-time data via a web portal and mobile app called MyEyedro. Toronto-based Wattsly, a personalized energy butler mobile app, offers a tagging feature that allows users to tap a point on their energy usage Smart Graph. It also enables tagging activities like laundry, which helps the app generate advice for further savings and challenge homeowners to be more efficient.

Fortunately for customers, as HEM capabilities are expanding, the costs of HEM and home automation devices and solutions are dropping. Creativity and competition provide an optimistic outlook for the HEM market, and adoption is expected to continue to grow over the next decade as a result. Navigant Research projects the HEM market will reach $7.8 billion annually in 2025.


Can Batteries Save the UK Solar Market?

— April 27, 2017

Last week, E.ON and EDF Energy both announced plans to launch solar plus storage programs for their UK residential customers. E.ON and EDF are two of Europe’s largest energy providers, and EDF is a large owner of coal, gas, and nuclear plants in the United Kingdom with a 13 GW portfolio.

EDF Energy has formed a joint venture with Lightsource, the largest solar operator in the United Kingdom, to launch Sunplug, a company that will be offering residential solar. Sunplug has indicated two contracting options for its systems:

  • One option will be to sign an index-linked, 20-year power purchase agreement with an initial price of £0.099/kWh ($0.123/kWh). Assuming 2% escalation over 20 years, this would average to £0.12/kWh. For comparison, the cheapest electricity tariff in the United Kingdom costs £0.12/kWh or £0.15/kWh ($0.15/kWh or $0.19/kWh) with or without fixed monthly costs, respectively. In this option, Sunplug is the owner of the system and receives any government incentives available to the installation and is responsible for any changes to it.
  • Sunplug’s second option will be a direct purchase for £7,999 ($9,999) that includes the equipment (5 kW PV system, inverter, and 6.6 kWh battery), 2-year labor cover, operations and maintenance, and a 2-year license for its home energy management system—but does not include installation or value added tax.

E.ON’s offerings are less clear, but the direct purchase for a typical system will start at £7,495 ($9,368) including the battery, or £4,495 ($5,618) for the PV system only.

The Economics of Self-Consumption

An interesting question is why both utilities decided to enter the UK residential market with solar plus storage programs rather than only solar. A key driver is the current regulatory environment, which has elevated the attractiveness of self-consumption in the UK solar market.

In the United Kingdom, a residential solar system can currently access the following revenue streams:

  • Generation tariff: This is paid for every kilowatt-hour generated, regardless of its destination. It is currently set at £0.0414/kWh ($0.05/kWh) and is indexed to the UK inflation rate.
  • Export tariff: In theory, this is paid for the electricity exported to the grid. For the time being, the government assumes that half of the kilowatt-hours generated are exported for installations smaller than 30 kW. Currently, the export tariff is set at £0.053 ($0.066).
  • Self-consumption: This is the customer’s bill reduction due to the avoided electricity consumption from the grid. In a northern European country, residential customers are typically only able to use about 20%-30% of the electricity produced by their own solar system without any storage or significant behavioral changes. Assuming 20% self-consumption and an electricity tariff of £0.12/kWh ($0.15/kWh), a solar system owner would save the equivalent of £0.024/kWh ($0.03/kWh) generated.

Taking these revenue streams into account, a residential solar owner with 20% self-consumption would receive £0.09 per kWh ($0.11/kWh) generated, whereas an owner with 100% self-consumption would receive £0.186 per kWh ($0.23/kWh) generated, 106% more. Of course, a battery would be necessary to achieve total self-consumption for a reasonably sized residential system. Using E.ON’s figures, the battery cost is £3,000 ($3,750). In other words, to earn 106% more per kilowatt-hour, the owner would need to invest only 67% more than the solar-only system—not a bad deal!

 UK Solar PV Plus Storage Revenue Streams

(Source: Navigant Research)


The Growing Importance of Recycling Spent Advanced Battery Materials

— April 27, 2017

Advanced batteries across all applications are proliferating the market in unfathomable numbers. Navigant Research expects advanced batteries to reach a cumulative 24.2 GW in new capacity globally by 2020—for stationary energy storage alone. As these assets have lifespans ranging from 4 to 20 years depending on the technology, the issue of what to do with these batteries when they reach the end of their usable lives is an important question that technology manufacturers, system owners, and customers must be able to answer. Second-use options are viable in some sectors, but recycling spent batteries will be a major market in the coming years. Manufacturers and governments around the world are recognizing the importance of recycling and how it translates to long-term sustainability goals.

Benefits of Recycling Batteries

Lead-acid batteries have been utilized in the market for several decades, but advances in more sophisticated technologies like lithium ion (Li-ion) and flow batteries have encroached on lead-acid market share. The spent lead-acid assets are retired and recycled in large amounts on a daily basis. An example of this is China’s announcement of doubling its lead recycling target to 2.5 million tons by 2020. China arrived at this target because the average lead-acid battery life is 4 years; batteries made in and around 2015-2016 will be available for recycling by 2020. Lead-acid battery recycling efforts are also ramping up in the United States. California lead battery manufacturers and consumers have to pay a $1 fee for each battery they make or buy following the implementation of the Lead-Acid Battery Recycling Act (AB2513). Among other recommendations, several California government officials requested adding an additional $15-$20 to each lead battery sold to help process it after its usable life.

Li-ion batteries are a bit trickier to recycle. Available in items ranging from consumer electronics to EVs, extracting the most valuable materials inside—namely, lithium and cobalt—are important to consider when reprocessing these batteries. Compounded with forward-looking lithium availability and supply chain issues, securing lithium access will be important for the industry in the future. Li-ion battery recycling is in its early stages, and there are only a handful of these plants in existence today. With few Li-ion battery chemistries available, the lack of standardization plays a role in limiting the emergence of more recycling facilities and best recycling practices for these batteries. Today, recycled lithium can be up to 5 times the cost of newly mined resources; the cost differences have limited demand for lithium recycling to date, but future price increases and new regulations can change this.

Raw material prices for advanced batteries have sporadically changed this past decade and lithium prices alone have nearly tripled. Other factors like demand in competing sectors (e.g., pharmaceuticals, construction, etc.), geopolitical relationships, and environmental concerns will also play a role in the future of battery material supply chains. Recycling advanced batteries is likely to be one of the principal methods to combat against volatile raw material prices and resource availability.

New Revenue Streams

Battery OEMs should look to partner with raw material suppliers, users, and governments to gain a strong position in their respective supply chains and increase collaboration across different sectors. Considering alternatives (e.g., second life usage), the battery recycling industry has the potential to generate significant returns. Companies that position themselves to take advantage of retiring assets will be able to access new revenue streams on top of existing businesses.


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