Navigant Research Blog

A Look at the Top Wind Turbine Manufacturers of 2015

— June 9, 2016

Der Rotor wird angesetztIn 2015, almost 29,000 wind turbines were installed globally by wind turbine OEMs, according to Navigant’s World Wind Energy Market Update 2016 report. Of the 41 OEMs supplying commercial-scale wind turbines, 28 of those companies are from Asia, 12 are from Europe, and one is from North America (GE). By the end of 2015, China remained the largest country in terms of the number of turbine OEMs that supplied wind turbines to the market, followed by India and Germany.

The strength of the U.S. market coupled with a major push from wind plant developers in China, Germany, and Poland to install capacity in 2015 before policy incentives adjusted downward in 2016 resulted in a record year of wind turbine installations. Additionally, healthy development and deployment continued in India, Brazil, Canada, and Turkey, as well as in some growing markets such as Mexico and South Africa. These trends also resulted in a shake-up among the top 10 wind turbine OEMs based on annual installed capacity. An overview of the 2015 rankings follows:

  • Goldwind unseated longtime global leader Vestas to take the top slot for annual capacity. Ninety-eight percent of its installations were located in the Chinese market; the total Chinese market saw a record 30.2 GW of wind installed.
  • Vestas had a record year, but capacity was not enough to surpass Goldwind’s leap to first place driven almost entirely by the massive Chinese market.
  • GE Renewables held on to its third place position, backed by strength in its domestic market in the United States and Brazil, as well as increasing installations in Europe.
  • Siemens fell two positions in the top ranking to fourth place despite nearly taking the top slot in 2014. However, the company’s 2015 offshore installations solidify its leading position in the offshore wind sector.
  • Despite no Spanish home market, Gamesa showed success in a variety of global growth markets such as India and Latin America, which propelled it from eighth place globally in 2014 to fifth place in 2015. The company even managed substantial installations in China, where few non-Chinese OEMs have found success. This success in geographically dispersed international markets shows why Gamesa is being targeted for acquisition by Siemens.
  • Enercon rode the installation boom in its domestic market of Germany and found continued success in securing international markets, but not enough to avoid dropping one place to sixth globally in 2015.
  • United Power, Ming Yang, Envision, and CSIC Haizhuang took the remaining top positions of seventh through tenth (in that order), driven by the record installation levels in China.
  • Senvion—for the first time tracked on its own after being sold by the Suzlon Group—just barely missed the year’s top 10 ranking by placing eleventh. The company demonstrated strength in both total megawatts installed and geographic diversity of installations.
  • As expected, India-based Suzlon slipped from the top rankings in 2015 since it was no longer combined with Senvion.
  • Nordex had a record year of wind turbine installations and placed fourteenth globally on 2015 installations.
  • The three other OEMs in the 11-15 rankings are Chinese manufacturers Sewind (Shanghai Electric), XEMC, and Dongfang.
  • Acciona placed sixteenth, experiencing 282% year-over-year installation growth and largely underlining why Nordex acquired Acciona’s wind division in 2Q 2016.
 

A Small Change with a Big Impact for U.S. Wind Incentives

— May 19, 2016

Der Rotor wird angesetztAn easily overlooked change in guidance from the Internal Revenue Service (IRS) last week may seem like arcane minutia, but it will have a profound impact on the U.S. wind market, measured in billions of dollars and gigawatts installed through 2023.

First some background. In late 2015, the U.S. wind industry and its stakeholders succeeded in securing from congress an elusive policy goal: long-term market certainty. Federal tax credits, predominantly in the form of the Production Tax Credit (PTC), have typically been provided to the wind industry in 1- and 2-year increments. The PTC pays $0.023 per kWh of energy produced for 10 years of operation of a wind plant, which amounts to roughly 30% of the total installed cost of a wind plant. Or it can be taken as a one-time Investment Tax Credit (ITC) worth approximately the same amount.

The 2015 legislation was a significant twist on wind policy. It was a deal between industry and government for the wind industry to eventually give up its tax credits in exchange for a 4-year gradual phaseout of the credits. It was structured so that wind plants that began construction by the end of 2016 would receive 100% PTC value, projects starting construction in 2017 would receive 80% of the PTC value, 60% in 2018, 40% in 2019, and zero in 2020. Start construction is defined as significant site work or 5% of project cost incurred.

The minutia that matters is the start construction guidelines and how long a wind plant is given to come online. In recent years, the IRS guidance of the PTC was to allow wind plants 2 years to complete construction in order to avoid a requirement to show continuous construction progress. That would result in 2018 being the peak capacity installation year, as wind plants starting construction in 2016 would come online by 2018 in order to secure 100% PTC value.

A Pathway to Offshore Wind

The guidance provided by the IRS last week changed the construction window from 2 years to 4 years. It also removes a previous guideline that stipulated construction must be continuous in nature. Combined, this will take a lot of pressure off the wind industry so it doesn’t have to rapidly build as fast as possible to meet a 2-year window. Wind plants seeking 100% PTC value and starting construction in 2016 will have until 2020 to be built. Applying the 4-year guidance, projects starting in 2017 will receive 80% value if completed by 2021, 60% value by starting in 2018 and completed by 2022, and 40% if starting in 2019 and completed by 2023.

The new 4-year window means that capacity additions will see less of a short-term spike and more of a smoothed out deployment cycle. Most wind plants don’t need 4 years for construction, so many will stick to shorter planned schedules. However, large offshore wind projects require longer construction timelines, and this new 4-year window could mean the difference between one or more large offshore projects proceeding that may not have before. For onshore wind, many developers will optimize their development cycles, turbine supply agreements, component transportation, and construction logistics to enable the most cost-effective and largest build cycle possible under these more flexible guidelines. For example, some developers may have a few foundations poured during the first year of construction at a site and turbines not installed until the fourthyear while development is prioritized elsewhere.

 

2015 Wind Installations Show Two Markets: China and Everybody Else

— May 2, 2016

Der Rotor wird angesetztThe figures for 2015 wind installations are in and they show two major trends. First, wind capacity continues to be installed at a major rate globally. Second, there are effectively two wind markets: China and the rest of the world.

In 2015, 63,135 MW of wind power capacity was added globally, a 23.2% increase from the 51,230 MW installed in 2014. On a cumulative basis, global wind power capacity grew to 434,109 MW from 372,381 MW in the prior year. This is according to the most recent and 21st annual global installation figures compiled in Navigant Research’s World Wind Energy Market Update 2016 report.

Markets New and Old

Growth occurred in almost every wind market, from the long-established European countries to new markets in Latin America, Asia, Africa, and elsewhere. North America and Latin America combined installed 14.5 GW in 2015, representing 23.0% of global capacity and just slightly overtaking Europe by a percentage point. The United States led with 8,598 MW of new wind capacity added in 2015 thanks to a building boom sustained by reinstated tax credits. Brazil followed with the most capacity in the Americas; its reverse auction system to award wind power purchase price contracts has proven very effective at supporting gigawatt-level installations on a yearly basis at competitively low contract prices.

Europe represented 22.1% of new global capacity with 13.9 GW in 2015, up from 12.1 GW in 2014. Germany saw the greatest increase, driven by major offshore wind capacity additions of 2.4 GW and a rush for developers to install onshore projects before incentives shifted to a more limited system in 2016. Record installations were seen in Poland, followed by substantial new capacity in France, the United Kingdom, Turkey, and over a dozen other countries.

China in the Lead

The degree to which the Asian markets—and China in particular—are driving wind demand cannot be overstated. The combined markets of South and East Asia represented 52.6% of global wind power capacity in 2015, up from 50.6% in 2014. Almost all of this annual record was driven by China, which installed a remarkable 30,293 MW, up from a record 23,300 MW in 2014, which itself was an incredible achievement. However, this increase has not improved China’s wind curtailment challenge, which worsened from approximately 9% wind curtailed in 2014 to around 15% curtailed in 2015.

China provides its wind developers and wind plant owners with feed-in tariffs (FITs), which are set prices per kilowatt-hour produced and levels varying according to wind speed location. The huge build in 2015 was partly driven by a minor adjustment downward of the rates beginning January 1, 2016, so wind developers rushed to bring capacity online before the rate adjustment. However, the rate drop is minor, so annual capacity installations above 20 GW are expected again for 2016 and in the near term.

Another notable market dynamic driven by China is that there is effectively a two-part global wind market splitting China and the rest of the world. This is not only in total capacity installed in a given year but in the underlying wind turbine supplier dynamics. China sourced 97% of its turbines from more than 23 Chinese wind turbine OEMs, shutting out all but a few Western turbine OEMs. Conversely, all installations throughout the rest of the world were around 97% supplied by over 18 Western and Indian wind turbine companies, and almost no Chinese suppliers.

This shows China’s overwhelming preference for its domestic vendors. Markets and developers outside of China have responded in kind by sourcing very few turbines from Chinese suppliers. Expect this dynamic to slowly shift as some of China’s more proven suppliers seek international diversification to offset a Chinese market slowdown and wind turbine manufacturing overcapacity in the country.

 

Gamesa Acquisition Could Stir Up Wind Turbine Vendor Dynamics

— February 24, 2016

Der Rotor wird angesetztSince early February, Siemens, Gamesa, and other stakeholders have been in talks exploring the potential for Siemens to acquire the Spanish turbine vendor. Should this come to pass, it would be a huge change to the top global wind turbine vendor dynamics. Vestas’ position as the number one turbine vendor would surely be challenged and more likely surpassed by a larger Siemens. 2015 project installation numbers are still being compiled, but Vestas led annual installations in 2014 with 12.3%, followed by Siemens with 9.9% and Gamesa with 4.7%.

The strongest reason for this acquisition is that Siemens’ wind business is weakest in the areas where Gamesa is strongest, such as India, Mexico, and Brazil. These are the key countries that Gamesa pivoted to when its home market in Spain collapsed in 2012 and 2013 due to austerity measures and energy policy reforms that terminated wind price supports.

In 2014 yearly installation figures, Gamesa had 21.5% market share in Brazil, just behind General Electric’s (GE’s) 22.2%, while Siemens was in fourth place with 15.7%. In Mexico, Gamesa was the market leader with 72.6% market share, followed next in line by Vestas, while Siemens had no installations. In India, Gamesa led market share installation in 2014 with 32%, outperforming India-based Suzlon at 28%—and again, no Siemens installations.

Smoothing the Bumps

These three countries are important growth markets for turbine vendors, and diversification across geographies helps vendors smooth out booms and busts driven by changes in country energy policies. Market diversification is precisely why Nordex of Germany is in the process of acquiring Spain-based Acciona’s wind turbine business, which not coincidentally is also strong in the Latin American markets. A Siemens acquisition of Gamesa could even be viewed as a strategic counterweight against the Nordex acquisition of Acciona. This is a similar example of a turbine OEM with concentrated strength in Northern Europe acquiring another vendor in order to diversify business and cushion overreliance on limited European markets.

Gamesa and Acciona are also, arguably, homeless. While both companies have always had strong export strategies, they have not had the benefit of the strong home markets enjoyed by most of their competitors. Preliminary Navigant Research data shows zero new installed wind capacity in Spain in 2015.

Gamesa has enjoyed success in the U.S. market, but it has lagged behind the big three of GE, Vestas, and Siemens. Again looking at 2014 installation metrics, Gamesa had only 4% of U.S. market share compared to Siemens at 20.7%  (although it should be noted that Gamesa inked 518 MW of orders for the U.S. market in the second half of 2015 and continues to secure healthy sales). However, the company has sharply reduced its manufacturing and supply chain presence in the United States and now relies on exports of nacelles from Spain and outsources blades and towers. There is not much supply chain overlap with Siemens in the United States, which has substantially more manufacturing presence in the country.

Offshore is probably the most fascinating and problematic area of overlap. Gamesa is in a 50/50 joint venture (JV) called Adwen with French company Areva. Adwen’s technology is based on Areva’s geared medium speed technology (formerly Multibrid). This is a proven and competitive drivetrain with 600 MW installed in 2015, and there is over 1 GW of orders booked for projects outside of France. It would be difficult to imagine the JV continuing as-is if Gamesa was acquired by Siemens, which is already the world leader in offshore wind. Adwen could continue solely as an Areva company, but this would be challenging, and a replacement partner could be a wise choice.

 

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