European regulators signed off on the massive $13.4 billion deal between General Electric (GE) and France-based Alstom this week. The principal driver of the deal is GE’s acquisition of Alstom’s power generation business. While the wind power aspect is small with regards to the broader deal, it represents one of the more significant shake-ups in the wind sector in quite some time.
GE will fully acquire Alstom’s onshore wind business, taking over the latter’s wind turbine assets. These currently consist of three turbine models, the ECO 100, 110, and 122, all of which are rated at 3 MW (and one 2.7 MW variant of the ECO 122). Tall hub heights at 119 meters and 139 meters are available for the ECO 122 turbine using hybrid concrete and steel designs. The turbines use doubly-fed induction generator (DFIG) high-speed geared drivetrains, the most common drivetrain design globally. This type of drivetrain is also used by most of GE’s turbines, which is likely to open up some supply chain efficiencies post-acquisition.
Alstom’s offshore wind business will not be fully acquired by GE. Instead, a 50/50 offshore joint venture (JV) will be created between Alstom and GE. Alstom’s primary asset in this area is its 6 MW direct drive Haliade wind turbine. This is the turbine of choice for close to 1,500 MW of awarded French offshore wind tenders, which provides a promising pipeline. The Haliade is also the turbine of choice for Deepwater Wind’s 30 MW Block Island wind project, the first offshore wind plant in the United States, currently under construction off Rhode Island.
Perspective on Scale
It is important to put the scale of the two wind businesses into perspective. In 2014, GE installed 4,624 MW of wind capacity while Alstom installed 286 MW, according to Navigant Research’s World Wind Energy Market Update 2015 report. This put their annual global market shares at 3rd and 24th, respectively, which means that GE is not acquiring an enormous new wind business. Its wind division and supply chain are already optimized for GE’s own wind business, which is focused on the U.S. market, followed by Canada and Brazil. What the acquisition will give GE is a small market share increase in Europe, where so far it has had limited success, mostly in Germany.
Brazil is one market where GE and Alstom have notable overlap. Based on Navigant Research’s figures for wind turbines installed during 2014 in Brazil, GE secured 22.2% market share while Alstom secured 13.5%. This is likely to be the first market where supply chain consolidations and efficiencies are enacted and the combined venture becomes a market leader. One clear benefit to GE’s wind business is that the more market share the company can pick up outside of the United States, the better it can cushion the impacts of the tendency for the U.S. market to face on and off again wind policies, resulting in booms and busts.
GE is not active in offshore wind and has stated it is because of offshore wind’s high cost, risk, and reliance on subsidies. Expect that tune to change since entering into the JV is an implicit acceptance of and de facto entry into offshore wind.
Part of what has been behind GE’s reservations about offshore is a reluctance to compete in a capital-intensive sector, where it would face stiff competition exacerbated by brand loyalty to European companies such as Siemens and Vestas. The fact that Alstom’s offshore turbines are part of this new JV should continue to give those turbines an edge in France and, more broadly, in Europe.
Tags: Energy Technologies, Mergers & Acquisitions, Offshore Wind Power, Onshore Wind Power, Wind Energy
| No Comments »