Winds of Change

Wind Turbine Manufacturers at the Tipping Point

Vestas’ announcement of its first quarter results came as another setback to the wind energy sector and mirrors the predicament of a number of wind turbine manufacturers, which is already suffering from turbine overcapacity, project delays and rising costs.

Vestas has been losing market shares in new installed wind turbine capacity since 2006, a stark contrast to its cost-competitive Chinese counterparts - Sinovel Wind Group and Xinjiang GoldWind Science & Technology in particular - whose market shares have been on a steady ascent in the past years. That these market positions might change in the future cannot be ignored, however. Both Sinovel and GoldWind’s net income fell in the first quarter of this year, owing from a decelerating Chinese wind power sector and an aggressive domestic price competition.  While one can argue that there are still technological discrepancies between Asian and Western turbine manufacturers, Vestas’ problems with its gearboxes on the V90-3.0 MW turbines did little to help its case. In the current situation of rising raw material prices, high turbine inventories and fierce price wars, it is in the interest of turbine manufacturers to keep their costs as low as possible to preserve their margins.

With a cumulative installed capacity of 3.5 GW, the offshore wind power market accounted for 1.5 per cent of the total wind power market in 2011. With large scale commercial offshore wind farms currently under construction and in the planning phase, offshore wind power capacity is expected to reach 52.1 GW in 2020 by growing at a compound annual growth rate (CAGR) of 35.1 per cent from 2011, and will contribute 7.1 per cent of the total wind power market by 2020.

Whilst wind turbine companies could seek refuge from the prospects in the offshore wind power sector, growth in this market is tempered by poor market conditions, lack of an offshore grid and difficulties in accessing credit. Uncertainties in the regulatory and economic climate are the prime reasons why both Nordex and Doosan Power Systems pulled the plug from its offshore wind power business. This sentiment is also echoed by Gamesa who with its partner Newport News Shipbuilding, halted plans to install its 5MW prototype turbine in the US.

In addition, there is stiff competition from incumbent players who are armed with sufficient financial and operational muscle to invest in Research & Development (R&D), as proven technology is increasingly becoming an important selling proposition to thrive in the offshore wind power business. Mitsubishi Power Systems Europe, Samsung Heavy Industries and Ming Yang are a few of those companies who are investing in its offshore wind power technology development.

Whether the Production Tax Credit (PTC), a 30 per cent investment tax credit available to a number of renewable energy plants in the US, will be extended is another hurdle for offshore wind turbine manufacturers. If indeed this is not renewed at the end of this year, Vestas for instance would need to cut a chunk of its US workforce that will hamper its ability to turnaround its performance and bring back investor confidence. In a similar vein, US offshore wind plant developers will likely find it difficult to find financing for its projects if the PTC is not extended.

Jennifer Santos is GlobalData’s Head of Energy Consulting Services.

Photograph: Getty Images

Jennifer Santos is GlobalData’s Head of Energy Consulting Services.

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Theresa May can play big fish with devolved nations - in the EU she's already a nobody

The PM may have more time for domestic meetings in future. 

Theresa May is sitting down with representatives from Scotland, Northern Ireland and Wales on Monday to hear their concerns about Brexit. 

For the devolved nations, it is the first chance since the seismic vote in June to sit down at a table and talk to the Prime Minister together. 

May has reportedly offered them a "direct line" to Brexit secretary David Davis. It must be a nice change for her to be the big fish in the small pond, rather than the small fish in the big pond that everyone's already sick of. 

Because, when it comes to the EU, the roles of Westminster and other nations is reversed. 

Brexit was small potatoes on the menu of Theresa May’s first European Council summit. It may hurt British pride but the other 27 heads of state and government had far more pressing issues on their plate to worry about.

So, it was an awkward debut Council evening meal of lamb and figs for Prime Minister Theresa May and dinner was served with a large reality check.

As May was later asked at her press conference, why would anyone listen to someone who already has one foot out the door?

Britain is in limbo until it triggers article 50, the legal process taking it out of the EU. Until that happens, it will be largely and politiely ignored.

May’s moment to shine didn’t come until 1am. She spoke on Brexit for “five minutes maximum” and said “nothing revolutionary”, EU sources briefed later.

May basically did that break-up talk. The one where someone says they are leaving but “we can still be friends”. The one where you get a divorce but refuse to leave the house. 

It was greeted in the way such moments often are – with stony silence. Brexit won’t be seriously discussed until article 50 is triggered, and then the negotiations will be overseen by the European Commission, not the member states.

As became rapidly clear after the vote to leave and in sharp contrast to the UK government, the EU-27 was coordinated and prepared in its response to Brexit. That unity, as yet, shows no sign of cracking.

German Chancellor Angela Merkel later damned May with faint praise. She hadn’t said anything new but it was nice to hear it in person, she told reporters.

Merkel, as she often does, had a successful summit. She needed Council conclusions on migration that would reassure her skittish voters that the doors to Germany are no longer thrown wide open to migrants. Germany is one of the member states to have temporarily reintroduced border checks in the passport-free Schengen zone

The conclusions said that part of returning to Schengen as normal was “adjusting the temporary border controls to reflect the current needs”.

This code allows Merkel and her Danish allies to claim victory back home, while allowing Slovakia, which holds the rotating Presidency of the EU, enough of an excuse to insist it has not overseen the effective end of Schengen.

But Merkel’s migration worries did not provide hope for the British push for immigration controls with access to the single market. The Chancellor, and EU chiefs, have consistently said single market access is conditional on the free movement of people. So far this is a red line.

Everyone had discussed the EU’s latest responses to the migration crisis at a summit in Bratislava. Everyone apart from May. She was not invited to the post-Brexit meeting of the EU-27.

She tried to set down a marker, telling her counterparts that the UK wouldn’t just rubberstamp everything the EU-27 cooked up.

This was greeted with a polite, friendly silence. The EU-27 will continue to meet without Britain.

Francois Hollande told reporters that if May wanted a hard Brexit, she should expect hard negotiations.

Just the day before Alain Juppe, his likely rival in next year’s presidential election, had called for the UK border to be moved from Calais to Kent.

Hollande had to respond in kind and the Brussels summit gave him the handy platform to do so. But once inside the inner sanctum of the Justus Lipsius building, it was Syria he cared about. He’s enjoyed far more foreign than domestic policy success.

May had called for a “unified European response” to the Russian bombing of Aleppo. It was a break in style from David Cameron, who is not fondly remembered in Brussels for his habit of boasting to the news cameras he was ready to fight all night for Britain and striding purposefully into the European Council. 

Once safely behind closed doors, he would be far more conciliatory, before later claiming another triumph over the Eurocrats at a pumped-up press conference.

May could point to Council conclusions saying that all measures, including sanctions, were on the table if the Russian outrages continue. But her victory over countries such as Italy and Greece was only achieved thanks to support from France and Germany. 

The national success was also somewhat undermined by the news Russian warships were in the Channel, and that the Brexit talks might be in French.

But even warships couldn’t stop the British being upstaged by the Belgian French-speaking region of Wallonia. Its parliament had wielded an effective veto on Ceta, the EU-Canada trade deal.

Everyone had skin in this game. All the leaders, including May, had backed CETA, arguing the removal of almost all custom duties would boost trade the economy. Belgium’s Prime Minister Charles Michel was forced to tell exasperated leaders he could not force one of Belgium’s seven parliaments to back CETA, or stop it wrecking seven years of painstaking work.

As the news broke that Canada’s trade minister Chrystia Freeland had burst into tears as she declared the deal dead, everyone – not the first time during the summit – completely forgot about Britain and its referendum.

Even as the British PM may be enjoying a power trip in her own domestic union of nations, on the international stage, she is increasingly becoming irrelevant. 

James Crisp is the news editor at EurActiv, an online EU news service.