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.

Photo: Getty Images
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Responding to George Osborne's tax credit U-turn should have been Labour's victory lap

He changed the forecast, we changed the weather. But still it rains.

The Labour Party should have rested on its laurels in the Autumn Statement. While Gideon name checked his Tory colleagues for their successful lobbying, he should have been reading out the names of Labour members who changed his position.  I'll let the Tories have the potholes, (even though it was in Labour manifesto) but everything else was us. 

He stopped his assault on tax credits. Not because he woke up in his mansion in a cold sweat, the ghost of Christmas Future at the foot of his bed, ringing out the names of the thousands and thousands of children he would plunge into poverty. Nah, it's not that. It's as my sons might say "no way George, you got told!" The constant pressure of the Labour Party and a variety of Lords in a range of shades, supported by that media we are all meant to hate, did for him. It's the thousands of brilliant people who kept the pressure up by emailing politicians constantly that did it. Bravo us, boo nasty George!

As Baron Osborne thanked the Tory male MP for his brilliant idea, to spend the Tampax tax on women's services, I wanted to launch a tampon at his head. Not a used one you understand, I have some boundaries. He should have credited Paula Sheriff, the Labour MP for making this change. He should have credited all the brilliant women's groups, Yvette Cooper, Stella Creasy, Caroline Lucas and even little old me, for our constant, regular and persistent pestering on the subject of funding for refuges and women's services. 

On police cuts, his side should not have cheered him at all. We are now in a position when loud cheers are heard when nothing changes. So happy was his side that he was not cutting it, one can only conclude they really hate all the cutting they do. He should not have taken a ridiculous side swipe at Andy Burnham, but instead he should have credited the years and years of constant campaigning by Jack Dromey. 

I tell you what Georgie boy can take credit for, the many tax increases he chalked up. Increases in council tax to pay for huge deficit in care costs left by his cuts. Increases in the bit of council tax that pays for Police. Even though nothing changed remember. When he says levy or precept it's like when people say I'm curvy when they mean fat. It's a tax. 

He can take credit for making student nurses pay to work for free in the NHS. That's got his little privileged fingers all over it. My babies were both delivered by student midwives. The first time my sons life was saved, and on the second occasion my life was saved. The women who saved us were on placement hours as part of their training, working towards their qualifications. Now those same women, will be paying for the pleasure of working for free and saving lives. Paying to work for free! On reflection throwing a tampon at him is too good, this change makes me want to lob my sons placenta in his face.

Elsewhere in Parliament on Autumn Statement day Jeremy Hunt, capitulated and agreed to negotiate with Student Doctors. Thanks to the brilliant pressure built by junior doctors and in no small part Heidi Alexander. Labour chalks up another win in the disasters averted league.

I could go on and on with thanks to charities, think tanks, individual constituents and other opposition MPs who should have got the autumn cheers. We did it, we were a great and powerful opposition, we balanced the pain with reality. We made Lord sorry the first Lord of the Treasury and his stormtroopers move from the dark side. We should have got the cheers, but all we got was a black eye, when a little red book smacked us right in the face.