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.

Getty
Show Hide image

Everyone's forgotten the one issue that united the Labour party

There was a time when Ed Miliband spoke at Momentum rallies.

To label the row over the EU at Thursday’s Labour leadership hustings "fireworks" would be to endow it with more beauty than it deserves. Owen Smith’s dogged condemnation of John McDonnell’s absence from a Remain rally – only for Corbyn to point out that his absence was for medical reasons – ought to go down as a cringing new low point in the campaign. 

Not so long ago, we were all friends. In the course of the EU referendum, almost all of the protagonists in the current debacle spoke alongside each other and praised one another’s efforts. At a local level, party activists of all stripes joined forces. Two days before polling day, Momentum activists helped organise an impromptu rally. Ed Miliband was the headline speaker, and was cheered on. 

If you take the simple version of the debate, Labour’s schism on the EU appears as an aberration of the usual dynamics of left and right in the party. Labour's left is supposedly cheering a position which avoids advocating what it believes in (Remain), because it would lose votes. Meanwhile, the right claims to be dying in a ditch for its principles - no matter what the consequences for Labour’s support in Leave-voting heartlands.

Smith wants to oppose Brexit, even after the vote, on the basis of using every available procedural mechanism. He would whip MPs against the invocation of Article 50, refuse to implement it in government, and run on a manifesto of staying in the EU. For the die-hard Europhiles on the left – and I count myself among these, having run the Another Europe is Possible campaign during the referendum – there ought to be no contest as to who to support. On a result that is so damaging to people’s lives and so rooted in prejudice, how could we ever accept that there is such a thing as a "final word"? 

And yet, on the basic principles that lie behind a progressive version of EU membership, such as freedom of movement, Smith seems to contradict himself. Right at the outset of the Labour leadership, Smith took to Newsnight to express his view – typical of many politicians moulded in the era of New Labour – that Labour needed to “listen” to the views Leave voters by simply adopting them, regardless of whether or not they were right. There were, he said, “too many” immigrants in some parts of the country. 

Unlike Smith, Corbyn has not made his post-Brexit policy a headline feature of the campaign, and it is less widely understood. But it is clear, via the five "red lines" outlined by John McDonnell at the end of June:

  1. full access to the single market
  2. membership of the European investment bank
  3. access to trading rights for financial services sector
  4. full residency rights for all EU nationals in the UK and all UK nationals in the EU, and
  5. the enshrinement of EU protections for workers. 

Without these five conditions being met, Labour would presumably not support the invocation of Article 50. So if, as seems likely, a Conservative government would never meet these five conditions, would there be any real difference in how a Corbyn leadership would handle the situation? 

The fight over the legacy of the referendum is theatrical at times. The mutual mistrust last week played out on the stage in front of a mass televised audience. Some Corbyn supporters jeered Smith as he made the case for another referendum. Smith accused Corbyn of not even voting for Remain, and wouldn’t let it go. But, deep down, the division is really about a difference of emphasis. 

It speaks to a deeper truth about the future of Britain in Europe. During the referendum, the establishment case for Remain floundered because it refused to make the case that unemployment and declining public services were the result of austerity, not immigrants. Being spearheaded by Conservatives, it couldn’t. It fell to the left to offer the ideological counter attack that was needed – and we failed to reach enough people. 

As a result, what we got was a popular mandate for petty racism and a potentially long-term shift to the right in British politics, endangering a whole raft of workplace and legal protections along the way. Now that it has happened, anyone who really hopes to overcome either Brexit, or the meaning of Brexit, has to address the core attitudes and debates at their root. Then as now, it is only clear left-wing ideas – free from any attempt to triangulate towards anti-migrant sentiment– that can have any hope of success. 

The real dividing lines in Labour are not about the EU. If they were, the Eurosceptic Frank Field would not be backing Smith. For all that it may be convenient to deny it, Europe was once, briefly, the issue that united the Labour Party. One day, the issues at stake in the referendum may do so again – but only if Labour consolidates itself around a strategy for convincing people of ideas, rather than simply reaching for procedural levers.