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.

Dan Kitwood/Getty
Show Hide image

I believe only Yvette Cooper has the breadth of support to beat Jeremy Corbyn

All the recent polling suggests Andy Burnham is losing more votes than anyone else to Jeremy Corbyn, says Diana Johnson MP.

Tom Blenkinsop MP on the New Statesman website today says he is giving his second preference to Andy Burnham as he thinks that Andy has the best chance of beating Jeremy.

This is on the basis that if Yvette goes out first all her second preferences will swing behind Andy, whereas if Andy goes out first then his second preferences, due to the broad alliance he has created behind his campaign, will all or largely switch to the other male candidate, Jeremy.

Let's take a deep breath and try and think through what will be the effect of preferential voting in the Labour leadership.

First of all, it is very difficult to know how second preferences will switch. From my telephone canvassing there is some rather interesting voting going on, but I don't accept that Tom’s analysis is correct. I have certainly picked up growing support for Yvette in recent weeks.

In fact you can argue the reverse of Tom’s analysis is true – Andy has moved further away from the centre and, as a result, his pitch to those like Tom who are supporting Liz first is now narrower. As a result, Yvette is more likely to pick up those second preferences.

Stats from the Yvette For Labour team show Yvette picking up the majority of second preferences from all candidates – from the Progress wing supporting Liz to the softer left fans of Jeremy – and Andy's supporters too. Their figures show many undecideds opting for Yvette as their first preference, as well as others choosing to switch their first preference to Yvette from one of the other candidates. It's for this reason I still believe only Yvette has the breadth of support to beat Jeremy and then to go on to win in 2020.

It's interesting that Andy has not been willing to make it clear that second preferences should go to Yvette or Liz. Yvette has been very clear that she would encourage second preferences to be for Andy or Liz.

Having watched Andy on Sky's Murnaghan show this morning, he categorically states that Labour will not get beyond first base with the electorate at a general election if we are not economically credible and that fundamentally Jeremy's economic plans do not add up. So, I am unsure why Andy is so unwilling to be clear on second preferences.

All the recent polling suggests Andy is losing more votes than anyone else to Jeremy. He trails fourth in London – where a huge proportion of our electorate is based.

So I would urge Tom to reflect more widely on who is best placed to provide the strongest opposition to the Tories, appeal to the widest group of voters and reach out to the communities we need to win back. I believe that this has to be Yvette.

The Newsnight focus group a few days ago showed that Yvette is best placed to win back those former Labour voters we will need in 2020.

Labour will pay a massive price if we ignore this.

Diana Johnson is the Labour MP for Hull North.