First published in Cleantech magazine, January 2011. Copyright Cleantech Investor 2011
By Anne McIvor
Wind markets in developed countries are suffering from turbulence - but wind is powering ahead in emerging economies and creating world scale turbine manufacturing industries.
2010 saw a dramatic slowdown in the rate of new installations of wind generating equipment, especially in the US and Europe, on the back of the recessionary environment, the failure of the US to pass legislation favouring renewable energy and competition from natural gas. The American Wind Energy Association reported that new capacity added in the third quarter of 2010 was 395MW, some 75% lower than in the same period of 2009.
Companies with high exposure to the US and European markets have seen their shares suffer. NASDAQ-listed tower manufacturer, Broadwind Energy, reported a 2010 third quarter year-on-year revenue decline of 36% and its shares had slumped more than 75% year to date by December 2010. The leading European wind turbine manufacturers, Vestas and Gamesa, both lost over 50% of their market value during 2010 (based on mid December share prices).Denmark’s BTM Consult valued the global wind turbine market at around US$75 billion in 2009. In its 2010 report, BTM expected the market to grow to US$124 billion by 2014, taking the installed generation capacity to an estimated 447GW within five years and potentially to 1,000GW within ten years – by which time wind could be meeting 8.4% of global electricity demand. However, BTM’s forecasts are likely to be scaled back by the time its 2011 report is released. Barclays Capital cut its global wind power growth forecast to 35.3GW of new capacity during 2010, down from the 36.9GW installed in 2009, while HSBC is forecasting 36.3GW of new capacity in 2010.
One trend, however, is clear: wind capacity continues to rise strongly in China, which is accounting for much of the global growth and where the market for turbines is booming.
China became the world’s largest wind market in 2009
China became the world’s largest wind market in 2009, with 13.75GW of new capacity installed – accounting for more than a third of the total new capacity of 38GW, according to BTM. During 2009 the US installed almost 10GW of new capacity, and Europe installed some 10.7GW. Although both the US and Europe are likely to have seen declines in 2010, China’s growth appears to have continued apace – and the rise in importance of the Chinese turbine manufacturers is a key trend.
Top Ten Wind Turbine Suppliers
Rank | Company | Country | Global Market Share 2009 (%) |
1 | Vestas | Denmark | 12.5 |
2 | GE | US | 12.4 |
3 | Sinovel | China | 9.2 |
4 | Enercon | Germany | 8.5 |
5 | Goldwind | China | 7.2 |
6 | Gamesa | Spain | 6.7 |
7 | Dongfang | China | 6.5 |
8 | Suzlon | India | 6.4 |
9 | Siemens | Germany | 5.9 |
10 | RePower | Germany | 3.4 |
Source: BTM Consult ApS |
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Denmark's Vestas Wind Systems only just managed to retain its number one slot with a 12.5% share of the global market in 2009. Close on its coat tails was GE of the US with 12.4% of the market. Sinovel, the largest Chinese manufacturer, ranked third with a market share of 9.2%. Sinovel was one of three Chinese companies featuring amongst the top ten manufacturers in 2009: Xinjiang Goldwind Science & Technology Co. (Goldwind) took the fifth place slot, with a market share of 7.2%, and Dongfang came in at number seven with a share of 6.5%. These figures imply a total market share for the top three Chinese companies of 22.9% of the global wind turbine market.
Beijing-based Sinovel claims to have completed production of the first 5MW prototype in China and is reported to be planning to enter production of 6MW turbines in 2011. The company’s planned listing on the Shanghai Stock Exchange in November 2010 was cancelled. However, Goldwind did complete a successful listing on the Hong Kong Stock Exchange in early October 2010, raising HK$6.8 billion. Goldwind’s shares, which were already listed on China’s Shenzhen Exchange, chalked up gains of over 30% during 2010 (to mid December) – in stark contrast to the poor performance of its European counterparts. Shares in Donfang, which is listed on the US OTC market, soared by 88% during the year.
Share Price Performance - Selected Wind Sector Stocks
| Company | Country | Listing | Currency | end 2009 | 7 Dec 2010 | % change |
| Dongfang Electric | China | OTC (US) | US$ | 2.64 | 4.97 | 88.3 |
| Goldwind | China | Shenzhen | CNR | 17.912 | 23.42 | 30.8 |
| RePower Systems | Germany | Frankfurt | EUR | 126.55 | 120.25 | -5 |
| Dongkuk Structures & Construction | Korea | Seoul | KrW | 8890 | 7210 | -18.9 |
| China Wind Systems | China | NASDAQ | US$ | 5.36 | 3.95 | -26.3 |
| Suzlon | India | Bombay | INR | 90.35 | 51.7 | -42.8 |
| Vestas | Denmark | Copenhagen | DKK | 317 | 161 | -49.2 |
| Gamesa | Spain | Madrid | EUR | 11.61 | 4.94 | -57.5 |
| Broadwind Energy | US | NASDAQ | US$ | 8.09 | 1.99 | -75.4 |
Larry Alberts and Ting Yin of the Boston Consulting Group (BCG) rank China’s turbine manufacturers into three groups. The ’First tier’ of “national champions”, which includes companies “competitively positioned relative to the top international players”, such as Sinovel, Goldwind and Dongfang Electric. ’Second tier’ companies are named by the BCG as Guangdong Mingyang, Guodian United Power, SEC, Zhejiang Windey and XEMC. There are a further 70 to 80 players, according to the BCG, which fall into the 'Third tier'.
The dramatic rise of the Chinese wind turbine manufacturing industry can be attributed to a combination of dramatic growth in the domestic Chinese market (driven by Government incentives) and the introduction of policies favouring local manufacturers. Foreign turbine manufacturers controlled 75% of the industry between 1996 and 2005, but the Chinese Government imposed a local-content requirement of 70% on wind turbines and raised tariffs on imported components at the same time as it was offering subsidies to help grow the market. According to Thomas M. Hout and Pankaj Ghemawat (quoted in the Harvard Review):
“By 2009 Chinese companies, led by Sinovel and Goldwind, controlled more than two-thirds of the market. In fact, foreign companies haven’t won a single central Government–funded wind energy project since 2005.”
The Chinese turbine manufacturers may have had an edge over their international competitors in terms of manufacturing prices: but it has also been reported that the bidding criteria provided Chinese companies with unfair advantages, focusing primarily on turbine unit prices rather than rates of return from a turbine or the life cycle cost.
China's proactive policy in developing an industrial base in wind (and other clean technologies) is outlined in the case study of the city of Baoding, cited as a successful example of a 'Climate Innovation Centre' in a report by infoDEF (the Information for Development Program) in collaboration with the United Nations Industrial Development Organisation (UNIDO) and the UK's Department for International Development (DFID).
China has some 55 national development zones, many of which focus on OEM businesses (manufacturing foreign products under licences), but Baoding has a particular focus on domestic innovation. The Baoding New & High Technology Industrial Development Zone has incubated companies such as HT Blade, a wind turbine blade manufacturer. Baoding supports innovation from research and development stage through to product deployment and diffusion – and the state connections provide clients with the ‘inside track’ on policy development. Baoding has its own venture capital firm which provides both debt and equity funding to the companies in the incubator. And it has strong links with Government, universities and banks such as the China Development Bank. Baoding backed wind turbine manufacturer, Guodian United Power, to set up a ‘state key laboratory’ for its industry. Both Guodian and HT Blade are reported to be planning IPOs in the coming months.
Dr Joanna Lewis of Georgetown University has written on the role of technology transfer and acquisition strategies behind the growth of Chinese wind turbine companies – and companies in India and South Korea. Goldwind acquired a licence to manufacture 600kW wind turbines from German Jacobs Energie GmbH (now part of REpower Systems AG – itself a subsidiary of India’s Suzlon) back in the 1990s. In 2001, it acquired a second licence from REpower for 750kW wind turbines. Subsequently, Goldwind has licensed permanent magnet direct drive technology from Vensys Energy. Dr Lewis compares Goldwind to Suzlon Energy of India, which has also developed technology through foreign licences. She points out that such technology development or acquisition strategies were conducted within the constraints of national and international intellectual property law. India’s ReGen Powertech also has a licence to manufacture turbines based on the Vensys AS technology – as has Enerwind/IMPSA Wind in Brazil.
India’s Suzlon has established a strong presence in developed wind markets – but it now focusing on emerging markets in China, South Africa and Brazil
Suzlon’s success, which has been well documented, is less recent than that of its Chinese counterparts. The Indian company has already established a strong presence in developed wind markets. It is consequently also suffering somewhat from the downturn in the US and Europe, and is redressing its strategy to concentrate on its domestic Indian market and the emerging wind markets in China, South Africa and Brazil. Its Repower Systems subsidiary, based in Germany, is expected to focus primarily on offshore wind opportunities in markets such as Europe.
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Brazilian Government policy, like that of China, is geared towards building a domestic industrial base by offering incentives for the purchase of locally manufactured turbines. Spain’s Gamesa reportedly plans to focus on Brazil, where it has opened a subsidiary and is supplying turbines for wind parks being rolled out by Iberdrola. Gamesa and Suzlon join Wobben Enercon, which has been established in the Brazilian market for some time, Vestas and IMPSA (Industrias Metalurgicas Pescarmona SA). IMPSA, an Argentine company which generates some 65% of its revenues in Brazil, was planning an IPO on the Sao Paulo Stock Exchange in 2010, but the listing has been postponed.
South Korea’s emerging wind manufacturing industry is set to focus heavily on exports
South Korea, in contrast to nations such as China, India or Brazil, will only ever have a limited domestic market for wind (estimates are for 1.1GW by 2012). There is a major focus on offshore wind and the government target is to install 2GW of offshore wind by 2020. Consequently, South Korea’s emerging wind manufacturing industry is set to focus heavily on exports. Heavy industry companies have entered the market in order to diversify their businesses, which have become largely reliant upon shipbuilding and have pursued aggressive expansion strategies.
Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, Doosan Heavy Industries & Construction and the STX Group (formerly Ssangyong Heavy Industries) have all entered the market over recent years. Doosan was the first company in Asia to develop 3MW offshore wind turbines. Hyundai Heavy Industries licensed 1.65MW and 2MW turbine designs from AMSC Windtec and has recently entered into a partnership with AMSC’s Windtec subsidiary to build a 5MW offshore wind turbine – which it will be permitted to market, manufacture and sell globally (purchasing power electronic components from AMSC).
Daewoo Shipbuilding & Marine Engineering aims to generate a third of its sales from wind power by 2020 – predominantly from offshore wind. In 2009 Daewoo acquired DeWind, a US turbine manufacturer, from Composite Technology Corp. for $49 million, providing it with a foothold in the sector. It is currently developing an offshore turbine – and is planning to build turbines in China and potentially in Romania. Daewoo also plans to build installation vessels for offshore turbines.
The STX Group has also pursued a strategy of acquisition, buying Netherlands-based wind turbine maker Harakosan Europe for $19 million. STX is reportedly building wind farms across eastern Europe, in Poland, Romania, Hungary and Bulgaria – which will be supplied by its own turbines.
South Korean parts manufacturers are also entering the export market: Dongkuk S&C, a spin-off from steelmaker Dongkuk Industries, is a leading manufacturer of wind towers, supplying companies such as Siemens. Taewoong has signed a contract to supply parts to Europe's Debran and the Chinese firm BYM Wind Technology; Korea 's Younghyun BM entered into a $7.5 billion contract to supply parts to Shengjin Trading in China; and Unison is supplying generators to Juhl Energy Development of the US.
In terms of investment opportunities, there appears to be a shift in focus by investment funds towards wind operators rather than turbine manufacturers, at least in the developed markets. However, opportunities for benefiting from China’s growing market may lie amongst the turbine industry – both in China and elsewhere. The BCG sees China's onshore wind market as approaching the stage where the national champions are globally competitive, can compete effectively without further policy support and are starting to export. They expect that this will result in shifts in domestic policy to lift restrictions on foreign manufacturers and to encourage reciprocity with targeted export markets. The emerging wind markets are increasingly set to call the shots as they focus on the potential for building a manufacturing industry – alongside the power generation industry.
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