Wind energy industry facing structural change

Entry of major energy utilities is forcing cost cuts and standardization

The boom in the global wind energy industry continues unabated: despite the drag on growth caused by the crisis in 2009, installed capacity rose 31 percent over the previous year. At the same time, the industry is facing structural change. While it has been primarily pioneering companies operating in this market to date, the weight is increasingly shifting – with the resultant consequences for manufacturers and suppliers. Major energy utilities that are expanding their energy mix to include wind power are taking on an ever greater role. This is increasing the size of the projects as well as the pressure to cut costs and standardize. At the same time, new providers are entering the market, which has led to overcapacities. According to the study by Roland Berger Strategy Consultants, consolidation in the industry is inevitable. Manufacturers have to grow, structure themselves more efficiently and cut their costs in order to survive. Suppliers, too, must adapt accordingly.

Thanks to the law enacted to promote renewable energies, installed capacity in Austria grew 30 percent in 2009, putting the country on a par with the international average. In Lower Austria alone, there are now 117 wind parks with a total of 460 wind turbines. It is hoped that capacity can be increased from the current 1,015 MW to 1,695 MW by 2013.

The global wind energy industry, too, is facing structural change. At present, wind power plant engineers are still a very diverse group. They range from purely wind power pioneers, who currently share about half the market, to a wide array of regional players and traditional engineering companies that are continuously expanding their market share, particularly through acquisitions. One of the major factors here is the growing demand from large energy utilities that are expanding their energy mix with ever larger wind parks in their efforts to meet the challenges posed by CO2 emissions trading and the rising cost of fossil fuels. To realize such major projects, energy utilities are concluding framework agreements with individual producers in an attempt to systematically standardize and industrialize the value chain. On top of this, in China in recent years, numerous new producers of wind power plants have emerged and are now edging their way into the global market.

Success factors are size and industrialization
The study concludes that the wind power plant industry needs to develop from a pioneer industry into a classical industry: The major energy utilities make the same demands of wind farm manufacturers as they do of producers of conventional power plants. As a result, product development will increasingly align with normal industry practice, also in the wind power sector, and thus stabilize the value chain. Furthermore, major technology corporations like Siemens and General Electric, and even local, particularly Chinese, players will expand their market share at the expense of the pioneers.

At the same time, the demands placed on suppliers are changing, too. They have to cut their costs through standardization and modularization in order to support manufacturers in the global competitive environment. But the increasing technological challenges are also giving suppliers the opportunity to position themselves as strategic partners. This will ensure that they don’t lose out during the upcoming consolidation.