Fall in orders is forcing wind turbine industry to adapt

A report by Frost & Sullivan, shows that although in 2009 revenues for wind turbine manufacturers have been relatively unaffected by the downturn due to the lead time in delivering orders placed in 2008 – when the market was stronger – 2010 will show a different picture.

Analysis shows that global wind turbine manufacturers have been experiencing a drop in orders this year. Vestas, the Danish wind company, saw shipments of turbines fall 12 per cent in the second quarter of 2009, down to 618, compared to the second quarter 2008, while shipment of megawatts (MW) fell 20 per cent to 1,172 MW and the order backlog fell 45 per cent. Meanwhile, Spanish engineering group Gamesa saw MWs sold in the first half of 2009 fall to 1,638, from 1,848 during the same period of 2008, and German wind turbine manufacturer Nordex's order backlog fell 24 per cent from 3,044 MW in the last half of 2008 to 2,470 MW to the first half of 2009.

Frost & Sullivan is advising wind turbine manufacturing companies to "adopt new strategies to keep their margins intact". It says some companies have already begun taking "extraordinary and urgent measures" to sustain and accelerate their growth.

"Certainly the consequence of the recent slowdown of activity has been a fall in lead times and order backlogs, prices of turbines, freight costs and raw-materials leading to renegotiation of contracts by wind turbine manufacturers with sub-suppliers and in turn sub-suppliers with raw material producers,” observed Frost & Sullivan analyst Gouri Kumar. “To keep their margins intact for next year, it is essential for companies to revisit their priorities and strategies. Some of them have already started working on this and it is interesting to see what they have been doing to keep afloat, grow or adapt strategically to the tough environment".

The report identifies how wind energy companies around the world have been involved in mergers and acquisitions and joint ventures, in order to keep afloat.

"GE Drivetrain Technologies formed a joint venture with Chongqing XinXing Fengneng Investment in China to produce gear boxes for the Chinese market, this inorganic growth strategy has also been adopted by companies such as South Korean Daewoo Shipbuilding and Marine Engineering, Areva, Chinese XEMC Windpower and Hyundai Heavy Industries," said Kumar.

Other companies have turned their focus internally and are fine tuning quality management, supplier auditing, operation and maintenance and training of technical personnel, thus reducing their capital expenditure per MW.

Companies, such as Vestas, have responded to falling orders by shutting down factories in UK and Denmark and refocusing their activity and manufacturing in higher growth areas such as US and China.

Gamesa took the slowdown as an opportunity to diversify and re-define its priorities, moving away from full scale development and focusing more on closing stage sales. Gamesa formed a venture with Iberdrola to develop wind farms.