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RENEWABLE ENERGY WORLD MAY–JUNE 2011 7

NEWS ANALYSIS

ALL AT SEA: WHERE WILL THE UK’S

OFFSHORE TURBINES BE BUILT?

UK OFFSHORE WIND POWER

ith 1341 MW installed, the

UK is the world leader in

offshore wind but with

many more turbines still to be built

and deployed, where they will be

built remains a key question.

Speaking in March this year,

UK climate change minister Chris

Huhne said that the UK would

have to see a ‘ve-fold increase

in the current rate of deployment

of renewables’ in order to meet its

targets for 2020.

Continuing, he said: ‘It would

be crazy to support producers

generating low-carbon energy,

businesses selling low-carbon

products, consumers installing low-

carbon measures – and not try to

capture some of the original value.’

But despite the scale of Round

III investment, the UK lacks a

volume turbine manufacturing

capability, with the majority of large

turbine parts built in Germany or

Scandinavia.

Although the UK does well from

small turbine manufacturing –

supplying 25% of the global market

– it doesn’t even make the top 10

when it comes to large wind turbine

production.

After the much-criticised review

of the country’s solar feed-in tariff,

UK chancellor George Osborne

took various measures in the UK’s

March government budget to

stimulate the country’s domestic

renewable industry, including an

extra £2 billion to establish the

much-mooted Green Investment

Bank. The bank will fund early-

stage technical development in key

areas such as marine renewables.

However, it is wind power that’s

in the spotlight, with a successful

UK wind manufacturing sector

potentially creating 60,000 jobs by

2020, according to RenewableUK.

Reducing the cost of wind power

deployment is also a key goal for

Round III and building factories at

ports from where turbines can be

easily loaded has the potential to

be more efcient, along with a host

of other benets.

Smoothing the path for factory

development, Prime Minister David

Cameron conrmed last October

that the £60 million grant earmarked

by the previous Labour government

for investment in English and

Welsh ports will go ahead as part

of the National Infrastructure Plan.

Another £70 million will go to

Scotland.

Three of the biggest turbine

manufacturers are already

committed: Gamesa will spend

up to £133.7 million on various

facilities including a factory, while

shifting its head ofce to London,

and GE has plans to invest up to

£100 million. Siemens chose Hull as

the preferred location for its turbine

factory in January this year.

Other notable recent investments

include Mitsubishi and Doosan in

Glasgow and Clipper in Newcastle,

while Vestas is putting £50 million

into its new technology park on the

Isle of Wight.

Vestas has also hinted that it

might build its new 164 metre

rotor diameter 7 MW turbine in

the UK. But further investment will

only happen if the manufacturers

believe that future market demand

warrants it and – crucially – that the

market will be stable.

‘The number one thing that will

attract Vestas to manufacture the

new turbine in the UK will be if

there is a visible order pipeline to

justify the signicant investments,’

said Matthew Delany, director of

government relations at Vestas

Offshore.

‘The state of the [country’s]

infrastructure is secondary to [the]

order pipeline. The £60 million port

investment fund certainly signals

the government’s belief in the

industry and is a step in the right

direction,’ he added.

Addressing uncertainties over

nancial support is the key point,

while clarifying and accelerating the

implementation of the Electricity

Market Review (EMR) is another

priority.

There are currently no rm

offshore wind funding plans beyond

2017, and statistics released in

March by the inuential American

Pew Charitable Trust claim the UK’s

private investment in the renewable

sector fell by a worrying 70% in

2010.

‘Over the last decade, successive

governments have provided

welcome nancial support, but

the pace of investment now needs

to change. Around 1 GW of wind

generation was added in 2009,

compared to over 3 GW required

annually by the end of the decade,’

said Alstom’s UK president and

head of power Stephen Burgin.

‘This step-change needs to take

place at a time when many other

countries and sectors are also

chasing a limited pool of capital,

so the government has to do all it

can to make the UK one of the most

attractive places to invest.’

‘We’ve just consulted on the

EMR package,’ said a spokesman

for the UK’s Department of Energy

and Climate Change (DECC). ‘We

know that certainty and clarity

in the long-term is important for

those people investing hundreds of

millions of pounds. This is about the

decades ahead, not just 2020.’

Other long-standing challenges

include nalising the regulatory

framework for offshore

transmission, agreeing investment

for the onshore transmission

network and reducing the planning

application periods for onshore

renewable projects. The latter is a

bete noire for manufacturers and

symbolises the uncertain future of

UK development.

‘Urgently addressing delivery

barriers such as planning and

grid issues should help create

more market certainty, which in

turn should help create the visible

order pipeline we need for a turbine

facility to be viable,’ said Delaney.

Chancellor Osborne tackled

planning in his budget statement,

with a new presumption in favour of

sustainable development.

The default answer to planning

applications is now ‘yes’, although

what this means in practice is yet

to be dened.

Osborne also guaranteed that

any renewable planning application

would produce a result within 12

months. How planning authorities

are to meet this goal is unclear.

The UK government is trying

hard to persuade more turbine

manufacturers to set up here, but

if it wants to make a clean sweep

of all the big players, it needs to do

more to assuage their concerns.

Ultimately this means taking some

tough decisions about how offshore

wind will be funded, built and run in

future – and taking them soon.

James Lawson

Will the UK’s increasing demand for wind

turbines see them built on home soil?

VESTAS

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8 RENEWABLE ENERGY WORLD MAY–JUNE 2011

NEWS ANALYSIS

ne of the key challenges

facing fast developing

economies such as India is

how to fuel and sustain economic

growth while simultaneously

reducing emissions. Like China,

India is strongly opposed to setting

emission reduction targets, arguing

that any constraints would adversely

impact economic growth, with

this resistance unlikely to weaken

before the current rst commitment

period of the Kyoto Protocol ends in

December 2012. But this emission

constraint resistance should not be

confused with sustainable market

development.

Since 2004 India has averaged

quarterly GDP growth of 8.4%,

reaching a historical high of 10.1%

in September of 2006 and a record

low of 5.5% in December 2004.

In the fourth quarter of 2010 GDP

grew 8.2% over the corresponding

quarter in 2009, with the IMF

forecasting GDP for 2011 at 8.2%.

In its summary for policy

makers, the Energy and Resources

Institute’s National Energy Map for

India: Technology Vision 2030 said

that, given the government’s plans

for rapid economic growth, the

country’s requirements for energy

and supporting infrastructure will

also increase rapidly over the next

two decades.

Analysts estimate that to maintain

this pace of growth will require India

to increase its energy consumption

by about 4% annually, with the

IEA estimating that India will need

to spend approximately US$800

billion on its energy sector by 2030.

Last year the Indian government

published a study based on 2007

data which showed a sharp increase

in industrial activity since the last

assessment in 1994, making India

the world’s fth biggest CO

emitter

after China, the US, Europe and

Russia.

Since 1994 emissions from

electricity, cement and waste have

more than doubled. India generates

90% of its electricity from coal,

which in turn accounts for more

than a third of its emissions.

Yet India’s emissions are

some 75% less than those from

China and the US.

Like China, India believes the

appropriate measure of sustainable

economic development is carbon

intensity. Its emissions relative

to economic output fell by 30%

between 1994 and 2007 and the

government has set a carbon

intensity reduction target of 24%

by 2020. To meet this target India

will have to become more energy

efcient, will have to reduce

its energy intensity and, most

importantly, will have to rapidly

invest in its renewable energy

infrastructure. And it is making

good progress.

India is among the top ve

countries in terms of renewable

energy capacity with an installed

base of over 19 GW of grid

interactive renewable power,

accounting for 11% of total

installed capacity, and about

2.5 GW of renewable generation

being added annually.

To support this policy India

recently launched the ambitious

National Solar Mission with a target

capacity of 20 GW by 2020 and the

aim of solar energy achieving grid

parity with the cheapest coal-red

capacity by 2030. With over 400

million of its population lacking

access to modern forms of energy,

it also has one of the largest off-grid

renewable energy programmes,

with more than 1.5 million

decentralized solar applications,

over 4 million biogas plants, and

in excess of 5 million m

of solar

thermal applications installed.

According to the Energy and

Resources Institute, ‘renewable

energy resources play a crucial

role in providing decentralised

power to remote areas. Apart from

continuing to provide support to

renewable energy schemes, efforts

should also be directed towards

large-scale deployment of related

technologies in order to further

bring down their costs.’

Aside from solar power, India’s

government has committed to

signicantly increasing its hydro

capacity.

But it is wind power that presents

India’s major growth opportunity.

According to the Indian Wind

Energy Outlook 2011, ‘wind power

must play a key role in fuelling

India’s growing economy, by

delivering substantial amounts of

clean and indigenous electricity’.

The report forecast that 65.2 GW

of wind power could be installed

by 2020, up from 13.1 GW at the

end of 2010, with a potential of

160.7 GW installed by 2030. Citing

last April’s Gulf of Mexico oil spill,

ongoing unrest in the oil-producing

Middle East and North Africa

region, and the Fukushima nuclear

disaster arising from the Japanese

earthquake and subsequent

tsunami, GWEC secretary-general

Steve Sawyer warned: ‘A return to

old-fashioned power generation

cannot be the answer, not only

for environmental, but also for

economic reasons.

‘Betting on the obsolete polluting

technologies of the past is not a

viable solution, and only renewable

energy can ll the gap that will

be left by nuclear power in a

sustainable fashion.’

Scaling up wind power, said

the report, would provide both

environmental and economic

benets, arguing that wind is now

competitive with conventional new-

built power generation technologies

such as natural gas.

But, it cautions, to realise the full

potential of India’s rich renewable

resources the government needs

to address several challenges and

barriers, including a clear renewable

energy framework at national level,

incentives for repowering, and rapid

up-scaling of grid infrastructure to

transport increasing amounts of

wind power to the demand centres.

According to the World Bank,

achieving India’s government’s

renewable energy goals for the

next decade will cost between

$10 billion and $64 billion in

subsidies, depending on whether

the government adopts a low-

diversity, low-cost renewable energy

resources scenario or a high-

diversity, high-cost scenario. The

higher cost scenario, which would

include solar, will only be viable if

fossil fuel prices continue to rise and

are free of distorting subsidies. Yet

although the government committed

to removing fossil fuel subsidies at

last year’s G20 summit, the country’s

deep poverty problems make this a

politically sensitive policy.

For all its support for renewable

energy development, and its desire

to become a world renewable

energy leader, the fact remains that

India will continue to be heavily

reliant on fossil fuels over the next

two decades.

Jeremy Wilcox

ECONOMY VERSUS EMISSIONS

INDIA’S RENEWABLE ENERGY CHALLENGE

India’s CO

emissions are some 75%

less than those of China and the US

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10 RENEWABLE ENERGY WORLD MAY–JUNE 2011

NEWS ANALYSIS

INTELLECTUAL PROPERTY

he news that China has

overtaken the US in installed

wind capacity, according

to research by the Global Wind

Energy Council, has put future

opportunities in this market into

sharp relief for international

renewables companies. China,

alongside a clutch of other

emerging economies, is set to play

an increasingly important role in

deciding the future success of key

Western players, as they vie for

the technological and commercial

rewards of these, potentially,

lucrative renewables markets.

But beyond the headline

numbers, there are particular

challenges facing new entrants.

Many of these will come in the

guise of intellectual property,

which requires strong policies and

frameworks to protect the future

value of such investments.

The Chinese Ministry of Industry

and Information Technology

last year restated a 10-year

commitment to aggressively

pursue green energy policies and

reduce its dependence on foreign

produced energy.

It followed China’s elevation in

2009 to the very top of the G20

table of countries investing in

renewable energy, pushing the US

and UK into second and third place,

respectively.

Additionally, a ve-year plan that

sees renewables take a 15% share

of nal energy consumption has

also been announced.

Altogether, this package has

been spurred on by a variety

of initiatives, which followed

renewable energy legislation

passed in 2005. These included

government-guided prices for wind

power, compulsory purchases for

all renewable energy generated, as

well as nancing vehicles geared

towards the renewables sector.

Subsidies for the development

of electric vehicles were also

introduced and totalled $273.6

million between June and

November 2010.

Rare earth minerals play a

signicant part in the manufacture

of certain renewable energy

models and China, with its major

stocks of these, is playing a key

part in managing the production

and supply of such materials.

According to some estimates,

CHINA’S DRIVE FOR

RENEWABLES POSES IP

CHALLENGES

What is the role of China in the global renewable energy

market and how is this driven by its IP policies?

DAVID APPLEYARD

China is deliberately moving away from its

moniker as the 'world's workshop' towards

becoming the 'world's innovator'

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12 RENEWABLE ENERGY WORLD MAY–JUNE 2011

NEWS ANALYSIS

up to 90% of the world’s rare earth

minerals are mined in China.

Recent political developments

have led the Chinese government

to reduce the export of these

minerals by around 10% every

year since 2006, much to the

concern of the wider international

market. By controlling the supply

and cost of many raw materials,

China has arguably put itself in a

strong position to indirectly control

a signicant slice of the renewables

market.

The rise in the cost of rare earth

materials could pose a considerable

threat to international customers,

unless alternative technologies are

developed.

While the green revolution has

been playing out in China, its focus

on research and development,

underpinned by an innovative

intellectual property system has

been fundamental in incentivising

relevant domestic innovation.

In its wake are some clear

indications that China is deliberately

moving away from its moniker as

the ‘world’s workshop’ towards

becoming the ‘world’s innovator’.

According to some estimates,

China is set to overtake the United

States and Japan in total number of

patent lings across all sectors later

this year.

Research into registered

intellectual property rights in China

suggests an acceleration trend,

with a growing number of Chinese

companies ling patents and other

registrable IP rights overseas.

Its dedication to modernise

the current policy and legal

framework has recently been

reafrmed with, for example,

the announcement that the UK’s

Ofce of Fair Trading has signed

a Memorandum of Understanding

with China for the cooperation

and exchange of best practice on

competition and consumer policy

and enforcement.

Against this backdrop, what

is the role of China in the global

renewables market and how is

this driven by its IP policies? More

importantly, what impact will these

factors have on Western companies

looking to enter this market?

China’s IP legal framework has

been evolving in recent years to

stimulate growth and innovation.

The rapid increase in patent ling in

China reects a growing awareness

of the need for and benets of IP

protection.

The Chinese government has

also made several amendments to

its patent law since 1992 that have

focused on attracting foreign-

direct investment into China.

These are designed to benet

domestic Chinese companies by

incentivising production in certain

areas, including renewables

markets. However, a number of

foreign companies looking to

locate or invest in China have met

these reforms with scepticism.

Some of the changes so far have

strengthened the quality of patents

granted, making these more

resilient to challenge.

Signicantly, a new form of

compulsory licensing of patents

has also been introduced. While

this initiative, aimed at dealing with

abuses of patent monopolies, is

so far limited to pharmaceuticals,

it has been created to promote

domestic interests.

Specically, companies may now

apply for and be granted a licence

to work a patent that is not being

properly exploited by its owner.

Importantly, this move is in

addition to an existing compulsory

licensing scheme, similar to those

in a number of other countries.

In response to these changes,

many foreign enterprises have

voiced concern that the end-

result may be to force the

licensing in China of foreign-

owned technologies, including

renewables.

The US Chamber of Commerce

has claimed these are anti-IP

policies that detrimentally impact

innovation in green technologies

and will lead to job losses in the

sector.

While the compulsory licensing

scheme is currently restricted to

pharmaceuticals, there are fears

it could be extended to other

industries.

Forced licensing of IP is,

therefore, a potential risk to

Western companies looking to do

business in China. There have also

been reports of changes to taxation

structures that would benet

domestic renewables companies,

and squeeze foreign competitors

out of the market.

Furthermore, the types of

corporate vehicle used by foreign

companies when doing business

in China have recently come under

scrutiny.

Questions over how Beijing may

respond in retaliation to political

pressure from the West increasingly

obscure these issues.

Beyond these current questions,

there is growing consensus that

China now has a strong legislative

framework, which offers effective

protection of IP rights.

A more signicant issue is that

of enforceability, where courts

have struggled to keep up with the

demands of a country experiencing

rapid growth.

Between 2004 and 2009, the

number of civil IP cases in the

Chinese courts rose from 8332 up

to 30,509.

What may still be a relatively

weak system of recovering

damages also means that litigation

is not always the best weapon to

use when disputes arise.

According to the UK Intellectual

Property Ofce, approximately

95% of IP related cases are brought

by Chinese businesses, which often

end up being settled out of court.

However, there are early signs this

may be changing.

As the Chinese market moves

from imitation to innovation, its IP

enforcement regime will strengthen,

with Chinese businesses seeking

greater protection for their own

intellectual assets.

Stronger protection for IP rights

will lter into the court systems and,

longer term, China is likely to be

viewed as a reliable place in which

to litigate.

Statistics from the Supreme

People’s Court of the People’s

Republic of China suggest that

foreign plaintiff/pursuer success

rates in IP cases handled in China

compare favourably to ‘win rates’ in

overseas jurisdictions, with plaintiff

success rates of about 70%.

Similarly, damages awards

are increasing in the Chinese

courts, with Microsoft recently

being awarded over $300,000 in

a claim against a local insurance

company.

While the move to tighten the

Chinese IP framework may be good

news in the longer term, it is unlikely

to dramatically reduce the risks for

foreign investors in the immediate

future.

For Western companies looking

to operate with only their IP in

China, there is a mixed outlook

ahead.

On one hand, if fears over

compulsory licensing are realised

in renewable markets, this may

cause difculties and disincentives

for organisations that aim to exploit

and utilise their IP in the Chinese

market.

For others, however, it may

be seen as an opportunity to

collaborate with local companies,

increasingly eager to build on their

early commercial success.

One such example is the move

by Aberdeen-based SeaEnergy

Renewables to sign a strategic

cooperation agreement with

Chinese state-owned company

Nanton COSCO Ship Steel

Structure Co to develop and market

steel structures for the offshore

wind industry.

The agreement will enable

the companies to cooperate on

a business plan to develop and

market turbine jacket substructures,

towers and access systems for

offshore wind farms.

China is one of the most attractive

countries for foreign investment,

backed by an economy on track to

become the world’s largest towards

the end of the decade.

Signicant progress has already

been made in creating a strong

intellectual property framework,

which will instil further condence

among foreign companies

looking to share and exploit their

technologies locally.

In the meantime, as with

any new market, renewables

companies looking to China must

ensure they secure the appropriate

advice, both at a local and at an

international level.

Gill Grassie

The Chinese government has reduced the

export of key RE-related rare earth minerals

by about 10%/year since 2006, to the

concern of the wider international market

Forced IP licensing is a risk for Western

companies wanting to do business in China.

Questions over how Beijing will respond to

political pressure from the West increasingly

obscures these issues

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14 RENEWABLE ENERGY WORLD MAY–JUNE 2011

NEWS ANALYSIS

POWERING A

RENEWABLE REVOLUTION

ASIAN WIND MARKET

he Asia-Pacic region currently leads the

global market in annual wind capacity

installations and will account for at least

45% of total megawatts added globally through

to 2025. In recent years, exponential growth

in regional wind power demand, coupled

with improving state and local incentives,

has encouraged local original equipment

manufacturers (OEMs) to scale up their sales

strategies. This has given rise to a ood of

indigenous manufacturing investments in China,

India and South Korea, both by aspiring domestic

players and by entrenched global vendors

seeking to cushion impacts of the economic

downturn. All of these trends are evolving

against the backdrop of a rapidly growing Asian

wind market which is forecast to lead the world

in new and cumulative wind capacity installed

through to 2025.

Over the past two years

Asia has emerged as

the world’s second-largest

regional player in terms of

total installed wind capacity

While global economic turmoil has stalled

recent wind market activity across Europe and

other Western regions, Asia has sustained a

record demand for wind power. After claiming

less than 1.9 GW of installed capacity in 2000

– representing approximately 10% of the global

total – the region has rapidly fed its appetite for

wind energy. Over the past two years, Asia has

emerged as the world’s second-largest regional

player in terms of total installed wind capacity,

capturing 25% of cumulative installations in 2009

and 29% in 2010, up from 13% in 2005. It has

also become the fastest-growing wind market

worldwide, accounting for 47% of global annual

wind additions in 2010, up from 21% in 2005.

The Asia-Pacic accounted for nearly half

of global wind capacity additions in both

2009 and 2010, driven largely by burgeoning

wind power demand in China and India. While

rampant local industry build-out has paved the

way for much of this growth, it has also yielded

vastly overheated supply market conditions in

markets such as China.

In response to intense local competition,

many of the region’s OEMs have been seeking

to broaden their reach into foreign markets to

defend market share.

Among key markets Asian suppliers are

seeking to penetrate, the US and Europe are

at the forefront, followed by several Latin and

South American countries. To date, only Suzlon

and Mitsubishi have been able to carve out a

substantive sales footprint abroad. A host of

Chinese and Korean industrial players eagerly

seek to follow in their footsteps, particularly

North America’s high-growth market.

Asia captured 89% of locally manufactured

wind turbine deliveries in 2009, with China

procuring the lion’s share, trailed by India and

more distantly by Australia. As China already

boasts the largest project pipeline and the

fastest-growing wind market in the world, it

should continue to feature prominently in Asian

OEM order book portfolios, particularly among

China’s top tier of vendors.

Driven primarily by the emergence of China

and India as major demand centres for energy

and renewable power, the Asia-Pacic onshore

wind market expanded at a compound annual

growth rate (CAGR) of 39% from 2005 to 2010.

China’s explosive wind growth has assumed

a central focus in Asia to date – particularly after

nearly doubling its installed capacity year-on-

year since 2005. Within just six years, China’s

contribution to annual wind turbine deliveries has

risen from 20% to 84% within Asia, and from 4%

to a record 41% worldwide.

India’s aggressive renewable energy plans

have also helped to sustain regional wind

growth. Despite its relative decline in market

share compared with China, India still accounted

for 12% of Asian wind power additions in 2010,

as well as 23% of the region’s total installed

capacity that year.

While also increasingly eclipsed by China,

Japan and Australia represent the second tier of

Asian wind markets, with each country capturing

4% of the region’s total wind installations by

year-end 2010. As Japan’s onshore market

approaches saturation, however, Australia will

be better-positioned for growth – provided that

its government can restore protable Renewable

Energy Credit (REC) pricing levels for wind

projects in the near term.

Asia-Pacic annual onshore wind growth is

expected to continue scaling rapidly throughout

the forecast period – increasing from just

400 MW in 2000 to over 22 GW by 2015 – to

become the largest onshore wind growth region

in the world. Consequently, Asia’s cumulative

installed onshore wind base should surpass

278 GW by 2020 and 412 GW by 2025. Overall,

IHS EER expects a CAGR of nearly 13% from

2011 to 2025, after which the region should

account for approximately 44% of the global

cumulative installed wind base by 2025.

While Asia lags signicantly behind Europe in

offshore wind development, China, Japan and

Korea have all installed offshore pilot projects

to date, positioning the region several strides

ahead of North America. Asia-Pacic offshore

wind growth should gain strong momentum

post-2013, as annual additions rise from an

estimated 530 MW in 2013 to over 2.4 GW by

2025. The region’s total installed offshore wind

base is expected to reach over 20 GW by 2025,

representing approximately 18% of the global

installed wind base by this time.

In 2010, the growth of the Chinese market

enabled Asia to post a record year, with over

16.5 GW of new wind capacity installed and

grid-connected. As a result, a host of players

have been scrambling to roll out new turbines

and expand manufacturing operations in this

key growth centre. Amid profound global supply-

demand uctuations, many entrenched foreign

vendors have followed a similar trajectory in

recent years, gravitating toward Asia in an

attempt to diversify away from nancial turmoil

in Europe and the US. At the same time, these

Western-owned players continue to suffer

signicant market share erosion, in relative

terms, in this region amid the ood of aggressive

local OEMs.

Key elements impacting Asia wind turbine

OEMs going forward include value chain

exibility, multi-megawatt-scale supply chain

build-out, customer differentiation, and lasting

product portfolio development.

As explosive local industry growth gives rise

to a competitive market environment, Asian

wind turbine OEMs face increasing pressure to

realign their strategies with changing threats

and opportunities. Due to the predominance of

licensed technology deployed in China, Korea

and select other regional markets, many new and

established players have been unable to provide

differentiation or niche advantages to shore up

greater market share.

At the same time, Asia-based foreign OEMs

are nding it increasingly difcult to grow

RENEWABLE

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Answers for energy.

All indicators point to continued growth for onshore and

offshore wind power – for economic reasons and also

because wind power is an important contribution to CO

emissions reduction in power generation. It pays off to

speed up new wind projects.

ENEAS generic solutions for wind power are specially

designed to provide an off-the-shelf solution for wind

power purposes. Based on Siemens’ vast experience in

automation of power-collection grids for wind farms of

all sizes, they ensure optimal processes throughout the

entire project life cycle of a wind power plant.

The preconfigured and pretested, universally applicable

solutions for switchgear on all required voltage levels suit

wind power plants – from a single turbine to large-scale

wind farms.

www.siemens.com/energy/eneas-wind2011

ENEAS generic solutions for wind power considerably

reduce the effort usually required for the clarification of

details and engineering. Comprehensively tested applica-

tions and templates increase the overall project quality

and transparency, and they accelerate the entire project

planning and implementation process.

Out-of-the-box solutions ensure faster

ROI and quick project implementation

ENEAS generic solutions for wind power

E50001-E720-F297-X-4A00

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16 RENEWABLE ENERGY WORLD MAY–JUNE 2011

NEWS ANALYSIS

protably, particularly in light of the growing

capacity of state-owned players especially in

China to internalize large portions of their supply

chain and costs, and consequently offer lower

market prices.

In general, Asian OEMs are responding to

these demand and supply shifts by incorporating

new demand for higher capacity turbines into

their technology procurement, whether through

licensing, co-development or independent

innovation, while also continuing to focus on

reliable, core models.

In anticipation of specic supply chain

constraints, some are opting to hone in-house

manufacturing capabilities for components such

as blades and gearboxes. Circumventing these

potential bottlenecks is tantamount to long-term

competitive advantage in the high-growth Asian

wind market.

Order intake strategies are rapidly

transitioning toward large-scale frame

agreements with provincial governments

and core state power generators. While

many of these customers have sought to

secure turbine supply through 2012, smaller

projects are being developed more rapidly,

often requiring less than a year from planning

through to commissioning. The Asian turbine

vendors in various stages of development –

currently totalling well over 100 – face intense

pressure to scale up to capture these eeting

opportunities.

Select emerging Asian suppliers, particularly

Koreans, have been offering extended

warrantees for their products, internalizing

risk in exchange for opportunity to build track

record. O&M relationships between suppliers

and project owners have also become subject

to heightened scrutiny as inexperienced players

seek to become entrenched, as quality concerns

surface, and as third-party contractors gain

market share.

In this capacity, both foreign players and joint

ventures are relatively well-positioned along the

learning curve.

Following Asia’s unprecedented wind power

capacity expansion, which accelerated at a

CAGR of 39% from 2005 to 2010, key regional

equipment suppliers have begun looking

abroad in an effort to leverage newly acquired

technology and lower-cost advantage. While

Asia captured 89% of locally manufactured

wind turbine deliveries in 2009 and 95% in

2010, export plans are becoming increasingly

critical to the business strategies of top

regional wind turbine OEMs. This is particularly

pertinent for Chinese players, as the country’s

turbine assembly capacity continues to exceed

local market demand levels by signicantly

greater proportions each year.

CHINA JOINS GLOBAL OEM TOP FIVE

As previously outlined, Asia maintains a

signicant share of global wind market growth,

accounting for 38% of total wind additions

worldwide in 2009 and 49% in 2010. In 2009

alone, the region’s top four vendors – Sinovel,

Goldwind, Dongfang and Suzlon – accounted for

30% of all global wind additions, and over half of

those in Asia.

At the same time, by virtue of their leading

positions in China’s burgeoning wind market,

Sinovel and Goldwind were able to vault into

the top ve global turbine manufacturers by

2009, with Dongfang securing the number nine

position. Suzlon also reported strong deliveries,

fuelled by consistent demand in its Indian home

market, and an increased presence in the US,

Europe and Latin America.

Asia’s expanding group of wind competitors

clearly exerts strong pressure on entrenched

global suppliers. Within this context, it is important

to note that Asia-based Western manufacturers

have been struggling to maintain their global

positioning in recent years, particularly as they

continue to fall short of capturing anticipated

levels of Chinese demand. Exponential Asian

assembly capacity growth, especially in China,

coupled with declining global order intake levels,

due to the nancial crisis, is certain to result in

intense market share battles worldwide in 2011

and beyond.

CHINA'S OVERHEATED MARKET

The Chinese government’s unrestrained

encouragement of local industry build-out, as

well as acute price-based competition, has

caused nationwide assembly capacity to double

year-on-year, rising from 10 GW in 2008 to

20 GW in 2009, and by another 50% to 30 GW in

2010. Despite select component bottlenecks that

still constrain equipment supply utilization rates

particularly in the control system, converter, and

gearbox bearing segments, such momentum

should continue – catapulting the market to

50 GW of projected assembly capacity in 2011.

In light of the mere 30% utilization rate that

may ensue in China within 2011, export should

constitute a key avenue for absorbing excess

domestic manufacturing capacity, particularly

within the next two- to three-year period

before the country’s supply market begins to

consolidate.

ASIAN TURBINE EXPORTS

While other entrenched global wind turbine

OEMs such as Suzlon – and even Gamesa and

Vestas on a smaller scale – have established

dominant positions in their home markets before

looking overseas, the intense local supply-side

competition prevailing in China has already

driven local players to aggressively solicit

international sales and market share, even if

prematurely, simply as a means of survival.

After diversifying into wind only recently, many

nascent Korean vendors have been following

a similar pattern of targeting international

markets without a viable local track record. At

the same time, their sense of urgency stems

more from a need to cushion the impact of

lagging shipbuilding and automobile sales

worldwide, as well as a relatively low demand

for wind power equipment in their home market.

ASIAN INTERNATIONAL POSITIONING

Asian players have pursued foreign wind market

entry through a range of different strategies to

date, many of which overlap with one another.

For instance, some have targeted IPOs outside

of their home markets to obtain global funding.

At the same time, a small group of players have

moved to acquire European wind turbine design

rms or OEMs in order to differentiate their

product offering. To compensate for track record

shortfall, it is becoming increasingly prevalent

for Asian suppliers to offer attractive project

nancing conditions for wind farms sourcing

their turbines either via equity or debt. Finally,

select pure-play OEMs have opted to expand

their value chain positioning by offering turnkey

development and/or pre-development technical

services to interested customers.

The Chinese government’s

unrestrained

encouragement of local

industry build-out has

caused nationwide

assembly capacity to

double year-on-year to

20 GW in 2009

ASIA HONES IN ON FOREIGN SALES

In recognition of the need to diversify their

regional customer base in order to secure longer-

term market share, many Asian OEMs have

been aggressively seeking entrance into high-

growth foreign markets by establishing a local

manufacturing and sales presence. Most have

been prioritising North America.

At the same time, some have also been

gradually moving into Europe and select other

world regions such as Australia, Latin America

(namely Brazil), and Africa (South Africa,

Ethiopia). Manufacturing constitutes the logical

next investment step for most, with timelines

highly variable.

Latin America remains poised for large-scale

foreign wind investment inux. Suzlon maintains

the strongest Asian presence there. Sinovel

(China), Unison (Korea), and Avantis (Germany/

China) also plan to tap into demand in the region

through a range of near-term strategies.

Europe meanwhile continues to serve as a

core R&D and sales hub for large pool of vendors.

With several exceptions, building overseas

assembly operations may be more of a longer-

term play for Asian vendors.

And while Asian OEMs vary widely in their

approach to foreign wind market entrance,

Goldwind has found success, in part, through its

recruitment policy.

Having tapped experienced American wind

executives from leading players for its US team,

it has leveraged local market knowledge and

placed a strong emphasis on local content and

domestic manufacturing plans.

South Africa is next in line as an attractive

investment target. Recent policies and

government commitments have inspired a rush

of investor interest in the previously unexploited

wind market there. To date Suzlon, Goldwind,

Sinovel, and Guodian United Power all plan to

establish a local sales presence there.

Stephanie Aldock

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Renewable Energy World - magazine - 5/6-2011

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