Wind energy generation has evolved over the years to emerge as key renewable energy generation method. It is more economical to install wind farms in areas where average wind speed in over 7.5 m/s. In 2011, the global demand for wind turbine was reported at ~ GW taking the cumulative installed capacity to ~ GW. In 2015, ~ GW was added which is highest ever recorded new additions in one year. China alone contributed more than ~GW of new capacity addition in 2015. By the end of 2016, cumulative installed capacity was reported at ~ GW. In terms of revenue generated from sale of new wind turbines, the market registered constant increase in revenue from USD ~ billion in 2011 to USD ~ billion in 2015. It registered a decline in 2016 and managed to generate revenue of USD ~ billion from sale of offshore and onshore wind turbines.
Wind power is extensively developed by many countries to reduce their reliance on fossil fuels. New investment has registered increase in investment with support from government and international financial institutions. Demand from corporates is the other key factor promoting the demand for wind and renewable energy. Services industry in the wind turbine market has gained substantial increase in revenue generation owing to increased installed capacity and aging turbines. Wind energy by installation of new capacity declined in 2016 compared to 2015. Vestas, GE, Siemens Gamesa, Nordex were some key players. Goldwind from China was the only player which has emerged as the large player but has limited global presence. The capacity of the single wind turbine is on continuous rise with fall in price per MW.
Value Chain Analysis in Global Wind Turbine Market
Raw material and machinery suppliers are at the bottom of the value chain in wind turbine market. They work on very low to very high margin depending on the stage and availability of material. Newly developed materials are sold at higher margin compared to generally available material such as iron, steel and others. Design and development is done by turbine manufacturer as well as component supplier. Component suppliers operate at the margin of ~% depending on the component. It is high for electronics and low for bearing gear box and others. Wind turbine companies operate at the margin of ~% depending on the capacity of turbine. It is low for most commonly used turbines and higher for newly introduced high capacity turbines. Most commonly used turbines are sold at margin of ~%. Construction and erection companies installing these turbines, transport service provider, and others operate at the margin of ~%. Wind farm developers are at the top of the value chain and are the end consumers of these turbines.
Business model in Global Wind Farm Development
Build-own-operate-transfer model is the new concept in many emerging countries. It is mainly used to reduce the government obligation to make large initial investment. The IPP company will manufacture/purchase and builds the wind energy systems at customer’s site (government or power companies).
Build own operate model is more popular among independent power producers. Many countries have deregulated their energy sector and this model is prevalent there. Most of the countries are yet to develop their wind energy potential. In this model the company doesn’t transfer the renewable energy systems to the customers.
Engineering, procurement and construction model is a common form of contracting arrangement within the
renewable energy industry. Under this model, the company designs, installation, procures the necessary components and materials and builds the wind energy systems on the defined customer location.
Net metering system and Feed in tariff system are the other methods used for power purchase or financing the installation of energy generation
Global Wind Turbine Market Segmentation
By Region: In 2016, Asia was the largest market in the global wind turbine sales. Majority of the contribution in Asian wind turbine market in Asia is made by China. In 2016, it added ~% of the total installation in the region. Europe slides to the second position on the basis of wind turbine market by cumulative installed capacity. North America contributed ~ GW of the new capacity added in 2016. Its total cumulative capacity was reported at ~ GW (~%) making it the third largest region for wind turbines. Contribution from Latin America (~%), Pacific region (~%) and Middle East and Africa (~%) was very low but has very large future potential demand.
By Type: Onshore wind turbine installation contributed ~% of the total cumulative installed capacity in 2016. Total cumulative installed capacity at the end of 2016 was reported at ~ GW. In 2016, ~ GW (capacity) of new wind turbines were installed across different countries. Offshore wind turbines contributed only ~% of the total cumulative installed capacity. Europe lead the market in offshore wind turbine market with total installed capacity of ~ GW. On the basis of new capacity added it contributed ~% in 2016.
Snapshot on Global Offshore Wind Turbine Market
Europe leads the market in offshore wind turbine market with total installed capacity of ~ GW. United Kingdom has installed highest offshore wind turbine capacity with cumulative installed capacity of ~ GW. Germany was the second largest country on the basis of cumulative installed capacity and largest market on the basis of new offshore wind turbine installations in 2016. Overall, ~ offshore wind turbines are grid connected with a total capacity of ~ MW.
Global Wind Turbine Services Market
Operation and maintenance is the key for continuous functioning of the wind turbines. The average cost of servicing in China is among the lowest in the world and was highest in the US and European region. (Huge upward variation is possible depending on the age of turbine and scope of O&M). In 2011 services market was estimated at USD ~ billion which increased to ~ billion in 2016. OEMs are the biggest service provider and also charge premium to ISPs and in-house maintenance.
Japan Wind Turbine Market, 2011-2021
Market for wind turbine in Japan increased from ~ GW in 2011 to ~ GW in 2016. Cost of installation per MW is higher in Japan compared to many other nations in the world. It was estimated at USD ~/KW for offshore wind energy segment at the end of 2016. Growth is slow on account of procedural delay caused by long EIA process. Hitachi, Japan Steel works and Mitsubishi were the leading wind turbine suppliers in the country. Hokkaido (~ MW) and Tohoku (~ MW) were the main regions where wind turbines were installed. Together the constituted more than one fourth (~%) of total wind turbines by installed capacity. More than ~ MW of wind energy are past Environmental Impact Analysis (EIA) stage and are expected to go online by the end of 2020. It is expected that market for wind energy will be ~GW by the end of 2021.
Turkey Wind Turbine Market, 2011-2021
Total of ~ wind farms are operational at the end of 2016 spread across different geographies in Turkey. Cumulative installed capacity increased from ~ MW in 2011 to ~MW in 2016. ~ turbines were installed for cumulative capacity of ~ MW at the end of 2016 as reported in GWEC report.
At the end of 2016, Ege was the leading region with total installed capacity of ~ MW accounting for ~% of total wind turbine by installed capacity. Marmara accounted for ~% with installed capacity of ~ MW. Other important regions included Akdeniz (~ MW), Ic Anadolu (~ MW), Karadeniz (~ MW), Gunedogu Anadolu (~ MW). Nordex leads the market with ~% market share on the basis of cumulative installed capacity. Other major players include Vestas, Enercon and GE. It is estimated that Turkey has potential to generate more than ~ GW from wind energy in areas with wind speed greater than 7 m/s at 50 meters height. It is expected that market for wind turbine on the basis of cumulative installed capacity will cross ~ GW by the end of 2021.
Future Outlook to Brazil Wind Power Market, 2017-2021
Wind energy segment in Brazil is expected to increase from an estimated ~ GW in 2017 to ~ GW in 2021 registering a constant positive growth.
Growth may be hampered due to poor economic condition of the country. Local manufacturing and associated service firms is expected to gain boost as the country targets to achieve the aim of installing 24 GW by 2024.
Australia Wind Turbine Market, 2011-2021
Australia was the seventeenth largest country in terms of wind turbine installed capacity. During the period 2011-2016 the market increased from ~ MW to ~ MW registering a five year CAGR of ~%. South Australia was the largest region in terms of total installed capacity contributing ~ MW of total installed capacity. Vestas was the leading company in Australia wind turbine market supplying ~% of the estimated turbine capacity. Other key players included Suzlon, GE, Sinvion and others. It is expected that wind turbines by installed capacity may reach ~ MW by the end of 2021. Proposal for feasibility study to install a wind turbine project between 10 and 25 kilometers off the coast of Gippsland, in the southeast of the state is also under process.
South Africa Wind Turbine MArket, 2011-2021
South Africa is the largest wind energy producer in Africa. Market for wind turbine was stagnant from 2011-2013 as no additions was made during this period. It was only ~ MW at the end of 2013 and increased ~ MW in 2016 with total installed turbines exceeding ~units. Wind turbine installation in South Africa is generally located in cape area. Eastern Cape accounted for ~% (~ MW) of the total installed capacity. A total of ~ turbines units were installed in the region. Western cape contributed ~% followed by Northern cape with 10.5%. Other regions contributed the remaining ~%.
Vestas was the leading player in the South African wind turbine market accounting for ~%(~ MW) of the total wind turbine supplied on the basis of installed capacity. Other key players include Siemens (~ MW), Nordex (~ MW), Suzlon (~ MW) and others. Market potential for developing wind energy in South Africa is very huge and the country has plans to develop cumulative capacity of ~ MW by the end of 2021. More than ~MW of projects were under construction phase at the beginning of 2017.
Future Outlook to Global Wind Turbine Market, 2017-2021
It is expected that demand for wind turbines will increase from ~ GW in 2017 to ~ GW in 2021. Demand will be mainly fuelled by China, Germany and the US. Significant contribution is expected to come from India and South Africa. New capacity additions may face stiff competition from developments in solar energy sector as price decline in installing solar energy capacity is much faster compared to wind energy segment Growth will be little slower in 2020-2021 as major markets may be reaching the saturation and new additions may slow down. It is also expected that some wind farms may be decommissioned to be replaced with better and efficient turbines.
By Revenue , 2017-2021
It is expected that unit cost of wind turbine per MW will register a continuous decline in future as technology improves and better efficiency and height is achieved. It is expected that USD ~ billion will be investment in 2021 for addition of new turbines. Post 2016, revenue generated from sale of wind turbine will register positive growth rate except in 2018 when it is expected that market will decline slightly by ~%. This may be caused due to decline in demand from China and falling prices of wind turbine per MW.
By Services Revenue
Revenue from services is expected to increase from USD ~ billion in 2017 to USD ~ billion in 2021. Europe will lose its dominance in the global services market by 2021. Aging turbines, rise of offshore wind turbine sector, focus on efficiency and maximum utilization will drive the growth in future. Role of in house maintenance will decline and ISPs are expected to partner with OEMs for better performance over the period of operation of turbine. In 2021, it is expected that more than ~ GW will be under O&M contracts including ~ GW in offshore wind turbine category.
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Ankur Gupta, Head Marketing & Communications