GE’s proposal to acquire French power engineering group Alstom’s power generation business for $13 billion is not a done deal – the French government has said it is conducting a review of the purchase, and may push for Alstom's wind assets to be acquired by state-owned Areva. Germany’s Siemens has also provided a counter-bid while it conducts due diligence. This proposal will, if completed, have major implications for all forms of generation – including wind power.
In truth, the prospective deal raises more questions than it answers regarding how the two company’s wind energy businesses will merge. First is how to square GE’s hesitant approach to offshore wind with Alstom’s serious and capable pursuit of the market. If that happens, this deal could provide a much-needed boost to the promising, but struggling, offshore wind sector.
Alstom has chosen direct-drive turbines for its next-generation offshore turbine, the 6 MW Haliade. The first prototype was installed in French waters in 2012 and a second in 2013. The same units are destined for a Rhode Island, Connecticut offshore wind farm. Alstom also won the right to be the exclusive turbine supplier to the consortium led by EDF Energies that secured three offshore projects with a combined capacity of 1,428 MW in the first French offshore wind tender expected to be commissioned by 2018.
Beyond that, the future for both Alstom and GE offshore is unclear. At the annual European wind conference in March, GE’s vice president for renewables Anne McEntee said the company was focused on the onshore wind market and questioned if offshore wind makes economic sense due to its high cost and vulnerability to policy volatility. GE knows from experience. It installed a 3.6 MW turbine offshore in Ireland in 2003, and since then has been largely quiet on offshore. GE’s re-entry into offshore seemed imminent in 2009 when it acquired Sweden’s ScanWind, which offered a 4.1 MW direct-drive offshore turbine. GE installed one in Sweden in 2011, but there’s been no further news.
Bigger is Better
The future is likely one with fewer but stronger wind turbine vendors than exist today. In offshore, consolidation is the strategy of choice, with Vestas forming a joint venture with Mitsubishi, and Areva forming a joint venture with Gamesa. If GE plans to use the Alstom acquisition to re-enter the offshore wind market, that furthers the consolidation trend and will help GE in terms of offshore turbine technology and market entry. Alstom’s offshore turbine is larger and arguably more advanced and robust than GE’s 4.1 MW unit. Also, GE’s financial strength is exactly what the offshore sector needs right now to increase the confidence of offshore wind investors and, in turn, help find solutions to bring down the cost of offshore wind for the entire industry.
Alstom’s onshore turbines are likely to be phased out as a brand, but the technology will be rolled into GE’s fleet and will augment GE’s 2.5 MW turbine offering with 2.7 MW and 3.0 MW units. Alstom turbines spin in 15 countries, and the company has a nacelle facility in Texas. Alstom also has a strong presence in Brazil, where it delivered 238 MW in 2013. Yet GE for the first time took top market share in that country in 2013. The merger would result in one less competitor for the limited market and cement GE as the most formidable competitor.
The information and views expressed in this blog post are solely those of the author and not necessarily those of RenewableEnergyWorld.com or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.