Washington, DC– The growth of the wind energy sector in the first decade of the 21st century has been phenomenal. The key catalyst for rising installations in the wind market has been government initiatives to reduce carbon emissions and dependence on fossil fuels. This has led to the emergence of the renewable industry, and wind power in particular.
Along with increasing wind power generation, manufacturing of wind turbines and their components has also received a significant push. European nations such as Denmark, Germany and Spain have pioneered the global turbine and component manufacturing industry and are home to the largest turbine and component manufacturers in the world.
In the wind turbine value chain, European companies dominated and most of the components were supplied by them.
With the passage of time, the Americas and the Asia-Pacific regions have emerged as hotspots for turbine and component manufacturing.
Blade Market Value
In 2009, the global rotor blade market had grown to US$7.787 billion, up from the 2006 figure of $2.556 billion, at a compound annual growth rate (CAGR) of 33 percent.
Key supports for the market’s growth included increasing installations and rising prices of rotor blades during the period. Despite a decline in rotor blade prices during 2009, the market value continued to expand as climbing demand for installations more than compensated for the price drop. The global rotor blade market value is expected to maintain this upward momentum, largely due to the continuing health of rotor blade installations.
The North American market’s growth is expected to be robust in the five-year period to 2015, largely driven by enhanced installations in both the US and Canada. The Asia-Pacific region is expected to emerge as a major market for blades because of the strong demand from the Chinese market. The European market for rotor blades will receive a push during the forecast period largely on repowering and offshore markets. GlobalData projects the global rotor blade market value will grow at a CAGR of 15 percent to 2015. By 2015, the value of the rotor blade market value is expected to reach $16.027 billion, up from $7.998 billion in 2010.
Financial incentives offered by governments across the globe to encourage wind power generation have been crucial to the wind market. Incentives in terms of FiTs or preferential pricing will lure power producers towards wind from fossil fuels.
In light of the increasing focus of governments to reduce carbon emissions, the demand for wind power installations is likely to receive a significant push, strengthening the demand side of the rotor blade market.
The importance of FiTs can be witnessed by the fact that wind power installations in Denmark started to decline when they were stopped. Most European countries now have a FiT system. They have also been critical in the development of wind power in Germany, which provides an onshore feed-in tariff of 9.02 euro cents/kWh and 13 euro cents/kWh for offshore production. Wind power capacity in Germany grew at a CAGR of 15.44 percent between 2001 and 2008.
In order to develop and strengthen the wind market value chain, governments across the globe prefer to foster the domestic production of turbines and other components.
The local content requirement law is one of the mechanisms that support the domestic manufacturing of turbine and components such as wind rotor blades.
The implementation of this mechanism in some countries is mandatory, as seen in Brazil, China and in the provinces of Quebec and Ontario in Canada.
The Quebec government is increasingly focusing on raising the share of domestic content in turbine installations and requires 60% of wind projects to use locally produced components.
Such state or provincial governments provide lucrative incentives to wind turbine and turbine component manufacturers in the country. As a result, rotor blade production and installations have also received a push for domestic manufacture.
In order to support growing demand, the Chinese government has increasingly focused on expanding the manufacturing base for rotor blades and other components.
The Chinese government mandated the production of nearly 70% of turbine components, including rotor blades, from domestic manufacturers.
As a result, competition in the domestic component market emerged with the increasing number of small and medium-sized players.
In 2004 China had fewer than 10 turbine manufacturers, but by 2009 this figure had increased to nearly 100. This rise in domestic manufacturing facilities in China encouraged the government to ease the local content requirement and this restriction was removed in 2009.
Chinese manufacturers are now among the top wind market players and the success story of the Chinese wind market reveals the importance of the local content requirement.
A Geographical Shift
Rotor blade manufacturing has undergone a major geographical shift from Germany, Denmark and Spain towards the Asia-Pacific region, and particularly to China and India.
The rapid growth in the demand for blades from the American and the Asia-Pacific region has led to the increasing need to diversify the production base beyond Europe.
The key drivers for the diversification of the production base from the European regions to Asia-Pacific and North America include availability of cheap labour and government support for local manufacturers of turbines and their components.
The labour cost differential between the European region and the Asia-Pacific region favours the shift of the production bases too. Moreover, China and India are the emerging wind markets of the future.
China has established itself as a manufacturing hub in the Pacific region, with strong demand in the domestic market backed by the local content requirement law. This has led to the emergence of Chinese rotor blade manufacturers in the international market.
Although the increasing focus of governments across the globe on the renewable energy sector, especially wind, has led to rising demand for turbines, manufacturers have been constrained by limited capacity.
As a consequence, the outsourcing of component manufacturing, particularly of rotor blades, has grown significantly. The major turbine suppliers are vertically integrating through consolidation of rotor blade manufacturing by outsourcing to vendors.
Outsourcing also allows turbine manufacturers to concentrate their investments in core competencies. Furthermore, it can ensure constant and reliable supply to manufacturers.
Independent suppliers have increased their share of the rotor blade market to turbine manufacturers. The key driver of this trend is the demand-supply imbalance in the turbine market while the share of in-house production of rotor blades declined to 54 percent of the overall rotor blade production in 2009 from 62 percent in 2006.