Stormy Days Ahead for Wind Energy

It appears that the supply chain for wind energy is about to undergo a significant transformation.

The boom years for wind seem to have ranged from about 2005 to 2008, and were punctuated by high levels of demand, excited government policies backed by guarantees and subsidies, and a tight supply chain that drove prices high. An enthusiastic mood among investors has changed to one of caution, however, and since 2010 the pressures that existed upon the supply chain to meet growth have all but evaporated.

Excess production capacity now exists; demand has slumped in the face of the ongoing global financial and economic crisis, and fierce competition is emerging based on both quality and price. Surpluses of components and materials are leading some  suppliers to reduce or suspend production, and some Chinese companies have shut down completely. The market may be forcing wind to provide products with low cost and high quality.

In some ways, the party seems to be over.

Writing for the research and investment publication Alt Energy Stocks, David Appleyard presents an intriguing analysis:

Over the past five years the whole of the wind technology supply chain has been in flux. The industry has seen a dramatic turnaround, with a negative supply situation for some key components and materials transformed into the current position, with a significant supply surplus. We present the key findings of the latest BTM Consult Supply Chain Assessment report.

Slower than expected economic recovery in the U.S., combined with the eurozone sovereign debt crisis and most recently the Chinese government’s effort to ‘overhaul’ the local wind industry, have completely transformed the wind industry supply chain. So concludes the latest in the biennial supply chain report from BTM Consult ApS, now a part of Chicago-based consultancy firm Navigant, Inc.

This comprehensive analysis reveals that over the past five years the industry has seen a dramatic turnaround, with a negative supply situation (2005-2008) for some key components and materials transformed into the current position with a significant surplus. Furthermore, with overcapacity now the case for most key components and materials, turbine prices have dropped to a level where both original equipment manufacturers (OEMs) and sub-suppliers are failing to see profitability, suggesting a tough time for the industry and a likely restructuring. (Read more…)

 

Lower costs and higher quality? That can’t be a bad thing, can it?

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