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Company Profile: GE sets its sights on offshore markets

UNITED STATES: It is no surprise that America's largest wind turbine manufacturer, General Electric (GE), has been buffeted by a weakened US wind market, meteoric rise of China's manufacturers and the technological progress of key rivals such as Vestas and Siemens.

GE 1.6 prototype turbine is operating in California
GE 1.6 prototype turbine is operating in California

Despite these challenges, GE has the clout to survive upcoming consolidation of original-equipment manufacturers (OEMs). It boasts the world's single largest fleet - as of January it had shipped 15,000 of its solid and increasingly reliable 1.5MW machines. In addition, it has made some impressive acquisitions, especially this year's purchase of Converteam and its 2009 acquisition of ScanWind. It also has a substantial portfolio of intellectual property that it protects aggressively, having lost little footing with the expiry of the disputed '039 variable-speed patent.

But all is not rosy for GE's wind business. The company has relied heavily on US sales, rather than European, and has failed thus far to make much headway in China, a problem it shares with other Western OEMs. Indeed, the New York-based company has slipped in global rankings of OEMs from second to third place, after Vestas and China's Sinovel. Two separate analyses of 2010 global installed activity compared with 2009, one by Make Consulting and the other by BTM Consult, have ranked GE in third place.

Revenue squeeze

Another critical assessment comes from Nick Heymann, industry analyst and senior vice-president with Sterne Agee. He notes that GE's global wind revenues dropped by more than a third between 2009 and 2010, from about $6.4 billion to $4 billion. "That's a pretty big correction," he says. By contrast, Vestas reported a 35.2% increase in 2010 revenue, to EUR6.9 billion from EUR5.1 billion in 2009.

Jefferies, the securities and investment group, referenced GE's wobble in a client note on wind power issued in January: GE reported $4.2 billion in new wind orders in 2010, down from $5.5 billion in 2009. That meant a 'book-to-bill' ratio of 0.84 - orders on the book versus orders filled - said Jefferies. "In line with expectations, GE's turbine prices were down 17% year-on-year," it added.

As Gerard Reid, analyst and co-author of the note, puts it: "GE has to invest heavily in technology to get ahead in the wind game". GE's (proven) technology has not pushed the envelope, in Reid's view. Contributing to GE's current lack of edge was its exit for several years from the offshore market.

Nevertheless, Reid says he expects GE to fare well: it has the name and the balance sheet to back orders. He believes GE's purchase of Converteam could allow it to gain the upper hand over Vestas, one of many OEMs that use Converteam technology.

"GE (also) has a great opportunity in offshore wind, so let's see what they can do with that," he adds, referring to the company's new direct-drive 4.1-113 turbine, based on ScanWind's 3MW platform (see box overleaf).

GE has declined to provide details of the recent financial performance of its wind-related activities. "We do not separate (wind) out," says Vic Abate, vice-president of GE's renewable energy business.

However, during a Q4 earnings teleconference with analysts, a transcript of which is available on GE's website, chief financial officer Keith Sherin said: "On the wind side, we had orders of $1.3 billion. They were down 17% (year-on-year). We had orders for 477 units versus 729 units last year in the fourth quarter." This contrasts with a rise of 1% in GE's overall energy orders.

GE is working toward a return to growth in wind, but it does not appear to anticipate achieving noteworthy improvement until 2012. GE chairman and CEO, Jeff Immelt, said during the Q4 analyst teleconference: "As we shift gears and look forward in 2012, we'll have, I think, fewer headwinds. We see the backlog for heavy-duty gas turbines and wind continuing to improve."

Business globalisation

With an approximate 10% share of the 2010 global wind turbine market, GE is trying to globalise its business.

Before the financial crisis, some 80-85% of GE's wind turbines sales were in the US, whereas in 2011 as much as 40% will be outside the US, says Abate. Sales in buoyant markets such as Brazil, Turkey and Canada may offer slightly lower margins, as noted by Immelt last October, "[but] that's where the demand will be".

Despite the recent drop in its wind business, GE has lost less ground in the US than some others. Between 2009 and 2010, GE increased its US share from 40% to 50%, says Dan Shreve of Make Consulting, a former wind energy market and competitive intelligence leader at GE Energy. In comparison, Vestas' US market share declined from 15% to 4% - although Vestas is expected to rebound healthily in the US during 2011.

In 2010, GE installed 49.7% of the new capacity in the US, according to American Wind Energy Association figures, far ahead of its number-two rival for the year, Siemens with 16.2%. GE's share consisted of 1,679 turbines installed with a total capacity of 2.54GW. This gave the company a 41.3% share of the total cumulative US market, compared with Vestas at 17.3%.

A significant element of GE's wind revitalisation plan is the rolling out of new or revamped turbines, including turbines for lower wind regimes. These new and/or improved products include the 4.1-113 for offshore (see box), the 2.75-103 onshore turbine and the 1.6-100, a prototype currently being tested in Tehachapi, California. GE says the 1.6-100 has the highest capacity factor of any turbine, in part because of blade length. It is designed for Class III wind speeds, unlike Vestas' rival V100 1.8MW, which is for Class II. Not surprisingly, the 1.6-100 has generated a buzz in the US industry.

Most turbines have a capacity factor - the actual energy produced compared with the maximum possible - of some 30% at wind speeds of seven metres per second, whereas the 1.6-100 is predicted to achieve some 45%, explains Bruce Bailey, president of consultancy AWS Truepower. That would translate into almost 50% more captured energy than, say, GE's 1.6-82.5 model. The question is, how much more will the 1.6-100 cost? GE says it has secured orders.

Since GE entered the wind business in 2002, through the purchase of Enron Wind, it has spent more than $1.5 billion on research. From 2009 to 2011 inclusive, research investment will be twice that of the previous three years, says Abate, with a focus on issues such as carbon composites - used in blades for the 1.6-100 - ice-repellent nano-coatings for blades and nano-composite magnets for generators. The magnet research could, in time, lead to solutions that reduce the demand for rare earths by up to 80%, says Keith Longtin, GE Global Research's advanced wind technology platform leader.

Service agreements

Another priority for GE has been expansion into the lucrative field of servicing. In May 2010, it introduced a full service agreement for all new GE 2.5xl wind turbines in Europe, with plans to extend it globally to all models. And in January, GE announced a ten-year contract with Spanish wind developer Cobra Energia to service 178 GE 1.5MW wind turbines in Spain coming off warranty from 2010 to 2012.

Also part of GE's roadmap to growth are further strategic acquisitions, such as the recent purchase of Wind Tower Systems, which produces a taller, futuristic 'space frame tower', or steel lattice wrapped in architectural fabric, viewed as a promising technology.

It is even rumoured that GE is in the market to buy a smaller European OEM with cutting-edge turbine technology. Despite such talk, GE has indicated it is slowing the pace of energy deals and, instead, emphasising a 'back to basics' approach designed to deliver organic growth.

Key joint ventures have been inked, including an agreement with one of China's 'big five' generating companies, Harbin Electric, to make onshore and offshore wind turbines in China. The deal should be finalised this month, according to Abate. GE has also signed deals with Scandinavian energy companies Statoil, Lyse and Gothenburg Energy, as part of its development programme for the 4.1MW model.

Analyst Heymann says that, ultimately, GE must make headway in the offshore market. "GE will be coming through and scrambling," he argues. When it bought Scanwind, it had been absent from the offshore market since the 25MW Arklow Bank was built off Ireland, co-developed with Airtricity and commissioned in 2004. The project's second phase was cancelled.

Developing a successful offshore turbine is crucial for GE, says Heymann, noting that his firm predicts 80% of future installed capacity will be offshore. "We expect GE to have commercial products ready for shipment for the offshore wind market possibly in the second half of 2012 and certainly by 2013," he says. "GE is targeting $1 billion in annual offshore revenues by 2015 once it commercialises and scales ScanWind's technology."

GE is careful about discussing its offshore plans. "We don't have specific targets - that particular business is lumpy," says Matt Guyette, GE's global strategy and marketing leader for renewable energy. Abate argues that forecasts of an annual global offshore market of 5GW to 8GW over the next five years are likely to be too high. More realistic would be 1GW to 3GW. "Offshore is still very expensive. There are a lot of challenges."

GE RE-ENTERS OFFSHORE TECH MARKET BY EIZE DE VRIES

Two years after acquiring Norwegian manufacturer ScanWind and its direct-drive technology, GE is re-entering the offshore market with a scaled-up 4.1MW offshore turbine boasting a 113-metre rotor diameter. It plans to install a prototype in Gothenburg's harbour during the third quarter of 2011.

The 4.1-113 is a further development of ScanWind's 3.5MW turbine model.

Discussing the thinking behind development of the 4.1-113, GE product manager offshore Vincent Schellings says: "We came to the conclusion that a switch to direct drive can drive down the cost of energy by up to 8%. Offshore gearbox exchange can be complex, too, while geared turbines require more operation and maintenance support (O&M)".

GE's view is that an evolutionary, small-step, developmental approach to technological innovation can ensure reliability levels are retained. Several dedicated GE technologies - with a focus on rotor blades, advanced controls, and grid integration - have all been integrated into the 4.1-113 as part of the scaling-up process.

Schellings said: "Several steps to optimise the cooling system enabled us to raise the generator's power rating from 3.5MW to 4.1MW, and we also increased the rotor diameter from 90.6 metres to 113 metres. The GE-designed blades use carbon fibre for the structural central spar. These combined measures have resulted in a 43% higher annual energy production at 10 metres per second (m/s) average wind speed, and about 40% at 9m/s."

More than 100 kilometres from shore, in the middle of the North Sea, average wind speeds are in the 10-10.5m/s range, while about 25-40 kilometres from shore 9-9.5m/s can be expected.

One key enabler of load reduction and product up-scaling is individual pitch control, as large blades face substantial wind speed differences while moving from top to bottom and vice versa. This is a proven technology whereby the rotor blade pitch angle is continuously adjusted during each revolution.

The 4.1-113's drive system layout comprises a generator located behind the tower and connected to the rotor by a long hollow main shaft supported by two main bearings. Commenting

on the choice of drive technology, Schellings explains that this layout ensures that only "pure" rotor torque and no unwanted loads caused by rotor bending moments can enter the generator.

"This is a major reliability-enhancing benefit, which functionally resembles the proven main shaft-gearbox drive solution applied in our 2.5MW series. GE has a decade of experience with heavy-duty rotating power-generating equipment like steam turbines based upon comparable design principles," he adds.

The top head mass, nacelle plus rotor, amounts to 280 tonnes of which 84 accounts for the generator alone. Two power converters and a transformer are incorporated into the nacelle, whose joint arrangement with the pre-assembled hub enables turbine commissioning and all functional testing onshore.

"Our strategy is to minimise offshore activities due to the unfavourable weather window, plus the costs of installation equipment," said Schellings. "We also tried to take advantage of lessons learned from more than 15,000 installed 1.5MW series turbines. These are delivered to construction sites in three main modules and mostly installed by third parties. So on-site installation is a matter of connecting the pieces together."

GE is using this installation method offshore, sub-dividing turbines into two tower sections, nacelle plus hub, with the blades fitted separately. Installing complete, fully commissioned nacelles offers big time savings, and single blade assembly is least sensitive to adverse weather conditions, claimed Schellings.

As all wind turbines require regular service and occasionally fail, redundancy is an accepted offshore strategy to minimise the impact of such failures. "We specifically wanted a spacious nacelle with easy service access to all main components and systems," Schellings concluded.

"A key redundancy feature is that the generator is electrically split into two 50:50 sections; each section feeds power to a separate power converter. In the event of failure in one generator segment or converter, the turbine can continue power generation at reduced output level."

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