One recent M&A deal that exemplifies the trend towards greater consolidation was GE Energy's $3.2 billion cash deal in March to acquire Converteam, the French manufacturer of motors and controls for the energy sector, including direct drives used in wind turbines.
GE says the takeover of Converteam, which posted 2010 revenues of $1.5 million, strengthens its equipment offering across its entire energy business - oil, gas and wind. Converteam offers electric alternatives to mechanical processes including drives, power electronics, rotating machines, generators and controls. The firm has 5,300 employees worldwide and operates in 80 countries.
Announcing the deal, GE Energy president and CEO John Krenicki said: "Converteam's people, products and services connect a lot of pieces in our portfolio, which will enable us to offer integrated solutions to our customers".
Another deal driving the wind energy sector towards greater scale was last month's agreement between Gamesa and China's largest wind developer, Longyuan, to pursue projects jointly outside China. Xie Changjun, president of Longyuan, said: "In Gamesa we have found the ideal partner for our growth strategy, thanks to its comprehensive understanding of the business."
Gamesa has also signed memoranda of understanding with China Resources Power and Datang.
In another consolidating deal, American Superconductor (AMSC) announced in March its $265 million acquisition of Finnish company The Switch.
Does the trend towards takeovers and other forms of consolidation enhance the wind industry supply chain or threaten its competitiveness? Johnathan Reynolds, business development director of North Sea offshore wind industry group Orbis Energy, sounds a word of caution: "We are seeing a lot of vertical integration across the supply chain, such as SSE's investment in Bifab and Siemens in A2Sea. While this is a good thing from the point of view of securing key contractors for the longer-term benefit of the offshore wind industry and to mitigate potential bottlenecks as the sector grows, it does offer challenges in terms of competitiveness and access to key contracts from other suppliers."
Orbis is working with developers and manufacturers to improve understanding of opportunities for supply chain growth and to identify how businesses can play to their strengths and gain competitive advantage.
Others view M&A activity as part of the natural evolution of the wind industry. "There is no escaping the fact that, if renewable energy and emissions targets worldwide are to be met, we need to scale up the wind energy industry very quickly, particularly offshore," says senior renewables analyst Alex Desbarres, from business information firm Datamonitor. "To move away from reliance on subsidies in order to address security of energy supply and climate change targets, wind players must rapidly and significantly scale up their operations. Consolidation is a natural evolutionary market response which will enable the wind sector to gain traction."
Bad news for smaller players
Judging the GE-Converteam deal to be "a good fit", Desbarres adds: "This might look like a blow to competition, but it's only a temporary blip. Deals like this might actually challenge the remaining players to innovate. This might be one step back for some of the smaller players, but it's two steps forward for the wider industry".
Datamonitor has identified other deals as also forming part of the consolidation occurring within the global wind energy industry. These include deals agreed in the past three years such as International Power and Trinergy Wind, SSE and Airtricity, Acciona and Woilica, EDP and Horizon Wind Energy, and Iberdrola and CPV Wind.
For Steven Hughes, operations director at medium-sized international renewables developer RES, a general trend towards consolidation is inevitable.
"The industry needs to scale up," he says. "Offshore is where the risks are greater and you need a large company to offer products in this market. If you want a strong industry, large entities are important."
Hughes admits that "limited numbers of players could mean a less competitive market than we have now. Nevertheless, wind energy's supply chain has to move beyond the "cottage industry" feel of a few years ago if the offshore industry is to achieve its intended growth worldwide".