Market conditions have forced original equipment manufacturers (OEMs) to become more and more competitive, squeezing out the smaller players.
And even among the heavyweights there is a struggle to gain market share and those all-important percentage points.
The high point of a steady year-on-year rise in wind power installations happened in 2009, when nearly 10GW of capacity was installed in the US.
This business was largely built on a legacy of the better days before the global financial crisis of 2008, and by 2010 installations dropped to only 5GW. Not much more is expected this year, according to Vic Abate, vice-president of GE Energy’s renewables division.
The five-year industry forecast of the Global Wind Energy Council (GWEC) expects the market to remain subdued for the next two years, due to legislative uncertainty at the federal level in the US and in Canada.
GWEC forecasts renewed growth in 2014 and within the next five years, the region is expected to have doubled its capacity to reach 94.2GW.
So what does this mean for wind turbine manufacturers in the US? Who will be the dominant players in 2011 and beyond?
When financing for wind turbines dried up in 2008, the active manufacturers in the market had to compete for fewer customers.
Developers found it difficult to raise finance for anything but turbines from GE, Vestas and Siemens, which meant market entrants had to be more aggressive on price-cutting.
GE was the dominant manufacturer, with Vestas and Siemens losing market share. Yet, despite this, turbine diversity increased.
That year, Germany’s Repower, Spain’s Acciona, German veteran Fuhrländer and Japan’s Mitsubishi secured a toehold on US soil.
While GE supplied almost 50% of the turbines in terms of installed capacity in the US in 2009, the range of turbine makers had grown from ten the previous year to 13.
Goldwind became the first Chinese maker to install a multimegawatt project in the US.
Market share was being fragmented by the likes of Suzlon, Mitsubishi and Gamesa, and the three leading manufacturers’ market share fell as a consequence, according to industry consultants Emerging Energy Research.
Everything changed again in 2010 when the effects of the global recession really started to bite. In the weak market, once again developers mostly turned to turbines with a history of reliability on US soil.
Analysts Make Consulting state that a 44% drop in new capacity in the US hit the international turbine manufacturers whose global position can be significantly affected by success in this major market.
Top three consolidate
But the big three’s foothold had been secured, with American Wind Energy Association figures showing a 70% market share in 2010.
GE’s market share grew from the year before. Siemens recorded a strong year in North America, when it was elevated to first position in Canada and second in the US in 2010.
But Vestas’ US market share eroded significantly in 2010 due to low order activity in previous years, a trend shared by other turbine OEMs as the market stalled.
Jan Kjaersgaard, head of Siemens Wind Power America, hopes that the company can now capitalise on its success in terms of installed capacity by gaining further market share.
According to Kjaersgaard, Siemens has a good order call-out for 2011.
It will install 600MW for MidAmerican Energy in Iowa, as well as 230MW for the utility Oklahoma Gas and Electric, and it has installed the first turbine of a 350MW project on Puget Sound in Washington, plus several other contracts.
An advantage of operating in the US market is that the projects are large, says Kjaersgaard. This results in better economies of scale as you can do more with the same amount of people.
He adds: "Projects are usually easier to build, certainly in the Midwest than more mountainous regions in other countries.
The wind belt in the US has optimum wind conditions and has almost unlimited potential, which makes it hugely attractive."
Kjaersgaard concedes that the fact that many areas do not have transmissions connections is a major concern but hopes the move towards more green energy will bring a significant build-out in connectivity.
The battle for runners-up market-share position lies increasingly in the hands of Vestas and Siemens — only percentage points separate them now, says Make Consulting director Dan Shreve.
Siemens had the most orders placed in 2010 —more even than GE. Despite a poor 2010 for Vestas, Shreve predicts that the big three will maintain their hold on the dominant positions.
All three were able to cultivate significant order intake in 2011 and may therefore capture most of the market.
He believes that Vestas is poised to make a significant comeback in 2011: "A lacklustre 2009 lost it some market share in 2010.
It will certainly be targeting some of GE’s market share. GE will stay in the number one spot. Siemens is making great strides with the development of its direct drive systems; its success will depend on the uptake of direct drive," he says.
Matching Asia on price
Emerging Energy Research’s Matt Kaplan partly attributes the dominance of the top three to their ability constantly to improve their price offerings, as Asia and China in particular come up with lower-cost products.
"There has been a trend in the market towards price reduction since 2008 and these three can be aggressive at cutting costs.
"Profit margins have declined 20% since 2008 for top wind turbine manufacturers. There is more supply than demand so developers have the upper hand. Manufacturers are dealing with a huge amount of competition in the market," he says.
Kjaersgaard explains Siemens’ success in gaining so much market share in the US: "Demand had diminished so it is the top three companies who are making all the announcements.
"The industry and the banking world want reliable technology, companies with strong brand names and strong balance sheets.
"The main purchasing criteria in the US are proven technology, good quality and strong technical organisation."
It seems that cultivating brand loyalty is key to getting orders. Vic Abate says that GE, as an OEM, gained 10 percentage points in US market share in 2010.
"Our customers and relationships with partners have good staying power in good times and in tough times."
Shreve believes such conditions will make it hard for second- and third-tier players to compete:
"Clipper and Suzlon had order intake weaknesses in 2010", he says.
Kaplan agrees: "Mitsubishi, Suzlon, Repower and Nordex are all making inroads with varying success.
But they will struggle to compete on cost and bankability with the top-tier customers. Mitsubishi is in a patent dispute with GE, so that will cost it customers. Suzlon has historically had an agreement with Horizon but the developer has now signed an agreement with Vestas."
Kaplan says this is indicative of a changing scene in terms of customer relations. There are five to six key players, so having major developers such as Horizon, Iberdrola and NextEra as customers is hugely advantageous.
Shreve points out that Gamesa’s link to Iberdrola is of great benefit. Gamesa has performed strongly in Mexico and moved forward with product innovation, such as its 4.5MW G10X turbine.
But he thinks it will still take time to win market acceptance: "It is important to demonstrate market readiness, and you need strategic clients in order to do that.
"You have to get a pilot built and then show significant operating scale. Having a strong balance sheet to stand behind warranties is imperative, as is a global focus.
"You need global supply chain partners in order to be competitive."
US companies are not only looking for stability but also innovative product solutions. Manufacturers need to be aggressive on technology, as well as commercially, in the face of limited grid access in windy areas.
Kaplan says: "In the US there is a trend towards lower wind speed machines. A lot of development activity is leading towards states like Ohio and Michigan, where they do not have high wind speeds, but there is good grid accessibility so transmission is good.
"Turbines have to contend with a wider range of wind conditions with a single machine and be increasingly efficient. Technology is driving the focus."
Shreve adds: "The US market favours smaller machines and looks at capacity factors as the leading purchasing criteria. This is because the limiting factor is transmission more than land availability."
Competition is fierce. Nordex’s N117 and Vestas’ V100 are well-suited to these demands. GE’s 1.5MW system is popular and orders for the next upgrade, the 1.6MW, have already been placed.
Siemens’ 2.3MW direct drive system will make less windy sites more viable, contends Shreve. Its nacelle is made in Kansas and the blades in Iowa, typifying Siemens’ approach to investment in the US.
Vestas’ recently announced "In the Region, for the Region" approach aims to bring research, supply chain, manufacturing, service and sales closer to its customers.
This has the potential to give Vestas an advantage by lowering energy costs for its customers in North America.
But Kjaersgaard is looking for long-term political commitment in return. "Siemens has made a strong strategic decision to invest significantly in the US in the expectation that there will be a long-term market.
"It has shown commitment to this market and wants political commitment in terms of long-term policy in return to secure the market beyond 2012," he says.
"A federal support mechanism would level the playing field with gas, coal and nuclear, all of which have significant government subsidies in place."
Analyst BTM Consult expects the US to continue to be a major world player.
The three big manufacturers will continue to dominate the market, but innovation and the global presence of second-tier players could begin to make the market more diverse again.