Plug and play: how wind projects progress under the turnkey model

INDIA: India is now the third largest wind market by annual installations, adding 3GW in 2011 after China (17.6GW) and the US (6.8GW), according to the Global Wind Energy Council. It is also a unique market where developers and turbine manufacturers are often synonymous.

Suzlon delivers completed wind farms featuring its own turbines
Suzlon delivers completed wind farms featuring its own turbines

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Pune-headquartered Suzlon has been credited with being a catalyst in India's rapid rise in installations. Key to this was the firm's business model, which runs from component manufacture through to full development and operation of the project.

Even though Suzlon started as a core manufacturer of wind turbines, 15 years ago it saw the value in providing end-to-end support right from turbine purchase to commissioning, known as turnkey. This was particularly useful in the initial years of the wind industry in India, when there was little understanding of the complicated legal and administrative processes that come with a wind project, from land acquisition, wind resource monitoring and site development, federal and local clearances and grid integration.

The turnkey concept was a game changer for India and became such an entrenched business model that it was adopted by global competitors such as Gamesa and Vestas and is now the norm for doing business in India.

Supply chain

For the Indian market, Suzlon's second core competence was its manufacturing base. Very early on the company realised the importance of the supply chain and developed a strategy to venture into component manufacturing and strategic acquisitions. Suzlon board members have previously explained that the strategy was put into practice once it became apparent that component supplies were not scaling up fast enough to meet the rapid growth in the demand side of the wind-energy market. This strategy gave Suzlon a huge competitive edge by enabling it to meet the growing demand that its competitors were ill-equipped to supply.

Suzlon has now been the market leader in India for 14 years, with a 43% share of all installed turbines and total installed capacity of about 7.4GW. Its customers, who in the main buy the finished wind projects, range from small businesses to large public-sector organisations and some of the country's large independent power producers, including Mytrah Energy and Tata Power.

Under the turnkey concept of project development, Suzlon offers a ready-made wind farm to investors. This requires it to be involved in all aspects of development, including land prospecting, wind resource monitoring, land acquisition and development, supply, construction and commissioning and, finally, operation and maintenance support (see graphic). Suzlon also provides assistance for loan processing and liaisons with utilities on behalf of its customers.

steps involved in turnkey project development model

In this way, Suzlon can sell a service rather than a product, which is particularly attractive for small businesses as it allows them to participate in the investment process without building any competence in the sector. From the developer's perspective, this model enables Suzlon to share costs across larger facilities and reduce unit infrastructure costs. It is for these reasons that the turnkey model of business has flourished in India. It has also led to Suzlon's dominance of the Indian market. With strong roots in all major wind states (see map), Suzlon is expected to continue to dominate the market at the state and national level.

However, in terms of annual capacity addition, despite a staggering 1GW of installations in the financial year 2011/12, Suzlon's actual market share in the annual installed capacity amounts to only 37%. While this may be on account of temporary problems in project execution or unanticipated delays in site approvals, the low share could also mean that new competitors are gaining ground in the growing market.

Many new entrants and entrenched players have introduced new low wind speed turbines (IEC class III), which are expected to perform better in the Indian wind environment. In contrast, the most successful Suzlon models in India have so far been class II machines. This has prompted Suzlon to develop new and improved designs for low wind regime conditions.

Product challenge

In April last year, Suzlon launched a range of 2.1MW machines with hub heights at 80, 90 and 100 metres, allowing higher power generation and greater cost benefits in lowto medium-wind speeds. As well as entering the low-wind speed market, Suzlon is using doubly-fed induction generator technology for the first time. It is also working on another class III turbine, a 2.1MW machine with 111 metre rotor diameter, which is expected to increase output by 29%.

Given Suzlon's' dominance in India's market, these new models are expected to up the ante by transforming the way turbine technologies are deployed.

Suhas Tendular is deputy general manager of projects at the World institute of Sustainable Energy.

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