Although developments in the US wind market are expected to be hampered by a lack of financing and the overall economic downturn in the short term, the latest five-year forecast from the Global Wind Energy Council (GWEC) expects the market to pick up again quickly. "Wind energy development in the US will see a small drop in 2009 as a result of tightening project finance. However, with the package of measures recently agreed by the US Congress, and the prospect of national emissions reduction legislation, the market will quickly recover," says GWEC. "Over the next five years, a total of 55 GW of wind power capacity will be added in North America, bringing the total to more than 82 GW," the organisation adds.
With 11 GW a year to install to fulfil that prediction, one of the key potential problems the industry faces is gaps in the supply chain, particularly for components. It represents a huge opportunity for domestic equipment manufacturers currently serving other markets that are suffering more of a downturn than wind as a result of the credit crunch.
Kathy Belyeu of the American Wind Energy Association (AWEA), points out that shipping "thousands of intact, fully built-out nacelles from Europe, hundreds of miles away, does not make a whole lot of sense," adding that the US market is largely supplied by foreign firms such as Vestas, Siemens, Gamesa and Suzlon, although local company GE has a leading 45% share. "So there's a huge trend now for domesticating the supply chain."
That opportunity has not gone unnoticed: Well over half of the people attending a sold-out event on developing the wind industry supply chain, recently held by AWEA in Ohio, are not currently in the wind power business. "It is absolute desperation. Companies are looking at ways to save themselves and being part of the wind supply chain is one avenue," observes the association's Britt Theismann.
The best opportunities
While there have been some job losses among wind component manufacturers in the US (Windpower Monthly, February 2009), this has mostly been in businesses focused on producing towers and, to a lesser degree, blades, the two areas where US manufacturing strength is currently greatest when it comes to wind. Indeed, these two areas account for most of the growth in domestically produced components for wind farms, which has risen from less than 30% market share in 2005 to around 50%. There is, however, more to a wind turbine than its tower and blades, notes Theismann.
There are around 8000 separate parts in a wind turbine - a similar number to that for a typical car. The main nacelle unit sitting on top of the tower can weigh as much as 170 tonnes. The equipment is mining-scale equipment built at aerospace grade. According to Theismann, less than 20% of the components required for the nacelles needed for wind turbines are currently manufactured in the US. "It is a fairly low percentage," he says. "That is the hardest part of the supply chain to build out. And then you get into more of the high-value engineering. If you look at that, it is still a pretty good opportunity." Large bore bearings, gears and other internal gearbox and drivetrain components present some of the best opportunities for the supply chain to ramp up in the US, says the industry.
Ian Cluderay, of American turbine manufacturer Clipper Windpower, agrees. "Wind is heavy manufacturing and we are talking high volume," he says. "The demand is like a drumbeat. It is like the automotive industry in terms of components." Last year was Clipper's first big year for turbine deployment - it brought about 595 MW online. But "the US has been behind the curve in terms of capability. Some of the sourcing we have had to do is to look overseas because we have not seen the capabilities here," says Cluderay.
Clipper uses around 120 different suppliers, he says, with about 35 of them deemed core suppliers. But there is a continuing tightness in the supply of generators, bearings, and blades, he says. "What is encouraging is the rapid investment in the US, new companies coming in from overseas and subcontractors staffing up," he adds.
This has, to some extent, been driven by the increasing demand for clean electricity, thanks in large part to the green energy mandates now in place in 29 US states (page 14-15). These require utilities to source an increasing percentage of electricity from green sources in future, although how much varies from state to state. Along with federal level tax credits, these long-term mandates give a certain amount of investor confidence going forward and have done much to attract foreign wind companies to the US. One such company is Spain's Acciona, a turbine manufacturer and wind farm developer/operator with around 4200 MW of renewables capacity online across five continents, mostly wind power. A relative newcomer to the American market, the company installed 286 MW in the US last year, using turbines from both its new manufacturing facility in Iowa and overseas. It hopes to eventually expand its supply chain within the US, removing the need to import from overseas. "The beauty of North America is that it is big. The bad news is that it is too big," says Perry Wozney, director of strategic procurement for Acciona, North America. "We've been scrambling trying to get enough good suppliers. Our supply base is very immature and the timing required to get key suppliers approved is going to continue to put a strain on the supply chain. If we do not get responses quick enough, we are going to have no choice but to look outside the US."
He hopes it will not come to that, saying local is always better. "The most successful and responsive supply base is regional, and regionally supported." Critical to Acciona, he adds, is finding partners that are not just capable of producing high-quality components but companies that have the financial wherewithal to expand and grow their production in step with Acciona's growth.