Experts discuss supply chain bottlenecks

Now that component suppliers are increasingly aware that there is money to be made in the wind industry, bottlenecks in the supply chain look set to be resolved over coming years, a forum on turbine supply and technology heard at Britain's annual wind energy conference last month. Speakers on the platform agreed that demand will outstrip supply for components until 2010 at least. But constraints will ease as sub-suppliers see that wind is a serious business requiring a serious long term commitment

Market growth is no longer controlled by demand but by turbine supply said Ross Walker of consultants Garrad Hassan. The North American and Asian markets could be much bigger than they are today were it not for the supply constraints, he said.

From turbine manufacturer Repower, Matthias Schubert said the company's turbine capacity is booked out to 2010. The wind industry is competing with other boom industries, such as shipping and mining, for its main engineered components. Globally, 20-30% of the manufacturing capacity for large bearings is now taken up by the wind industry, with a waiting time for bearing delivery of 18-24 months, said Schubert. He also reported lead times of 70 weeks for sub-sea cabling between offshore wind turbines. There are offshore projects with all necessary permits and turbines lined up, but which cannot proceed because they lack cabling, he said. But in the next two or three years he believes the industry will see a big increase in component production capacity.

Torben Bjerre Madsen, chairman of MAKE Consulting, Denmark, said suppliers and sub suppliers have not seen adequate reason until now to expand their manufacturing capacity. "The key to supply chain improvements is long term commitment throughout the value chain," he said. "It is only from 2006 and 2007 that we have seen this long term planning by the industry." With companies like GE and Siemens staying in the industry and old wind companies getting bigger, there is no doubt that wind power is serious business, he added. It will be able to compete with other industries for vital components.

"Wind is now on a scale that it is not a small niche market that can be pushed to one side," agreed Mike O'Neill from Renewable Energy Systems. But the wind industry could be out-priced by other industries if energy prices are depressed. "There will be a point in some markets where it cannot sustain higher prices and that will go back through the supply chain."

Steep rises in turbine prices last year are not expected by the platform to continue. "We have seen a levelling out of turbine prices, particularly in the last 12 months," said O'Neill. Prices would not go down, he said, but neither did he think they would rise much further. Walker agreed. There would be some price increases for turbines, he felt, but nothing dramatic. A lot will depend on whether the production tax credit that underpins the US wind power market is renewed, or not, he said. Schubert commented that wind turbine prices "will depend on the development of energy prices."

None of the speakers saw any immediate threat to European turbine manufacturers from new entrants from Asia. Walker noted that over 40 Chinese manufacturers are currently in the process of producing 1.5 MW wind turbines. But Chinese technology will have a limited impact on the global market for the next three to four years: less than 5%, he believed. "The growth rates are much higher in Asia, so why would Chinese companies want to enter the European market?" asked Torben Bjerre-Madsen.