What the status reports reveal are a series of strong trends and defining themes which will shape the course of wind power for the foreseeable future. Dominant among them is a global shortage of wind turbines. Demand has exceeded supply, turning the world of project development and wind turbine manufacture upside down. Gone are the days when finding investors -- or just keeping them happy -- was what kept developers awake at night. Now it is all about how best to secure turbines from manufacturers who can pick and choose who they want to deal with -- and on what terms.
For the wind turbine manufacturing industry it is a healthy change from the days of volatile markets, fickle orders, cripplingly competitive contract terms and unreasonable deadlines. As uncertainty over gas and oil supplies grows, so does the stability of markets for wind power. From Canada to China, from Italy to India, from South Korea to Spain, market structures for strong growth of wind energy are being laid. Action has replaced talk. In the parlance of the business community, this new "visibility" is driving the trend for advance contracts for hundreds of megawatts. For the first time, turbine suppliers can raise product prices and plan long term. That should relieve the supply bottlenecks being experienced today. As Robert Gleitz of GE Energy points out (page 27), his company could make as many wind turbines as its customers wanted if only the industry's component suppliers could ramp up their production. But to do that they need raw materials -- and two years ago the industry was in no position to order the materials it finds itself in need of today.
Strategic planning is replacing the helter-skelter urgency of the past. Vestas announced nearly a year ago that it intended to sacrifice market share on the alter of profitability -- a strategy clearly visible in our status reports. Vestas is losing out to competitors on many a market, mainly by making way for Gamesa. Siemens, meantime, has spent an entire year investing massively in expanding both its workforce and production facilities, while relatively few turbines were made. The impression given is that this slumbering giant will wake before long to do some landscape-altering tramping about the wind power scene.
Indeed, all the major wind turbine suppliers are building new production plant, with Asia a particular focus, and all report full order books to 2008. For the first time in a long time the chance is there for relatively minor wind turbine makers to get in on the act. Last month, Britain's EU Energy secured a framework deal for delivery of 500 MW of its German-made DeWind turbine to the United States (page 26). Spain's Acciona group, the world's third largest owner of wind plant, is exercising another option. It has created Acciona Windpower to produce its 1.5 MW turbine. On the same theme, our status reports reveal that a series of grid-scale prototype turbines are being tested around the world from companies yet to make a mark in wind power -- in South Korea, Japan, China, India, Brazil, Italy, Spain and New Zealand. Not all are big name players, but Subaru is among them.
Perhaps the wind sector's most fundamental shift is in wind plant ownership. A business that not long ago was driven by thousands of wind-turbine owning enthusiasts is now dominated by a handful of energy majors fighting a rearguard action to keep fleet-footed, independent asset hunters at bay. So while Iberdrola and FPL might own the two biggest single wind plant portfolios, the third and fourth largest are held by two (very different) independent companies, Spanish construction group Acciona and international investment company Babcock & Brown, both growing their wind holdings fast.
The concession approach
How to structure markets for wind power remains a subject of hot debate. The route of government concessions, rather than mandates or fixed purchase prices, seems to be gaining popularity. Today, competitive bids for government contracts are the basis of wind markets in China, India, Portugal, Denmark, Canada, Brazil, Ireland, France, and Morocco. A number of governments apparently believe that for building capital intensive infrastructure, the concession approach represents the best value for the consumer. Or perhaps they see it as a way of controlling who the profits flow to. History has taught the wind industry that no country is keen to see foreigners as the only beneficiaries of its renewable energy budget. South Korea could be the next disgruntled customer. Its 15 year standard offer power purchase contracts have attracted a swarm of foreign developers and suppliers. Local industry is none too happy about it (page 48).
So one trend seems likely to stick: the geographic spread of wind power will be accompanied by demands for domestic manufacture. Spain started the trend nearly a decade ago and the Canadian province of Quebec is taking it a step further. But Portugal might cap them both. Its next round of concessions are based on an iron-fist strategy for selecting the bids most likely to create local jobs and boost local economies.