Welcome to our May edition of the Supply Chain Insights

The global wind sector has seen massive activity growth in the past decade as countries look to boost installed renewable generation capacity and strive to reach their emission reduction goals. While China has driven a significant part of this growth in recent years, Russia’s invasion of Ukraine has prompted European nations to lift their renewable targets with the aim of boosting their energy independence and security. Global wind capacity was already expected to grow significantly this decade, but as a result of the Russia-Ukraine conflict, politicians are now calling for additional acreage to be made available for the development of wind farms, as well as more rapid permitting processes.

While supportive policies create opportunities in the wind industry, the envisioned pace of deployment may put pressure on various parts of the supply chain. Equipment suppliers must rapidly expand capacities to support the growing backlog, while balancing rising costs due to sanctions pushing up prices of essential equipment and raw materials.

Adding to the challenges for the wind supply chain are rapidly growing component sizes. Turbine manufacturers are putting in significant effort to produce ever-larger turbines which help lower the cost of wind power. The cost saving potential from larger turbines is especially present in offshore wind, where higher wind speeds can be unlocked but installations processes are more complex and costly. As offshore wind activity is set to grow significantly faster this decade relative to its more mature onshore equivalent, the ability of suppliers to adjust supply to changing demand will be defining factor in the years to come.

In this edition, we take a closer look at these dynamics within the turbine manufacturing sector.

Thank you for reading.

Alexander

Alexander Dobrowen Fløtre

Vice President
and Product Manager of Offshore Wind
Energy Service Research

Will manufacturing capacities keep up with rapid wind energy build-out?

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• OffshoreWindCube 
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• Offshore Wind Analytics
Complete overview of the global offshore wind market  >> Learn more

• WindSupplierCube 
Historical and upcoming investments, contract awards, unitized demand, and service purchases for wind energy projects >> Learn more

• Wind Supplier Analytics
Collection of market analysis covering global wind supply chain activity  >> Learn more

• SolarSupplierCube  
Historical and upcoming investments, contracts awards, and service purchases for solar energy projects. Supply and demand analysis for solar equipment raw materials, together with EPC >> Learn more

• Solar Supplier Analytics
Collection of market analysis covering global solar supply chain activity >> Learn more

• ServiceCube (Renewables) 
Cost and renewables and low-carbon energy service market analysis with global sector-by-sector and project-by-project coverage >> Learn more

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Growing turbine sizes drives need for turbine manufacturers to adjust supply going forward

Renewable energy sector growth has accelerated in recent years as governments and companies have set ambitious emissions-reduction targets. Among renewable energy sources, wind energy is the most established in terms of operational capacity, driven primarily by onshore wind, which constituted more than 94% of the total wind capacity at the end of 2021. Having seen stable wind capacity additions of around 60 gigawatts (GW) per annum between 2016 and 2019, as shown in Figure 1, new capacity leaped to more than 110 GW in 2020 and 2021. These high levels are expected to remain, reaching more than 120 GW this year. The growth in activity was primarily driven by mainland China, where supportive feed-in tariffs (FiT) led to a large-scale build-out of both onshore and offshore wind, with developers racing to commission their wind farms before the FiTs expired by the end of 2020 for onshore wind and one year later for offshore wind.

While still a small part of the total market, offshore wind capacity has grown rapidly in recent years, a trend that is expected to continue going forward. Turbine sizes in the offshore wind market are generally larger than those installed onshore, which means that offshore wind’s share of total installed wind turbines is expected to grow at a slower pace than the share of offshore wind capacity in the global wind energy mix. As turbine sizes are expected to grow going forward – both in the onshore and offshore wind markets – new capacity is expected to outpace growth in new turbines.

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Turbine manufacturers have ramped up capacities to accommodate the growing demand seen in recent years, and global turbine manufacturing capacity is estimated to have reached around 154 GW in 2021 (Figure 2). While the top five manufacturers include established players such as Vestas, GE and Siemens Gamesa – which occupy first, second and fourth places, respectively, in terms of global market share – several Chinese original equipment manufacturers (OEM) have climbed the ranks as a result of the activity boom in the domestic market. These include Goldwind (occupying third spot in 2021), Envision (fifth) and MingYang (seventh), among others. Mainland China has had a policy of building up a domestic supply chain, with primarily local manufacturers securing contracts for most of the work scopes related to onshore and offshore wind.

Given the current state of global wind turbine manufacturing capacity, we estimate that the wind turbine manufacturing utilization rate is 75%, alluding to the estimated 115 GW of shipments last year (Figure 3). The global utilization rate five years ago was around 53%, with 54 GW of shipments and 102 GW of manufacturing capacity, showing significant excess capacity due to anticipation of increasing demand. In 2019, the estimated manufacturing capacity was up by almost 20%, as manufacturers prepared for activities to ramp up in the Asian market, especially in mainland China. In view of this trend, we expect wind turbine manufacturers to increase their capacity to meet the wind power installation demand in the next two or three years. This year is envisaged to be the peak installation year for the European market, with more than 4 GW planned to be commissioned.

The manufacturing capacities of different turbine size groups is also a pertinent issue in the sector. Turbine sizes have grown in both the onshore and offshore wind markets, with the latter seeing more significant growth. As shown in Figure 4, we estimate that the largest manufacturing capacity in 2021 was in the 2-4 MW group, with more than 70 GW capacity. Compared to the capacity demand in 2025, there is excessive manufacturing capacity for the 2-4 MW and the 4-6 MW groups. A bottleneck could, however, develop in the larger groups, such as the 10-12 MW and larger than 12 MW groups (Figure 4). Only a handful of bases manufacture these huge turbines, such as GE’s Cherbourg base, Vestas’ Nakskov base and Siemens Gamesa’s Le Havre base, which started operation in March 2022. There are, however, some plans to expand manufacturing capacity for these large turbine groups. Siemens Gamesa intends to establish a factory for its 14-MW turbines on the US east coast, while GE aims to start production at its Teesside base in the UK in 2023. Moreover, historically it does not take long – typically less than 1.5 years – to establish a new base or production line for wind turbines. Siemens Gamesa’s Taichung nacelle facility in Taiwan and its Le Havre blades factory were built within one year, indicating that companies can quickly increase production levels.