Seven things we learned from FTI's latest ranking of top turbine suppliers

The world’s five largest wind turbine makers reinforced their dominance last year according to FTI Intelligence, but falling prices, political shifts and solar are all affecting their corporate strategies. Richard Heap reports

The merged Siemens Gamesa was unable to shift Danish giant Vestas as the world’s largest onshore wind turbine supplier in 2017, and General Electric slipped to fourth place in the rankings.

That is according to FTI Intelligence, which today published its initial rundown of the world’s top wind turbine manufacturers based on their sales in 2017. This showed that Vestas held onto the number one position, ahead of Siemens Gamesa, Goldwind, GE and Enercon.

FTI is set to publish the full rankings in its ‘Global Wind Market Update – Demand & Supply 2017’ report next month. Here are seven key talking points from the preliminary findings:

1. M&A deals helped the top five to reinforce their dominance…

Mergers and acquisitions (M&A) are a tried and tested way for manufacturers to strengthen their position in a competitive market, and Feng Zhao, head of FTI Intelligence, said that this was showing in the 2017 statistics. FTI Intelligence has reported that 62% of onshore installations in 2017 were by the top five turbine suppliers – a rise of ten percentage points year-on-year.

This is no great surprise given that the fourth- and sixth-largest suppliers in 2016 – Siemens Wind and Gamesa – are now one business; and that other transactions announced last year included the acquisition by Enercon of Dutch rival Lagerwey.

However, the strength of these larger players was also reinforced as some smaller firms left the market, either because they chose to withdraw (Daewoo, JSW) or because they filed for insolvency (FWT Energy, Seawind) or entered receivership (Vergnet). The demise of Adwen after the Siemens Gamesa merger also removed a player from the offshore market.

2. …and so did strong activity in President Trump’s backyard

The US may have been through political upheaval in the last 18 months after the election of President Trump, but leading manufacturers are continuing to prosper under The Donald.

For example, Vestas and Siemens Gamesa both improved their standing in the US, where we saw wind farms totalling 7GW completed last year despite the election of the famously anti-wind Donald Trump as US president. Vestas held onto its position as the largest supplier in the market in 2017, pushing GE into second place for the second year running – but Vestas and GE enjoy a combined 90% share for projects in advanced development or being built.

The continued certainty for the vital production tax credit despite recent tax reforms should help the US wind market to maintain its momentum through to 2020.

3. Strong conditions in Germany won’t be maintained

Meanwhile, political upheaval continues in Germany, where a government has still not been formed following the federal election in September.

German manufacturers enjoyed strong conditions in 2017 as projects of almost 6.5GW were finished, which is the result of a construction boom brought about as developers rushed to win support for projects under the previous system of feed-in tariffs. This helped Enercon, Nordex Acciona and Senvion last year, but tougher years are coming now that the auction-based tendering system introduced in January 2017 is well established.

4. The slowdown in China led to a global slump of 5%...

The US and Germany are both key markets, but they are still dwarfed by China where wind farms of 19.5GW were completed in 2017, according to the Global Wind Energy Council.

This represents a continued slowdown in China, where wind farms totalling 30.8GW were completed in 2015 and 23GW in 2016, and this is taking a toll on Chinese manufacturers including Goldwind. Overall, the Chinese slowdown led to a fall of 5% year-on-year of wind farms completed around the world last year (52.6GW).

5. …and China also highlights a booming solar market globally

In China, we can also see the tough competition facing the wind market from solar globally. According to FTI, more solar photovoltaic capacity was completed in China last year than the amount of wind capacity completed globally. Wow!

The booming solar market is forcing top wind turbine manufacturers to look at how best to develop wind-solar-storage hybrid schemes. Vestas, Siemens Gamesa, GE and Goldwind are all looking to launch fully-integrated utility-scale hybrid developments in 2018.

6. Auction-based tendering arrived in 2017…

Around 15 countries held competitive auctions for new wind capacity in 2017, including Germany and India. In these, 20GW of onshore capacity was awarded and 5GW offshore.

This shows that auctions are here to stay, and are helping to drive down the cost of wind energy to new lows. For example, the latest auction in Mexico set a record low for onshore wind with an average strike price of $18.68/MWh. Cost reduction has also been evident in offshore wind auctions in Germany and the UK.

7. …and this is forcing manufacturers to restructure

The stunning falls in the levelised cost of wind energy onshore and offshore are forcing top manufacturers to make tough restructuring decisions as they seek to maintain their profit margins. The programme of up-to-6,000 job losses set out by Siemens Gamesa in November just the latest of these, and forms part of a €2bn cost-cutting plan detailed this month.

The focus on returns is also forcing companies to look at other ways to bring in revenue, and is forcing turbine vendors to look more closely at their digital offers to help their customers to optimise project returns. For example, Envision has teamed up with Microsoft, Accenture and ARM; Goldwind is working with DNV GL; and Vestas bought Utopus Insights this year.

This will be vital as top turbine makers look to reinforce their positions in the coming years.