Wind Turbine Manufacturing Localization

Scenario 1. Wind turbine manufacturing localization.

According to data provided in 2014 Wind Technologies Market Report by U.S. Department of Energy, at least 12 existing wind turbine or component manufacturing facilities were consolidated, closed, or stopped serving the industry in 2014. In addition, for a second consecutive year, no major new announcements were made in 2014 about prospective future wind turbine and component manufacturing and assembly facilities.

In addition, AWEA (2015a) reports that U.S. manufacturing facilities have the capability to produce more than 10,000 individual blades (~7 GW) and 3,700 towers (~7 GW) annually. Figure 17 contrasts this equipment manufacturing capability with past U.S. wind additions as well as near-term forecasts of future U.S. installations. This figure clearly illustrates that even in 2020 there will be an excess of production capacity.

Figure 17. Wind additions: historical installations, projected growth, DOE Wind Vision report

For that reason, there are no objective interests in local manufacturing in United States. However, it might be possible to make manufacture for some details of wind turbines. As mentioned in Figure 12, less than 15% of wind turbines generators manufactured in US. As an example, in wind turbine type: REpower MM92 Turbine, cost of wind turbine generator is 3,44% of the total cost of the wind turbine (Annex 5), so we can conclude that generators for other types of wind turbines can be approximately from 2,5% to 4,5% of wind turbine cost. The cost of the generator is relatively small fraction of the total cost of the wind turbine, but in the pursuit of cost optimization, even a small cost reduction can provide a competitive advantage, and this fact can be a strong reason for US producers.

An extra benefit to manufacturing in US we can find in the Deloitte’s report (2016, Global Manufacturing Competitiveness Index). According this report, CEO survey respondents were asked to rank nations in terms of current and future manufacturing competitiveness (Annex 6). United States have a second place in competitiveness index, slightly behind China in 2016. Nevertheless, projected rank illustrate that by 2020 the US will be the number 1 in this rating.

Wind turbines generators manufacturing in United States.

For realization of such penetration scenario, it is necessary to focus on following points:

1) Market entry and distribution

Due to the general uncertainty of the development of wind energy market and the presence of a huge manufactory infrastructure in the US, I recommend to join the market only in form of Joint Venture with top manufacturers of wind turbines in United States, such as General Electric, Siemens and Vestas. Investor’s share in this JV should range from 25% to 50% (depends on the investor's appetites and desires of partners). This form will bring maximum benefits in US market for this project company.

Main benefits:

• Financial risk limitation (as part of the infrastructure project, we are reducing our investment cash flow) Most important: when you enter new market/country, JV helps you to avoid overspending which is the common problem for all newcomers;