window into large wind: large wind market & industry ......april 8, 2010 4:00-5:00 pm edt ann...

WINDow into Large Wind:

Large Wind Market & Industry

- Update and Perspectives -

Loch McCabe & Tim Kumbier

Dave Crumrine, Organizer

April 8, 2010

4:00-5:00 pm EDT

Ann Arbor, MI

734-975-0333

www.shepherdadvisors.com

Overview

• WINDow into Large Wind provides a

Baseline Market Update for US

Manufacturers and Service Providers:

− Overview of current large wind market

− Review of Federal stimulus dollars allocations

− Highlights of Shepherd/ U. Michigan survey of

purchasing patterns in the wind supply chain

• WINDow into Large Wind is not:

− An introduction to the wind industry

− A wind supply chain analysis

− A product/technology review

2Copyright 2010 Shepherd Advisors

Agenda

• About Shepherd Advisors

• Large Wind Market Update

• Federal Stimulus Allocation

• Wind Industry “Buy-Chain” Survey Highlights

• Wrap-Up & Going Forward Questions

• Q & A

– Please type questions in box and we’ll respond as

we can in the time we have left

• If you are interested in receiving a copy of this presentation,

please contact Tim Kumbier or Dave Crumrine, 734-975-0333


About Shepherd Advisors

• Clean energy business management consultancy

• 10+ Years & located in Ann Arbor, MI

• Improve position; grow revenues; lower risk

– Sound strategy + actionable market intelligence +

relevant connections + public resources

• Wind, Solar, Biomass, & Energy Efficiency

• Manufacturers, Suppliers & Service providers

• Developers & Generators

• Governments & Communities

• Contact information …


734-975-0333


http://www.shepherdadvisors.com

About Your Presenters

5

• Loch McCabe

– Shepherd Advisors’ Founder and President

– Clean Tech Industry Since Late 1980s

– Growth Strategy, Market Development & Securing

Public Resources

• Tim Kumbier

– Leads Shepherd Wind Industry Practice

– 20+ Years Driving Business Growth

– Market Analysis -> Business Development

Copyright 2010 Shepherd Advisors

Agenda






• Q & A• Please type questions in box and we’ll respond as we can in

the time we have left


Large Wind Market Update

• Global Market Demand

• US Market Demand

• OEM Market Shares in the US

• US Industry Trends and Drivers


2009 Global Market Demand

Global Demand

–Nearly 158 GW cumulative

installed capacity (up 31%

over 2008)

–Record 37.5 GW added

capacity in 2009 (up 43%)

–$63 billion market (up 31%)

–New growth driven by

China (13 GW; 35% of

additions) and US (10 GW;

26% of additions)

8

02468

101214

Top Five Countries in Added Capacity (GW) 2009

Source: Global Wind Energy Council (GWEC)


2009 Global Installations

US

Germany

China

Spain

India

Italy

France

UK

Portugal

Denmark

Other25.1 GW

19.1 GW

10.9 GW

4.9 GW

4.5 GW

3.5 GW3.4 GW

4.1 GW

35.2 GW

25.8 GW

9

Top Ten Countries, Cumulative Installed Capacity

Source: GWEC


Wind Generation for Select

Countries

0

5

10

15

20

25

Wind Generation as % of Total Generation, 2008

10

Sources: International Energy Agency (IEA) Wind; DOE


2009 US Market Demand

US Demand– 35,159 MW cumulative

installed capacity (up 39%)

– 9,922 MW added capacity in 2009 (up 18%); second in world behind China

– Nearly 5700 turbines added

– $17 billion market

– In 2009, Texas was state with most capacity (9,410 MW) and most growth (2,292 MW)

– Fourteen states with more than 1,000 MW capacity

– 2% of US electrical demand

11

0

500

1000

1500

2000

2500

Top Five States in Added Capacity (MW) 2009

Sources: American Wind Energy Association (AWEA); DOE


US Market Size and Growth

12

Source: AWEA

0

10000

20000

30000

400001996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Additions

Cumulative

US Cumulative & Annual Wind Capacity (MW)

39% Compound Annual Growth Rate, 2004-2009


Ramp Up to Produce 20% of US Electricity by 2030

13

305 GW

Source: DOE 20% by 2030


Ramp Up to Produce 20% of US Electricity by 2030

14

35 GW as

of 2009

305 GW

Source: DOE 20% by 2030


New Installs Against 20/30 Curve

16 GW Annually:

~7,000-10,000 turbines (drivetrains, frames, and housings)

~21,000 to 30,000 blades and tower sections

15

Source: AWEA

Actual installations

2008: 8,425 MW


2007: 5,258 MW


2009: 9,922 MW


2009 Top Ten States

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

TX IA CA WA MN OR IL NY CO ND

Top Ten States, Cumulative Capacity (MW)

Cumulative

2009 Additions

16

Top ten states represent

26,691MW, or 76% of total US

installed capacity

Source: AWEA


New Construction Underway

Going into 2010

• At least 2,786 MW representing an estimated

1,500+ turbines

• At least 37 projects in 21 states

• Average project size = 75 MW

• Average turbine size = 1.8 MW

17

Source: AWEA


Global Industry OEM Market Share

Vestas15%

GE Wind13%

Sinovel9%

Enercon8%Goldwind

7%Siemens

7%

Gamesa6%

Suzlon6%

DEC5%

REpower3%

Nordex3%

United Power2%

Mingyang2%

Mitsubishi2%

Acciona2%

Other10%

2009 Estimated OEM Global Market Share

18

Source: MAKE Consulting


US Industry OEM Market Share

GE Wind40%

Vestas15%

Siemens12%

Mitsubishi8%

Suzlon7%

Clipper6%

Gamesa6%

Other6%

2009 OEM US Market Share

19

Source: AWEA


US Market Growth by OEM

0

2000

4000

6000

8000

10000

12000

2005 2006 2007 2008 2009

Annual New Installations (MW)

Other

Nordex

REpower

Acciona

Mitsubishi

Clipper

Gamesa

Suzlon

Siemens

Vestas

GE Wind

20

Sources: DOE; AWEA


US OEM Market Share Trends

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009

Other

Nordex

REpower

Acciona

Mitsubishi

Clipper

Gamesa

Suzlon

Siemens

Vestas

GE Wind

21

Sources: DOE; AWEA


OEM Investment Activity Includes

• OEM production facilities in 2009-10

− Siemens broke ground (Hutchinson, KS; 9/09)

− Nordex broke ground (Jonesboro, AR; 9/09)

− Vestas broke ground (Brighton, CO; 3/09)

− Mitsubishi announcement (Ft. Smith, AR; 10/09)

− A-Power announcement (Nevada; 3/10)

• 2008 production facility announcements

− Nordic (Pocatello, ID)

− Fuhrlander (Butte, MT)

• First-time sales into US market (last two years):

− AAER, Acciona, A-Power, AWE, DeWind, Fuhrlander,

Nordic, Northern Power, REpower

22

Sources: Press releases; DOE; AWEA


OEM Investment Activity Includes

cont’d

• Acquisitions

− United Technologies Corporation acquires 49.5% stake

in Clipper Windpower (12/09)

− GE acquires ScanWind from Morphic Technologies

(direct drive technology for offshore; 8/09)

− Daewoo (S. Korea) acquires DeWind from Composite

Technology Corp (8/09)

− Suzlon increases stake in REpower to 90% (5/09)

• Other noteworthy investments

− Samsung/Korean Electric Power announce $7B

investment in Ontario (1/10)

− GE announces $453M investment to develop and

expand offshore wind facilities in Europe (3/10)


US Market Trends & Drivers

• Overall growth remains robust

– Project financing options are recovering

– Federal stimulus money

• Projects, Manufacturing, R&D, Transmission

• Prevailing mindset toward “Jobs, Jobs, Jobs”

• More transmission & integration projects

• OEMs are expanding production footprints

– OEMS are building US production facilities

– New OEMS continue to enter US market

– New large players entering & expanding

24

“Tailwinds” Propelling US Wind Industry


US Market Trends and Drivers

• More opportunities

– US onshore wind energy potential 3x previous

– Offshore growing in Europe; starting in N. America

– State & National? RPS

– Ontario Green Energy Act (with feed-in-tariff)

– Latin America market opening up

• More experience w/ larger wind loads

– 19% in Texas; >50% in Spain

25

“Tailwinds” cont’d



• Ongoing sobering effects of recession

– Financing is still a challenge

– Overall energy usage is down

– OEMs selling “project by project”

– Strong cost pressures

• US wind manufacturing supply chain growth

stalled in 2009; pace of recovery is slow

– OEMs in Supply Chain “holding pattern” in US

– Relying more on established European suppliers

26

“Headwinds” Confronting the Industry



• Transmission & integration challenges

– NIMBYism

– Pushback from conventional industry

• Lack of long-term national energy policy

– Increases caution of Foreign OEMs about US

– “Not Made in USA” concerns in Congress

• Growing Asian presence as both market &

supply base (China & S. Korea)

27

Turbulent “Crosswinds”


Agenda



• Federal Stimulus Allocations to Wind Sector



• Q & A– Please type questions in box and we’ll respond as we can in



Federal Stimulus Dollar

Allocations

• American Recovery and Reinvestment Act

signed February 17, 2009

• Key incentive programs under ARRA

− 1603: “Payments for Specified Energy Property in

Lieu of Tax Credits” (power generation projects)

− 48C: “Advanced Energy Manufacturing Tax

Credits” (clean energy manufacturing facilities)


1603 Program Overview

• Payments for power generation projects:

− Started construction in 2009 or 2010

− In service by January 1, 2013 (large wind) if construction

began during 2009 or 2010

– Equal to 30% of basis of property (including equipment)

• 1603 Awards as of mid-March 2010

– $2.7 billion

– 450 domestic renewable energy projects

– 41 states

• Expect to award estimated total of $5 billion,

supporting nearly $15 billion in projects


1603: Wind vs. Other Clean Energy

31

Energy

Type

Amount Funded

($M)

% of

Total $

Number of

Projects

% of Total

Projects

Average

$/Project (M)

Wind Facility $2,226 85% 47 11% $47

Geothermal $155 5.9% 9 2% $17

Solar

Electricity $137 5.2% 308 73% $0.4

Biomass $54 2.1% 7 2% $8

Open Loop

Biomass $18 0.7% 3 1% $6

Landfill $13 0.5% 4 1% $3

All Other

Projects $9 0.3% 44 10% $0.2

Total $2,612 100% 422 100% $6

• Wind has accounted for 11% of projects but 85% of funding

• Contrast to solar, with 73% of projects but only 5% of funding

Note: Total as of March 9, 2010 Source: Dept. of Treasury


1603: Wind Award Locations

32

State

Number of

Awards Funding ($M)

% of

Funding

Average

$/Award (M)

TX 8 $806 36% $101

IL 5 $249 11% $50

OR 4 $197 9% $49

IN 2 $183 8% $92

PA 3 $171 8% $57

CO 1 $100 4% $100

IA 1 $93 4% $93

MO 1 $85 4% $85

All Other

States 22 $343 15% $16

Total 47 $2,226 $47

• TX has has received more than 3x funding of next closest state (IL)

• Together TX and IL have received nearly 50% of funding

• IN, CO, IA and MO each have one or two very large awards

Source: Dept of Treasury


1603: Developer Impact

33

Developer

MW

(3,691 Total) % of Total

Number of

Projects

(37 Total) % of Total

Average

MW/Project

Iberdrola 1,042 28% 9 24% 116

E.On Climate &

Renewables 512 14% 3 8% 171

Horizon-EDPR 397 11% 3 8% 132

NextEra Energy 341 9% 3 8% 114

Babcock & Brown 283 8% 1 3% 283

Canon 190 5% 1 3% 190

Eurus 180 5% 1 3% 180

Invenergy 111 3% 2 5% 56

enXco 106 3% 1 3% 106

NaturEner 104 3% 1 3% 104

Other Known

Developers 427 12% 12 32% 36

Note: For 37 projects where developer was known

• Iberdrola captured about ¼ of the MW and projects

• Top five account for 70% of MW and 51% of projects

Sources: Dept. of Treasury; AWEA


1603: OEM Impact

34

OEM

MW

(3,449 Total)

% of Total

MW

Turbines

(2,035 Total)

% of Total

Turbines

Number of

Projects

(32 Total*)

Average

MW/Project

Mitsubishi 862 25% 579 28% 4 215

GE Energy 834 24% 556 27% 11 76

Gamesa 528 15% 264 13% 4 132

Suzlon 389 11% 185 9% 6 65

Acciona 251 7% 136 7% 2 125

Vestas 204 6% 121 6% 1 204

Siemens 200 6% 109 5% 2 100

REpower 120 3% 60 3% 2 60

Nordex 63 2% 25 1% 1 63

Note: For 32 projects where OEM was known; one project includes two OEMs

Mitsubishi and GE were big winners, together accounting for

49% of MW and 55% of turbines

Sources: Dept. of Treasury; AWEA


48C Program Overview

• Clean Energy Manufacturing Investment Tax Credits

− Qualifying facilities produce wind, solar, or other renewable

and clean energy equipment

− Projects placed in service by 2014

− Tax credits worth up to 30% of each planned project

• Tax credit awards in January 2010

– $2.3 billion in tax credits

– 183 manufacturing projects

– 43 states

– Supporting company investments of nearly $7.7 billion and

expected creation of over 17,000 jobs

• Additional $5 billion may be appropriated this year

(included in administration’s proposed budget)


48C: Wind Awards

• Wind awards represented approximately 27%

of projects & 15% of total tax credit dollars

− Estimated 50 wind manufacturing projects totaling

$341M in tax credits

− Averaging $6.8M of tax credit per project

• Of the wind tax credits, approximately $161M

went to OEMs and $180M went to

tier/component manufacturers

• Individual project awards ranged from less

than $1M to more than $28M

36

Sources: DOE; Dept. of Treasury


48C: OEM Impact

OEM Tax Credits ($M) # Projects Average

$/Project (M)

Vestas $52 3 $17

Siemens $36 3 $12

Gamesa $31 3 $10

Nordex $22 1 $22

Fuhrlander $10 2 $5

Mitsubishi $5 1 $5

Nordic $3 1 $3

Alstom $3 1 $3

Total $161 15 $11

37

• Wind OEMs received 47% of the $341M wind total

• Top four awards of $141M combined represent 41% of the wind total



48C: Tier/Component

Manufacturers

Manufacturer Tax Credits ($M) Component

Merrill Technologies Group $22 Nacelle

Rotek $20 Bearings

Winergy Drive Systems $13 Power transmission

equipment/ gearbox

Brevini Wind USA $13 Gearbox

Vela Gear Systems $12 Gear sets

38

Top Five Tier/Component Manufacturer Tax Credit Awards


Top five tier/component manufacturer awards of $80M combined

represent 23% of the wind total


Agenda









Wind “Buy-Chain” Market Survey

• What is the “Buy-Chain”?

• Buy-Chain Framework

• Wind Buy-Chain Survey Highlights

− Overview

− Respondent Demographics

− Key Findings


What is the “Buy-Chain”?

• Series of purchasing decisions – following the

money – from end user back to raw materials

• Want to understand the circumstances

around buyers’ purchase decisions and key

factors driving them

– Who is buying what?

– Why they are buying?

– How they are buying?


Supplier

Supplier’s

Customer

Supplier

Customer’s

Customer Market/

External

Forces

• Material

Supply

• Labor Supply

• Technology

• Financing

• Economy

• Competition

• Regulation

• Policy

Bu

y C

hai

n

Su

pp

ly C

hain

Buy-Chain Framework

Many factors influence purchase decisions

at each link in the buy-chain


Raw Materials

Tier 1/ Tier 2/

Components

Turbine (OEM)

Construction/

Installation

Wind Developer

Utility/ Power

Producer

Policy Makers

Wind Industry Buy-Chain

Buy C

hain

Supply

Chain


Wind Buy-Chain Survey--Overview

• Collaboration between Shepherd Advisors and

University of Michigan Ross School of Business

• Surveys were sent to more than 1,000 wind “supply

chain” participants

− 94 respondents; 49 of these were manufacturers

− 73 completed surveys; 42 of these were manufacturers

− “Solid” overall response rate of 9% (7% for completed)

− “Indicative” though not statistically significant

• Survey was conducted during November 2009


Respondent Demographics:

Manufacturers

45

4

14

7

17

7

Type of Wind Manufacturer

Wind Turbine OEM

Tier 1 Supplier

Tier 2 Supplier

Component Supplier (non-Tier 1 or Tier 2)

Equipment Supplier

Note: n = 49


Respondent Demographics:

Manufacturers

• Broad spectrum of company size, from < 10

employees to > 500 employees

• Cross-section of wind industry experience

− 43% <= 2 years

− 29% > 10 years

• More than 2/3 have wind revenues below $10M

− 38% < $1M

− 31% > $10M

• For 74%, wind revenues represent < 20% of

company revenue

• 55% have three or fewer wind industry suppliers


Key Survey Findings: Importance

47

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Degree of focus on wind energy

Geographic proximity to your company

Experience in wind energy industry

Innovation track record

Ability to collaborate on product development

Financial stability/strength of supplier

Ability to increase production to meet your …

Rapid turnaround/delivery

Competitive pricing

Reliability of product or service

Ability to meet your company's specs

Quality of product or service

How important to your company are the following attributes when choosing your key wind industry

suppliers (5 = High; 1 = Low)?


Key Survey Findings: Satisfaction

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0





Abbility to collaborate on product development


Ability to increase production

Rapid turnatound/delivery

Competitive pricing

Relilability of product or service



Satisfaction with Suppliers Along Attributes (5 = High; 1 = Low)


Key Survey Findings: Importance

vs. Satisfaction Gap

49

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0





Ability to collaborate on product development


Ability to increase production to meet your …

Rapid turnaround/delivery

Competitive pricing

Reliability of product or service



Satisfaction

Importance


Key Survey Findings: Outlook

• 42% of manufacturing respondents expect

their wind revenues to grow at least 20%

annually over the next three years

• 24% expect their wind revenues to grow 5%

or less annually

• 33% expect to add wind suppliers over the

next year


Key Survey Findings: Summary

• Wind industry buyers want suppliers they can

count on to deliver the “fundamentals”

− Quality; Reliability; Ability to Meet Spec; Competitive

Pricing; Rapid Turnaround

− 55% have three or fewer suppliers

• Nevertheless, opportunities exist to establish new

“trusted supplier” relationships

− Gaps between importance and satisfaction on key

attributes

− 33% expect to add suppliers

• Respondents are cautiously optimistic about

growth prospects in the wind industry


Agenda









Key Takeaways

• US wind industry growth will continue

– Improving finances and overall economic activity

– Higher energy costs

– More wind than earlier thought

– Off shore is coming in next 3-5 years

• Growth is being tempered

– Transmission & integration constraints

– Push back as projects get closer to people & wind

becomes larger share of energy pie

– Lack of national renewable energy policy

• US suppliers had a challenging 2009


Key Takeaways

• OEM caution continues

– Financing for new projects is still a challenge

– OEMs can draw upon existing suppliers

– OEMs’ global focus is moving towards China

– Asia is rapidly building scale

• Many suppliers are optimistic

– US and World market continues to grow

– OEMs continue to build new US production

– Suppliers that meet rigorous quality standards,

specifications, reliability, and competitive pricing

requirements are well positioned


Some Going Forward Questions to

Consider

• Are you as well positioned as you want to be to

grow in this very challenging industry?

• What are the key questions, info and insights

you need to evaluate how best to grow?

• Are you as well connected as you need to be?

• What is your growth financing strategy?

• How well are you tapping public resources?

• How does your firm align with the large wind

“Buy Chain?”

Shepherd Advisors can help!


Thank You from Shepherd Advisors

• Presenters: Tim Kumbier & Loch McCabe

• Clean energy business management consultancy

• Wind, Solar, Biomass, & Energy Efficiency

Industries

• Clean energy developers, generators,

manufacturers and suppliers

• Founded 2000 in Ann Arbor, Michigan

• www.shepherdadvisors.com

• 734-975-0333

• Go ahead and call us!


http://www.shepherdadvisors.com

Agenda





• Industry Trends & Going Forward Questions

• Q & A


Questions?

We’ll Answer What Questions We Can In the

Balance of the Hour

We Appreciate Your Time & Attention

Thank You!

If you are interested in receiving a copy of this presentation, please

contact Tim Kumbier or Dave Crumrine at 734-975-0333

Tim Kumbier [email protected]

Loch McCabe [email protected]



mailto:[email protected]

mailto:[email protected]

http://www.shepherdadvisors.com/

window into large wind: large wind market & industry ......april 8, 2010 4:00-5:00 pm edt ann...

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