Roland Berger wind energy study

Roland Berger wind energy study: the industry needs to move from being pioneers to a mass industry

The global wind power industry keeps on booming: although the crisis put the brakes on growth in 2009, installed power is 31% up on last year. At the same time, the industry is on the verge of a structural change. While most of the companies involved in this market to date have been pioneers, the balance is shifting increasingly, with all the corresponding consequences for manufacturers and suppliers. The major utilities are devoting more and more attention to this area and adding wind power to their energy mix. This means projects are getting bigger, and the pressure to reduce costs and standardize is increasing. At the same time, new suppliers are pushing into the market, which has led to excess capacity. Roland Berger Strategy Consultants’ study says the industry has no choice but to consolidate. Manufacturers need to grow and become more efficient, and reduce their costs to survive. And suppliers must adjust accordingly.

“Wind farm manufacturers are still a very mixed group at the moment,” says Manfred Hader, the Roland Berger Partner who wrote the study. They include pure wind power pioneers who have divided around half the market between them to date, and a whole host of regional players and conventional mechanical engineering companies who are expanding their market share continually through acquisitions. “The market is in motion, and will restructure itself completely in the coming years.” One major factor here is the growing demand from major utilities, who are expanding their energy mix with ever larger wind farms to meet the challenges of CO2 emission trading and rising fossil raw material prices. To implement such major projects, utility companies are signing framework contracts with individual producers aimed at systematically standardizing and industrializing the value chain. “This is increasing competition amongst the manufacturers and the pressure to reduce costs,” says Hader. “And many new Chinese wind farm producers have come onto the market in recent years and are now pushing into the world market.”

Size and industrialization are the decisive factors
Roland Berger’s experts have come to the conclusion that the wind farm industry needs to turn itself from a pioneer industry into a conventional one: “Because the major utility companies want the same things from wind farm manufacturers as they do from those making conventional energy generation systems, product development in wind farms will also come into line increasingly with normal industrial practice and stabilize the value chain,” says Roland Berger Principal Matthias Spott. “And major industrial groups like Siemens or General Electric, but also local, mainly Chinese players will be expanding their market share at the pioneers’ expense.” So the motto must be, “Grow and be industrial – or get out,” says Spott.

What manufacturers expect from their suppliers is also changing at the same time. They need to help the manufacturers compete globally, including standardizing and modularizing their products and by reducing costs. Hader says, “The closer a manufacturer works directly with a utility company as a customer, the more important it is that they also work closely with their main suppliers to optimize the entire value chain.” On the other hand, the increasing technological challenges also offer suppliers the chance to position themselves as key partners to manufacturers and ensure they do not get left behind when the impending consolidation arrives.