Top trends in the wind sector

How it all began?

I joined the renewable industry after a five-year-long stint in the consulting domain. In this stint, I got a chance to interact with multi-sectoral teams. It helped sharpen the cross-sectoral viewpoint. We used to study the financials (Capex, Opex, etc.) on paper. But then I wished to see the capex on the ground. And my wish was fulfilled after joining the wind sector.

It is an amazing experience in the wind power segment. Honestly, I had a little apprehension about joining this sector. After the Feed-in-Tariff (FiT) regime faded out in India, I felt a flat growth was prevailing. The situation was in stark contrast with the solar industry which was booming (and still solar is booming).

I had a negative perception of this sector. It was quite obvious because -

• A developer incurs a cost of INR 4 crores/MW for solar whereas the cost for setting up a wind project is INR 6 crores/MW.
• Solar module is a commoditized business whereas the suitability of Wind Turbine Generators (WTGs) depends upon site-specific conditions such as terrain, wind speed, etc. A higher rating WTG may not perform better than a lower rating WTG if the wind profile is not favourable.
• Logistic constraints are more in the wind sector. Their massive size demands a full-fledged planning and logistic mechanism.

“One can imagine the size of WTG. Adani’s 5.2 MW WTG has a tip height of 200 meters. This is even more than the height of the Statue of Unity which is 182 meters.”

(Please note that the Tip Height is the height from the ground level base of the wind turbine to the tip of the wind turbine blade at the twelve o'clock position.)

Change of perspective

After a few months of joining the wind sector, I went through desktop research and attended a few conferences. It transformed my perspective. I got to know about the various market drivers working in hindsight such as the revamping of auction mechanisms in EU countries, efforts to streamline the permitting and grid connectivity, introduction of new WTG machines to cater to the remaining low-medium wind speed areas, etc.

Now, I hold a positive perspective on the overall growth of the wind industry. Last year also marked the crossing of One Terawatt (1 TW = 1,000 GW) of global cumulative wind power capacity. It took around 40 years to achieve this feat. But with the continued momentum, the next terawatt of addition is expected to be achieved by 2030 itself (or in the next 7 years only).

Top 4 trends

With a renewed interest in myself and seeing the vigor in the wind sector, I constantly keep track of major happenings. And that’s why I would like to share the top 4 trends in the wind sector. It is a mixed bag of positives and negatives.

Trend#1 – The need to attain energy security is propelling for global policy push.

I consider energy security as a big determinant in paving the way for renewable energy. After the Russia-Ukraine war which led to export restrictions on Russian oil and gas, the EU started focusing on REPowerEU. ?

There is a situation of over-reliance on Chinese imports in the renewable space in the US market. It has led to increased adoption of tariff and non-tariff barriers to safeguard the interest of their local industry. Biden administration also came up with the US Inflation Reduction Act 2022 (IRA). It is considered the biggest stimulus program for renewable energy in the world.

Amidst the prevailing “China+1” sentiments, India is trying to leverage through localizing manufacturing.

In a nutshell, various countries are working on self-sufficiency to protect themselves from geopolitical uncertainty and wind can play a pivotal role in it.

Trend#2 - China’s domination to continue.

In the wind sector, China has an average of 65-70% share across the global wind supply chain. It seems as if they are increasing their strength with time. It was a phase-wise growth (as below) to becoming a leader in this space. ?

• Phase 1 – Global component suppliers used to build manufacturing sites in China to serve both Chinese OEMs (manufacturers) and their traditional customer base.
• Phase 2 - Chinese suppliers began to increasingly qualify as suppliers to the global market, although mainly as component sub-suppliers.
• Phase 3 (current scenario) – Now, they are competing with western WTG OEMs in the overseas market through their low-cost offerings and better payment terms (deferment up to initial three years).

Phase 3 has to potential to keep China’s dominance to stay for a long time unless an alternative option emerges. ?

Trend#3 - The World will gradually move towards Offshore wind.

Even though various countries are tilting towards the offshore wind market, I believe the pace of adoption would be slow. The main reason is the huge gap in the capex cost i.e., offshore cost is four times that of onshore wind.

Countries like the UK, China, Germany and Denmark have started focusing on offshore wind. However, the bottleneck in terms of the auction mechanism, grid availability, setting up of infrastructure, etc. is hampering the growth.

In short, the offshore market is a high-potential segment owing to no land constraints and a good capacity utilization factor (CUF). But its adoption would be slow.

India also introduced its National Offshore Wind Energy Policy in 2015. However financial support in the form of Viability Gap Funding (VGF) is introduced recently in 2024. Also, no domestic OEMs have concrete plans for this segment. Suzlon is a slight exception as it has just commissioned its first offshore operational offshore met station in the Arabian Sea.

Trend#4 – Western OEMs will be focusing on the profitability in near future.

Western OEMs like SGRE, Vestas and Nordex are grappling with weak profitability. That’s why they are prioritizing their core markets such as the US and Europe which offer healthy profit margins.

SGRE is planning to prioritize stabilizing its onshore business unit, which faces lasting reputational harm from recently announced reliability problems on the flagship SG 4/5.X platform.

As per MEC+ analysis, it can be seen from the recent WTG ordering trends in India during Q2 CY 2024 that the western OEMs market has shrunk to 10% only. Also, Indian OEMs occupy the largest share of 43% followed by Chinese player (Envision) with a 41% share. It shows that Western OEMs are retracting from the Indian market even though it holds potential for growth.

It can be inferred that while Western OEMs would be busy focusing on improving profitability, Chinese OEMs would penetrate newer markets like Saudi Arabia, Egypt, Morocco and Turkey. They are slowly entering into EU market also even though prevailing sentiment is against them.

Conclusion

It can be concluded that the wind sector is going through ups and downs. Ups in terms of increasing installation trend whereas downs in reference to poor financials of OEMs and increasing threat from Chinese entrants. Every country is standing at its own phase of adoption of wind energy. Some are pushing for local manufacturing whereas others are looking to import cheaper turbines.

But amidst all this, one thing is clear the wind sector will have an amazing journey going ahead. I hope the same for my career in the wind sector too. ?

(Disclaimer: The expressed opinions are purely personal.)

Source –

• https://www.adani.com/en/newsroom/media-release/adani-wind-receives-certification-for-indias-largest-turbine#:~:text=Adani%20Wind's%205.2%20MW%20wind,wind%20turbines%20in%20the%20World.
• https://aenert.com/news-events/energy-news-monitoring/n/global-wind-report-2024-1-tw-milestone-is-surpassed/#:~:text=117%20GW%20of%20new%20wind,1%20terawatt%20(TW)%20milestone.
• https://gwec.net/wp-content/uploads/2023/12/MISSION-CRITICAL-BUILDING-THE-GLOBAL-WIND-ENERGY-SUPPLY-CHAIN-FOR-A-1.5%C2%B0C-WORLD-Update.pdf
• https://www.dhirubhai.net/posts/mec-intelligence_wind-orderbook-envision-activity-7246731756303745024-iOpa?utm_source=share&utm_medium=member_desktop

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