We are bullish on the prospects for the Wind industry for several reasons:
Subsidies required to support wind energy are limited: Wind energy is now fairly mature technology where the cost profile has been falling steadily with improvements in technology. For plants in the best locations, wind energy is already fully cost competitive with fossil fuels. In Europe, the expectation of a robust price for carbon in phase 2 of the European trading scheme (ETS) also underpins its cost competitiveness. The CO2 futures curve is at EUR 20/ton for 2008, reflecting the market’s expectation of a far tighter market in phase 2.
Many new power plants in the post 2010 time period will inevitably be wind farms as the expectation of high carbon prices coupled with high oil prices are dis-incentivising power companies from building fossil fuel fired power plants. In addition solar energy remains relatively small scale. The world’s largest solar power plant is a 40MW project comprising one million solar panels; by contrast the world’s largest wind power plant is almost 20 times the size at 780MW. Solar is thus far less suitable for large scale roll-out of renewable energy capacity.
Wind turbine generators: a very concentrated group of companies
Vestas: Very clearly the market leader, market share increased from 27.6% in 2005 to 28.2% in 2006. Present as a top three supplier in all ten of the largest markets and market leader in the UK and Portugal. Importantly has a strong product offering in offshore markets which should position it well in the medium long term. Expect to see Vestas’ market share in new installations decline to 17% by 2011; lower than company forecasts but still retaining market leader status, despite new entrants and strong growth in the market
Gamesa: Gamesa increased its market share from 12.8% to 15.6% of the market in 2006. It was the leading supplier in Spain with 50.6% of the market share. It was also the leading supplier in Italy and several smaller markets, Egypt, Mexico and Morocco. Gamesa is expanding capacity in the US and China which are set to be important growth markets. We forecast a 13% market share for Gamesa by 2011, on our numbers.
GE Wind: GE Wind is the third largest wind turbine manufacturer in the world but its market share slipped from 17.5% to 15.5% in 2006. It is the largest supplier to the US and Canadian markets and its fortunes are very linked to these two markets. GE will face fierce competition for market share from new entrants to its markets and without a high level of vertical integration, it also looks disadvantaged in the near – medium term.
Enercon: Privately held German manufacturer with a market share of 15.4% in 2006 compared to 14.2% in 2005. Enercon is the number one supplier to German markets and second largest supplier to Indian markets.
Suzlon Energy: In fifth position globally in 2006 with market share increasing from 6.1% to 7.7%. Suzlon has the largest market share in its home market and established footholds in the US and China. Like GE its fortunes are linked to its domestic market and we see Suzlon with a considerable advantage on its home turf. A 50% market share in India looks defendable to 2011 and in addition with the acquisition of REPower, the company now has access to new offshore and repowering markets in Europe.
Siemens Wind: Sixth largest manufacturer in the world with market share increasing from 5.4% to 7.3% in 2006. Strong position in burgeoning offshore markets.
Clipper Energy: We expect Clipper to challenge GE for market leader status in US markets by 2011. We forecast a 5% global market share in new installations by 2011, an impressive performance for the industry start-up.
Nordex: Germany remains a core market but also France, China and the UK all represent important growth markets for the company.
Source: Merrill Lynch, Renewable Energy - Industry Overview
