Will the Credit Crunch positively affect demands on Supply Chain in the Wind Energy sector?

Frost and Sullivan have just released a survey entitled Strategic Assessment of the European Wind Energy Market: Value Chain Analysis which provides an interesting insight into the various supply issues that have been facing the Wind Turbine Generator (WTG) manufacturing industry in the past three or four years, and the implications of the current global financial crisis.

The demand for crucial components such as gear-boxes, bearings etc have been so heavily in demand that many WTG manufacturers have been fighting for their right to secure an ongoing supply. In turn, wind farm owners and developers have been competing aggressively to procure Wind Turbines, and in many cases have been faced with expensive long-term framework agreements, and with a six month (or even one year) lead time. The wind energy industry has been experiencing a double-digit growth rate that the supply chain could simply not keep up with. Six months ago, that trend was set to continue for at least another couple of years.

However, the economic down trend, according to Frost and Sullivan, could curiously affect the supply chain challenge. Nervous about the financial climate, some of the major players in the industry have reduced their aggressive development targets. This, in turn, should lead to a supply and demand equilibrium, which will open up the market and ultimately make Wind Turbine’s more available and accessible on the market. Dramatic falls in the cost of raw materials such as steel and copper, and a reduction in prices for construction services, will see increased competition between WTG suppliers again.

So ultimately this slow down (whilst not forgetting that global government incentives have not shifted despite economic challenges) may just strengthen the wind energy industry, allowing it some respite from dramatically increasing costs and re-vitalising competition between the key players. Read more in this Frost and Sullivan press release.

By Clare Buxton
Wind Energy Sector Lead