Wind developers ordered up nearly 100 gigawatts of turbines last year, an unprecedented flood of demand that comes amid deepening uncertainty over the impact the coronavirus outbreak will have on global supply chains and economies.
Last year’s orders crushed previous records in the wind industry and represented 65 percent growth over 2018, according to new figures from market research firm Wood Mackenzie Power & Renewables.
A number of key markets put up stellar growth figures, including the U.S., which is in the middle of its own historic wind boom. But 2019’s real story was China, where a nearly unbelievable 50 gigawatts of wind turbine orders were placed as developers moved to lock in equipment ahead of an expiring feed-in tariff and to take advantage of new transmission lines.
The entire global wind market has been installing somewhere between 50 and 60 gigawatts annually in recent years.
“China was just off the chain,” said Luke Lewandowski, research director at Wood Mackenzie.
Lewandowski stressed that signed contracts don’t automatically translate into finished projects. “It will be interesting to see how much of that [100 gigawatts] gets realized — not only because of the coronavirus."
Still, the rush of orders bodes well for the global wind market, which faces growing competition from solar energy. All told, last year's turbine orders were worth $78 billion, WoodMac says.
Denmark’s Vestas led the industry in orders, followed at some distance by Siemens Gamesa, GE, Goldwind and SEwind.
While the sheer volume of orders rushing in would indicate a strong seller’s market, Lewandowski noted that the industry is still under “incredible price pressure,” much of which falls onto the shoulders of the turbine manufacturers.
Despite posting record orders and deliveries in 2019, Vestas saw its operating margin slide to 8.3 percent, down from 13.9 percent three years prior. The company has a goal of lifting its margin back to 10 percent.
Another big story last year was the rapid rise of the offshore market, now a significant part of both annual wind additions globally and turbine orders for future projects. Offshore turbine orders reached 17 gigawatts last year, driven once again by China, WoodMac says.
Can the supply chain handle it?
The gusher of demand for turbines in China poses tricky questions for the global wind supply chain — and that’s before accounting for the COVID-19 outbreak.
“If the Chinese supply chain is so busy and maxed out satisfying domestic demand, can they assist with global demand?” Lewandowski asked. “And does that create opportunities for other production centers?”
Outside of China, the wind turbine industry is just coming out the end of a multiyear consolidation phase, leaving it centered around Vestas, SGRE and GE. Many once-leading turbine makers have folded (Senvion), been absorbed into larger players (Gamesa) or face a challenging future (Enercon).
The renewable energy industry is nervously awaiting updates on the impact of COVID-19 for China’s vital supply chains. Many Chinese factories were brought to a standstill earlier this year, although some appear to be rumbling back into production.
Last week TPI Composites, a leading supplier of wind rotor blades, said it expected a $45 million revenue hit in the first quarter due to COVID-19. The U.S.-based company, whose customers include Vestas and GE, said its Chinese factories have reopened and are ramping production back up as employees complete quarantine requirements.
On a conference call this week, Jérôme Pécresse, the head of GE Renewable Energy, said the company is seeing a “positive recovery” of its Chinese supply chain.
The latest numbers on global order activity, offshore orders, and regional order intake analysis can be found in this Wood Mackenzie report.