Brazil's wind supply chain looks elsewhere as prospects dwindle

IN DEPTH | After 10 years and almost $10m of investment to supply the sector, materials group Owens Corning is reluctantly laying plans for life beyond wind

Owens Corning – one of the main suppliers of glass-fibre textiles for turbine blades, nacelle bodies and spinners in Brazil – is taking steps to replace declining wind orders with contracts from other sectors, reflecting the nerves in the country's once vibrant wind supply chain.

“We had invested constantly in past years, including in equipment, to supply the wind sector and now we are planning to sell glass fibre to other sectors,” Mario Bozzo, the country manager of Owens Corning’s Brazil subsidiary tells Recharge.

Over the past decade the company has invested R$30m ($9.7m) in equipment and another $50m in a new furnace, mainly based on an average 2GW annual demand projection for the wind sector as global OEMs complied with the local content programme of the Brazilian National Development Bank (BNDES).

Alongside an estimated 1,000 companies that invested some R$1bn ($329m) to supply the sector, the glass fibre maker hired an estimated 200 people to handle wind orders. But now all that is threatened after Michel Temer’s government cancelled tenders amid declining power demand, and has taken steps to reduce the role of the BNDES in financing for the industry.

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Owens Corning is now developing products using the same glass fibre processing equipment it installed for wind to supply the naval or grain-transport sector.

“Our aim is offer fibre glass in substitution to other materials such as metal in other industries,” says Bozzo.

Sales to the wind sector currently account for about 30% of the company’s total output in Brazil. But as demand is expected to decline from an average of 2GW a year between 2009 and 2015 to below 1GW a year by 2020, the US textile maker has decided to get ahead of the curve and look for clients in other areas.

One option could be exporting, but this depends on the group’s other units which are located in India, Europe and the US, said Bozzo.

Brazil has currently 11GW of wind installed – accounting for 8% of total capacity – and is in the middle of a 7GW build-out that will end in 2019 or 2020 at the latest. An insignificant number of projects are due to come online from 2021 onwards.

Since 2015 – when 1.5GW of wind was contracted – Brazil hasn’t contracted any new wind projects,ringing alarm bells in the newly-created industry developed by the remaining six wind turbine makers – GE, Acciona, Enercon, WEG, Vestas and Gamesa – with a combined output capacity of 3GW a year.

A battery of studies by renewable energy groups have indicated the need to keep on contracting in reserve tenders – through which the government contracts power for stand-by supply that is not directly relate to demand. The aim is to ensure supply security when the economy rebounds after 2020 and maintain what is left of the 50,000 jobs created in the supply chain

But last year the government cancelled the only wind and solar power tender, alleging it would be too costly for consumers amid a more than 1% decline in power demand.

With no wind contracted, like other suppliers, Owens Corning will not wait to see idle capacity grow in its plants.

The government says it is still studying the possibility of a small tender this year, but the wind and solar PV industries want a longer-term commitment with contracts of at least 2GW a year.

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“1GW does not sustain the supply chain in healthy way, we need at least 2GW,” Bozzo says.

Bozzo added that because Owens Corning is a multinational group, it has cash to diversify while other more specialised suppliers may go under.

“The dismantling of the sector can occur rapidly and companies may register losses very quickly,” he says. “The opposite is not true. Investing to supply the wind sector requires buying machines, training people and a lot of capital. It’s a long cycle until the turbine is built.

“Back in 2007 the decision to expand our capacity was mainly because of the positive outlook of the wind sector,” says Bozzo indicating that if Brazil takes too long before getting back on track, he might not have capacity to offer.

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