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Senvion expects 'hundreds of megawatts' of US orders in 2018

German wind turbine maker Senvion expects to secure “several hundred megawatts” of US orders by next year, and believes its lack of North American manufacturing facilities will be an advantage as the market readjusts to life without the production tax credit (PTC).

Senvion, formerly known as REpower, has a 1.2GW base of turbines installed in the US and another 1.4GW in Canada, but it has struggled recently in North America – failing to install any new turbines in the US since being sold by India’s Suzlon to US private-equity firm Centerbridge Partners in 2015.

But the turbine OEM, which was returned to the public markets through a 2016 listing on the Frankfurt Stock Exchange, has singled out the US as one of its most important growth markets going forward.

In June, Senvion made David Hardy – who formerly led Vestas’ commercial activities in the US and Canada as senior vice president for sales – its chief sales officer, relocating him to Hamburg.

Meanwhile, Lance Marram – himself a veteran of Vestas and Gamesa – has replaced Helmut Herold as chief executive of Senvion North America.

Unlike Herold, who was based at Senvion’s Canada headquarters in Montreal, reflecting the company’s historic strength in that market, Marram will be based at its US headquarters in Denver, Colorado.

“Contracts don’t get signed in two weeks,” Marram tells Recharge. “But I expect business to close next year.”

“I expect several hundred megawatts to get signed next year – that’s the objective,” he says. “And I expect those turbines to [enter commercial operation] potentially by the end of next year, but more reasonably in 2019.”

“We expect to capture a good market share right from the start.”

Bigger is better?

There are several trends underway in the US wind market that put Senvion at a longer-term advantage, Marram claims. The first is a move towards larger turbines.

US turbine capacity, rotor diameters show big jump in 2016

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Between 2010 and 2016, the average capacity rating for turbines installed in the US rose from 1.77MW to 2.15MW, according to the American Wind Energy Association, and many expect that number to continue rising. Fully 10% of all turbines installed last year were rated above 3MW – most of them supplied by Vestas.

Senvion offers a range of onshore turbine models in the 3MW+ class, which it believes will help it regain a chunk of the US market. “I believe the US is on a path where – and I’ve experienced this in Europe and South America – it’s very quickly becoming a 3MW+ market,” Marram says.

Even in the Midwest, where land is relatively cheap, Senvion is talking with clients for whom 3MW+ machines may be more cost-effective, he says. Pulling this transition off, however, may take some work to educate the big US wind EPC contractors.

These contractors – “the Blattners and the Mortensons and the Wanzeks” – have become deeply experienced with 1.5MW-2MW turbines, and can install half a dozen machines per week employing a “cookie-cutter approach”.

“They’re now learning to do larger turbines, but I think we have to do a lot of teaching there,” Marram says.

“I look at the balance of plant costs that they’re providing [for larger turbines], and I realise it shouldn’t be so costly – it’s being done in Europe and South America much more competitively. So we have do a little more proactive teaching there to help them bring those costs down.”

No US factories, no problem

Beyond 2020, Senvion believes its lack of North American factories could prove to be an advantage, at least temporarily, as it won’t have “lots of fixed costs” in a market that may contract dramatically for a few years. Senvion closed a blade plant in Ontario in 2015.

“When you have a two- to three-year horizon where the market could drop 50% – which has been the history of the US when you have an expiration of the PTC – that’s a huge impact.”

“We’re in a great position where we can invest [in new North American manufacturing facilities], and we will if we get the volume, but we don’t have our hands tied.”

From a logistical standpoint, there are ways for Senvion to compete with larger rivals that have factories in the US, Marram says.

With towers, “you can bring them in from Korea, you can buy them in the US, you can buy them in Mexico – we’re pretty much at even par there”.

It’s more challenging to win projects located near a rival turbine supplier’s US blade plant, Marram concedes. GE’s LM Wind Power unit makes blades in North Dakota and Arkansas, while Siemens and Vestas have blade factories in Iowa and Colorado, respectively.

But as for nacelles, “a lot of that stuff comes from Europe today anyway, regardless of the supplier, so I don’t see too much of a challenge there”, he says.

On balance, “there will be areas where, even taking a little bit more [content] from overseas, we can still be as competitive – or even more competitive”.

There are many parts of the US where it’s cheaper to deliver wind components via ports than by trucking them internally, he says. “Going through the Port of Houston is super cost-competitive. And if you have an East Coast project, it doesn’t make sense to bring in components from the Midwest or the West.”

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