OPINION: Germany shows the way

This month’s WindEnergy Hamburg will be one of the biggest renewables events ever, with 40,000 people attending over four days.

It marks an attempt by Germany’s industrial sector to show that it can become a reference point for a truly global wind business.

Germany is proving that a major industrial economy can move to an energy system based on renewables. Last year, 10.8% of global investments in wind turbines were made in Germany, worth €3.45bn ($4.6bn), out of a global €32bn. Renewables accounted for 28.5% of the country’s power output in the first half of 2014, and wind is heading for a year of record installations.

The mood among the chief executives Recharge has interviewed for this issue — among them Siemens’ Markus Tacke and Nordex’s Jürgen Zeschky — is one of confidence in steady growth. Everything points to wind — with Germany as a driving force — settling into its role as one of the world’s most important equipment and engineering industries.

However, as I argue in my book Wind Power: The Struggle for Control of a New Global Industry, which is being published this month to coincide with the Hamburg show, there is still a long way to go before wind becomes a truly mature global industry.

First, there are in effect two wind markets: China — which accounts for almost half of annual installations — and the rest. The Western companies that did well in the early stages of China’s market have seen their shares fall to less than 10%, while the much-heralded “invasion” by Chinese manufacturers of Europe and the US has yet to materialise. It will be interesting to see how big the Chinese presence is in Hamburg.

This situation is far from optimal from the point of view of productivity, and how it works out will be key over the coming years.

Secondly, the wind market is global in its reach, but still fragmented, with dozens of companies competing with their own designs and models, sometimes helped by local-content requirements. Stop-go market growth caused by inconsistent government policies has often made companies cautious or unable to increase capital spending consistently. Whether the industry and its companies can reach the global economies of scale that will allow decisive gains in manufacturing systems is another key question.

A third issue is the full impact of “big data” and the corresponding increase in transparency. Wind is far behind industries such as aviation in terms of knowledge-sharing and collaboration over maintenance and spare-parts stocks. And companies are just starting to realise the implications of the ever-increasing flows of data that have become available from turbines.

In recent months, signs have emerged of a speeding up of consolidation, with GE’s acquisition of Alstom and the offshore tie-ups of Vestas-MHI and Areva-Gamesa. Such trends can be expected to accelerate as the industry grows and matures.

One thing is for sure, more maturity isn’t likely to mean more boring. The explosive emergence of frontier wind geographies means a constant flow of new opportunities and challenges. Paradoxically, wind companies need to be more local in their approaches and products in many countries as they become more global.

And I am convinced that there are still major technological innovations to come that will help wind’s competitiveness as it moves to a tipping point. Wind isn’t there yet, and that’s why it’s fun.

Wind Power: The Struggle for Control of a New Global Industry is published by Routledge

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