In Depth: GE thinks local with bespoke wind turbine for Brazil

GE is developing a wind turbine specifically for the growing but cut-throat Brazilian market, as it ramps up its hub-assembly factory in Campinas for bigger and more competitive machines, Recharge has learned.

In two years, the US company has delivered 293 hubs made in Brazil. It has 601 machines on order and expects to announce new deals imminently.

Brazil has become a key market for the company, says Sérgio Souza, GE wind sales manager for Latin America.

GE survived a recent audit by Brazilian development bank BNDES that saw some of its competitors, including Vestas and Siemens, de-authorised from the bank’s list of manufacturers that comply with the 60% minimum national-content rule.

Project developers using those turbines would have to pay higher interest rates if they want BNDES financing — the principal source of funding for Brazilian wind power.

“The centre of our strategy was always to localise,” says Souza.

GE built its initial business model around contracts signed at the first wind-power tender in December 2009, when it partnered clients including Renova Energia and Desa. It built a hub-assembly line at the company’s 62-year-old Campinas Gevisa factory, an easily modifiable structure that has served to build everything from locomotives to hydraulic equipment.

When GE decided to create the hub line, it was not a BNDES requirement, says Souza, but it made the most sense: placing the factory at a functioning facility meant not having to find land and start from scratch, one less thing to deal with among many fiscal and logistical challenges.

Souza says GE is committed to doing business locally as long as it makes economic sense. That might not be obvious, given that it is cheaper, for example, to import towers than to build them locally, but access to BNDES financing seems to supersede almost any other consideration.

Prepared for further rule-tightening

The industry expects local-content rules to be increased or in some way expanded, which GE is prepared for. “Whatever BNDES asks for, we are ready to attend [to it],” Souza tells Recharge.

Meanwhile, as negotiations are being finalised to supply Renova’s future wind projects, GE has signed a memorandum of understanding with the Bahia state government to install a factory of some kind.

That idea is still “baking in the oven”, with the company mulling over various scenarios, including moving the entire hub line to Bahia, building a completely new line or even going beyond hubs and building nacelles there.

“It’s not a decision that comes without consequences,” says Souza. “It’s great to bring more business to Brazil but it has to fit our business model.”

GE has several local steel tower suppliers and gets its blades — for projects around the world — from Tecsis in Sorocaba, São Paulo state. Nacelles are brought in from Greenville, South Carolina, and Pensacola, Florida. The locally assembled 20-30-tonne hubs represent about 10% of the weight and price of a project.

GE has been producing hubs for its 1.6-82.5 turbines, and will continue to do so, but the expansion at the Campinas factory will provide installations to build hubs for 1.6-100 machines, which are stronger and more competitive. GE has already sold 140 of the bigger models.

New turbine version for the northeast

Although the 1.6-100 machines offer strong performance and are well suited to local winds, GE is developing a new version specifically for Brazil’s northeast — which has average speeds of seven to nine metres per second and low turbulence.

The conditions are “friendlier” for turbines and the machines can be optimised accordingly.

“The cost benefit is what we’re looking to improve, to give more value for the same price,” says Souza.

The total cost per MW installed today is R$3.3m-4m ($1.64m-1.98m), slightly higher than the estimated cost in the US of $1.5m-2m.

Developers are already under pressure, with power-purchase agreement prices at record lows. With costs likely to increase as local content goes up, and recent currency volatility going against them, turbine manufacturers are unlikely to be able to lower their prices much more.

“It’s an increase in cost, without a doubt,” says Souza, given that the exchange rate has risen from R$1.60 to the US dollar during the last tenders in 2011 to about R$2 today, making anything imported that much more expensive.

Although Brazil is seen as a growing and sustainable market, uncertainties remain. As Souza says: “Every day arriving at the office you wonder what’s going to be the fire of the day.”