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How the Vestas V150 took Brazil by storm

ANALYSIS | Product and supply chain innovation plus rapid investment and aggressive pricing behind success story, say industry experts

In the last two months alone, Brazilian power regulators have received requests from three different developers to change layout or swap turbines at their planned projects, and all of them involved a desire to use the same technology – Vestas’ V150 4.2MW platform.

These three wind farms – which haven’t yet been announced by the Danish OEM – will add another 216MW to a 2GW-plus order-book that it has built up since October last year, when the new platform was launched in the country and soon became a sales success story that leaves Vestas on course to be the leading turbine supplier in the country.

Behind the success of the V150 – which has just received the OK from Brazilian officials under local-content rules – lies not just an advanced product, but a restructuring of global supply chains, rapid investment in response to market trends and an aggressive pricing strategy.

“Vestas implemented a product design and supply chain management [strategy] that has given the company a better margin for the [V150]. How [Vestas] is successful now is different from how it was successful before,” Philip Totaro, partner and founder at US wind power consulting firm IntelStor told Recharge.

With such a huge order backlog for the next two to three years, Vestas will almost double its market-share in Brazil. It will jump from just under 1GW spinning and 500MW under construction to 3.5GW. This means from around 10% of the country’s 15GW current total wind power capacity to around 19% of a market projected to reach 19GW in three years.

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IntelStor’s projections go further: they put the V150 on course to be the number one newly-installed turbine in Brazil, topping 4GW. That is almost three times more than IntelStor’s projections for Nordex Group’s 3MW, AW125/3000, which is in second place with an estimated 1.6GW of orders, and over five times Siemens Gamesa’s SG132, 3.4MW, with a projected 702MW.

Industry specialists say that although the V150 is a “very good machine” for Brazil’s constant, uni-directional trade winds with speeds of 8-10m/s, its performance doesn’t differ too starkly from the other 4MW to 5MW platforms offered by various OEMs and increasingly favoured by developers.

The V150, Siemens Gamesa’s SG 132 and GE, with its Cypress platform, are the three current favourites for Brazilian project planners, Alexandre Pereira, Brazil head for test and certification specialist UL told Recharge.

“These were the most tested models in wind farm design recently, and Brazilian conditions are adequate for these larger-bladed models. But their performance in our computerised simulations are very similar for the same sites and conditions.”

According to Pereira, that means turbine choice is based on several dimensions. Price is one, but so is product availability – especially if projects need to come online on schedule to avoid heavy contractual penalties, or if wind farm owners plan an earlier start of operations to take advantage of sky-high spot market prices that can be more than double those set in the 20-year regulated market PPAs which anchor most projects recently contracted.

That is why Vestas started marketing the V150 as early as possible in Brazil following the platform’s launch in mid-2017, and then invested $25m in six months to start producing the turbine in the country.

"I’ve been hearing that prices offered by Vestas are very competitive."

It matched this speed to market with a pricing strategy that has seen it sell the V150 at prices undercutting the market by 7%, calculates Totaro – which in an industry where margins average 6%, is very aggressive.

Other industry commentators tell a similar story. “I’ve been hearing that prices offered by Vestas are very competitive,” a power sector consultant told Recharge, speaking on condition of anonymity.

Data from power regulator Aneel on projects using Vestas V150 machines that received federal tax breaks are more than 3% below the average per-megawatt costs for wind farms with other turbines.

That competitiveness can be partly explained by the fact that Vestas was the first OEM to make its Brazilian plant an integral part of its global supply chain, with all the efficiencies that follow for the V150 globally. “The factories in the different countries are producing 'different flavours' of the same machine. It’s all one thing [and] that allows for more opportunity for to larger supply chain efficiency,” says Totaro.

Components are still outsourced locally, but if there is a bottleneck in the market, the sub-components can be imported from a factory in another country – and if the market tanks, the same component can be exported.

Vestas Americas South regional manager, Rogério Zampronha, preferred to stress the turbine's technical qualities as a key factor in the market-leadership of the new platform, but agreed that global support is important.

“Aside from the [technical] solidity of the equipment and global-class services support, we offer the best rates of turbine availability in Brazil, an important factor in our competitiveness,” he said.

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The advantages of a flexible, modular approach with a high degree of common componentry are the shape of things to come for Vestas, which early this year launched its EnVentus platform based around exactly those concepts.

In any case, it makes sense to be aggressive in Brazil, one of the most competitive and fast-changing wind power markets in the world because of its local-content rules and its high growth potential, which could see capacity double from the current 15GW over the next decade.

After investing $400m between them to comply with localisation rules between 2013 and 2016, the six OEMs in the country still need to get their money back. Which means fighting for market-share in the 2GW a year market, even as wind power prices have declined in recent years to around US$20/MWh from over $50/MWh.

In Totaro’s opinion the battle for the Brazilian market is still live – but if they want to challenge Vestas, others will have to follow the example of the Danish group.

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