Turbine manufacturer Enercon set another milestone in its expansion strate- gy when it opened a concrete tower segment factory in Zurndorf in Burgenland, eastern Austria, last December. The factory will produce up to 200 turbine towers per year. Enercon, which is based in Aurich, Germany, did not seek broad media coverage of this move, but there is no doubt that the new plant will play a major strategic role in the company. “Europe is currently one of our most important growth regions. Our new factory in Zurndorf will supply towers to wind energy projects in Austria, eastern Europe and southern Germany,” says Ruth Brand-Schock, manager of Enercon’s Berlin office.
The choice of location could hardly be better. “We are currently seeing a major wave of expansion in Austria,” says Martin Fliegenschnee-Jaksch, spokesperson for the Austrian Wind Energy Association. He estimates that new installations quadrupled to 300 megawatts (MW) in 2012 and expects “further significant growth” this year. This is likely to be a topic of intense discussion at EWEA 2013 in Vienna in February. Enercon is supplying most of the turbines. Fliegenschnee-Jaksch says that the Burgenland energy supplier Bewag has ordered E-101 / 3 MW turbines with a total capacity of 500 MW from Enercon.
This will breathe new life into Austria’s wind market. New installation prety much ground to a halt in 2011 because the funding provided under the Green Electricity Act ran out ahead of schedule. In its amendment to the act in July 2011, the Austrian Federal Government subsequently provided an annual EUR 11.5 million in new funding for wind energy. Windfarm operators are now guaranteed a feed-in tariff of EUR 0.095 per kilowatt-hour (kWh) for 13 years.
The outlook in eastern Europe is generally positive. The forecasts are good for Poland and Romania, where Enercon will supply towers manufactured in Zurndorf. “We definitely expect to see growth on both markets,” says Per Krogsgaard from the Danish market research company, BTM Consult. Poland is looking particularly promising thanks to its stable funding policies and wealth of suitable wind-power sites. “At the very least, the annual new installed capacity will double from 600 MW in 2012 to 1,200 MW in 2016,” Krogsgaard believes.
These new markets could be very important for Enercon, as the wind industry is expecting 2013 to be a tough year. “New installations could fall worldwide from 46,000 MW to 40,000 MW this year,” Krogsgaard fears. An estimated 8,000 MW were installed in the US last year, making it the second largest market in the world after China. However, the American wind industry is still expected to decline, despite the very welcome recent extension of the tax incentive, the Production Tax Credit, for one more year. “We can expect things to be pretty quiet on the US market in 2013,” Krogsgaard says. Meanwhile, manufacturers are already facing a major decline in demand in Italy and Spain due to a lack of investors. BTM Consult estimates that new installations in Spain could fall from 1,000 MW in 2011 to 500 MW this year.
According to a recent survey by another Danish market research company, Make Consulting, China will install 19,000 MW next year, making it a truly enormous market. However, the country does not serve as a real alternative for European and American manufacturers as they find it hard to gain a foothold on the Chinese market. Vestas, Gamesa and GE Wind Energy have a market share of seven percent between them, but the other 93 percent is divided among Chinese companies. The wind farms off the German coast don’t hold much promise for manufacturers either. Various factors such as delays in grid expansion and a lack of investors mean that the construction of offshore wind farms in the North Sea and the Baltic Sea is not living up to expectations.
Germany is the only mass market that suppliers can count on. The German Wind Energy Association (BWE) estimates that new installations increased by 2,400 MW in Germany last year. Almost all of this –2,200MW– is onshore. “If policies remain stable, the German market could experience similar growth in 2013,” says BWE president Hermann Albers. “It is a good sign that the federal states have adopted a joint resolution on the switch to renewables. It is important that the Federal Government supports the states in their ambitious wind energy targets and helps them to exploit their potential in this field.”
This sounds like good news for Enercon, which has always focused on Germany for its core business. Of the 1,563 turbines that the company set up in 2012, 556 were installed in Germany. Nonetheless, the feared dip in demand on the large wind markets could also turn into a problem for Enercon, as other turbine manufacturers are increasingly setting their sights on Germany to make up for the lack of demand elsewhere. The maket leader Enercon can expect to face tougher competition. “We are seeing a clear focus on Germany, so it will be a major challenge for us to maintain our market share of almost 60 percent,” says Enercon’s marketing expert Brand-Schock. “We aim to maintain this share by continuing to concentrate on quality and good service.”
For its part, Enercon’s competitor Nordex wants to more than double its sales in Germany from a current seven percent of its total turnover to 15 percent in the next two years. “We have neglected the German market for too long. Now we’re hoping to see a renaissance,” says Nordex spokesperson Ralf Peters. Vestas is pursuing a similar strategy. “US business is likely to take a nose dive of 60 to 90 percent,” says Wolfgang Schmitz, former president of Vestas Central Europe. He points out that there is positive development on the German market. Vestas has increased its market share from 14 to 22 percent and expects to enjoy further growth. He adds that the V112 and the larger V126 turbines, which are specially designed for sites with low or medium wind speeds, are becoming Vestas’ “bread-and-butter”.
However, it remains to be seen whether sales will develop as companies are hoping. All of them want to increase their German sales, but a real boom in the sector is unlikely. Nonetheless, Krogsgaard does not find the companies’ plans for growth unrealistic. “We’re familiar with the mechanisms. Firms will sell their turbines at a lower price and find more buyers as a result.” In his view, this means that Germany may install more new turbines than currently forecast. manufacturers have similar expectations. Nordex wants to increase its total turnover by a third to EUR 1.5 billion by 2015 while maintaining its European business at 80 percent of total sales. “We don’t necessarily have to branch out to Asia in order to grow,” Peters says. Instead, Nordex wants to focus on selling more in Germany. The company received EUR 114 million in orders from Germany in 2011. This figure was set to increase to EUR 200 million in 2012 and to as much as EUR 300 million in the medium term. “We are getting a lot of new business in Germany. We want to consolidate this trend by taking a more proactive approach to our clients and supplying special products and services,” Peters explains. Nordex wants to shore up its German business with higher sales in the emerging wind markets in eastern and northern Europe. “Poland and Romania are becoming interesting for us,” he says. Outside Europe, he currently sees Latin America as the most promising market. He believes that countries such as Chile have the potential to offset lower sales in the US.
Enercon also believes that it is on the right path with its strict focus on sales in Europe and Germany. The firm installed turbines with a capacity of 3,200 MW in 2011. “Our aim is to install between 3,500 and 4,000 MW in the coming years,” says Enercon spokesperson Felix Rehwald. Impressive wind farm project pipelines show that its growth plans have not simply been plucked out of the air. Christian Schnibbe, spokesperson for Bremen-based WPD, says that his firm wants to complete projects in Germany with a total capacity of 180 to 200 MW this year, compared with the 105 MW it installed in 2012. “As Baden-Württemberg, Bavaria and Hessen are now opening up to wind energy, we hope to be able to use many other new wind sites in the near future,” he says.
Juwi Wind from Wörrstadt in Rhineland-Palatinate is also expecting good sales. In 2011, the company’s projects had a total capacity of 150 MW worldwide, but it expects this figure to rise to 550 MW this year. According to the firm’s managing director, Marie-Luise Pörtner, 70 percent – that is, 385 MW – of this total will be installed in Germany, while the rest is mainly planned for emerging markets such as Poland. Within Europe, the company sees Poland as a particularly promising market. “In 2014 and 2015, we want to set up the first wind farms in Poland from our project pipeline, which has a total capacity of between 500 and 600 MW,” Pörtner says. She says that Poland is “not an easy market”, as its quota-based funding system limits the market. “On the other hand”, she says, “Poland has many suitable sites and plenty of investors.” It looks like Enercon has chosen a good strategic position by opening a factory in eastern Austria.