WINDow into Large Wind: Large Wind Market & Industry - Update and Perspectives -

Transcription

1 WINDow into Large Wind: Large Wind Market & Industry - Update and Perspectives - Loch McCabe & Tim Kumbier Dave Crumrine, Organizer April 8, :00-5:00 pm EDT Ann Arbor, MI

2 Overview WINDow into Large Wind provides a Baseline Market Update for US Manufacturers and Service Providers: Overview of current large wind market Review of Federal stimulus dollars allocations Highlights of Shepherd/ U. Michigan survey of purchasing patterns in the wind supply chain WINDow into Large Wind is not: An introduction to the wind industry A wind supply chain analysis A product/technology review 2

3 Agenda About Shepherd Advisors Large Wind Market Update Federal Stimulus Allocation Wind Industry Buy-Chain Survey Highlights Wrap-Up & Going Forward Questions Q & A Please type questions in box and we ll respond as we can in the time we have left If you are interested in receiving a copy of this presentation, please contact Tim Kumbier or Dave Crumrine,

4 About Shepherd Advisors Clean energy business management consultancy 10+ Years & located in Ann Arbor, MI Improve position; grow revenues; lower risk Sound strategy + actionable market intelligence + relevant connections + public resources Wind, Solar, Biomass, & Energy Efficiency Manufacturers, Suppliers & Service providers Developers & Generators Governments & Communities Contact information

5 About Your Presenters Loch McCabe Shepherd Advisors Founder and President Clean Tech Industry Since Late 1980s Growth Strategy, Market Development & Securing Public Resources Tim Kumbier Leads Shepherd Wind Industry Practice 20+ Years Driving Business Growth Market Analysis -> Business Development 5

6 Agenda About Shepherd Advisors Large Wind Market Update Federal Stimulus Allocation Wind Industry Buy-Chain Survey Highlights Wrap-Up & Going Forward Questions Q & A Please type questions in box and we ll respond as we can in the time we have left 6

7 Large Wind Market Update Global Market Demand US Market Demand OEM Market Shares in the US US Industry Trends and Drivers 7

8 2009 Global Market Demand Global Demand Nearly 158 GW cumulative installed capacity (up 31% over 2008) Record 37.5 GW added capacity in 2009 (up 43%) $63 billion market (up 31%) New growth driven by China (13 GW; 35% of additions) and US (10 GW; 26% of additions) Top Five Countries in Added Capacity (GW) 2009 Source: Global Wind Energy Council (GWEC) 8

9 2009 Global Installations Top Ten Countries, Cumulative Installed Capacity US 3.4 GW 3.5 GW 35.2 GW Germany China 4.1 GW Spain 4.5 GW India 4.9 GW Italy 10.9 GW 25.8 GW France UK Portugal 19.1 GW 25.1 GW Source: GWEC Denmark Other 9

10 Wind Generation for Select Countries 25 Wind Generation as % of Total Generation, Sources: International Energy Agency (IEA) Wind; DOE 10

11 2009 US Market Demand US Demand 35,159 MW cumulative installed capacity (up 39%) 9,922 MW added capacity in 2009 (up 18%); second in world behind China Nearly 5700 turbines added $17 billion market In 2009, Texas was state with most capacity (9,410 MW) and most growth (2,292 MW) Fourteen states with more than 1,000 MW capacity 2% of US electrical demand Top Five States in Added Capacity (MW) 2009 Sources: American Wind Energy Association (AWEA); DOE 11

12 US Market Size and Growth US Cumulative & Annual Wind Capacity (MW) Additions Cumulative Source: AWEA 39% Compound Annual Growth Rate,

13 Ramp Up to Produce 20% of US Electricity by GW Source: DOE 20% by

14 Ramp Up to Produce 20% of US Electricity by GW 35 GW as of 2009 Source: DOE 20% by

15 New Installs Against 20/30 Curve Actual installations 2009: 9,922 MW Actual installations 2008: 8,425 MW Actual installations 2007: 5,258 MW 16 GW Annually: ~7,000-10,000 turbines (drivetrains, frames, and housings) ~21,000 to 30,000 blades and tower sections Source: AWEA 15

16 2009 Top Ten States Top Ten States, Cumulative Capacity (MW) Top ten states represent 26,691MW, or 76% of total US installed capacity Cumulative 2009 Additions TX IA CA WA MN OR IL NY CO ND Source: AWEA 16

17 New Construction Underway Going into 2010 At least 2,786 MW representing an estimated 1,500+ turbines At least 37 projects in 21 states Average project size = 75 MW Average turbine size = 1.8 MW Source: AWEA 17

18 Global Industry OEM Market Share Mingyang 2% Nordex 3% 2009 Estimated OEM Global Market Share Acciona Mitsubishi 2% 2% United Power 2% REpower 3% DEC 5% Other 10% Vestas 15% GE Wind 13% Suzlon 6% Gamesa 6% Siemens 7% Goldwind 7% Sinovel 9% Enercon 8% Source: MAKE Consulting 18

19 US Industry OEM Market Share Clipper 6% 2009 OEM US Market Share Other 6% Gamesa 6% Suzlon 7% GE Wind 40% Mitsubishi 8% Siemens 12% Vestas 15% Source: AWEA 19

20 US Market Growth by OEM Annual New Installations (MW) Sources: DOE; AWEA Other Nordex REpower Acciona Mitsubishi Clipper Gamesa Suzlon Siemens Vestas GE Wind 20

21 US OEM Market Share Trends 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Other Nordex REpower Acciona Mitsubishi Clipper Gamesa Suzlon Siemens Vestas GE Wind Sources: DOE; AWEA 21

22 OEM Investment Activity Includes OEM production facilities in Siemens broke ground (Hutchinson, KS; 9/09) Nordex broke ground (Jonesboro, AR; 9/09) Vestas broke ground (Brighton, CO; 3/09) Mitsubishi announcement (Ft. Smith, AR; 10/09) A-Power announcement (Nevada; 3/10) 2008 production facility announcements Nordic (Pocatello, ID) Fuhrlander (Butte, MT) First-time sales into US market (last two years): AAER, Acciona, A-Power, AWE, DeWind, Fuhrlander, Nordic, Northern Power, REpower Sources: Press releases; DOE; AWEA 22

23 OEM Investment Activity Includes cont d Acquisitions United Technologies Corporation acquires 49.5% stake in Clipper Windpower (12/09) GE acquires ScanWind from Morphic Technologies (direct drive technology for offshore; 8/09) Daewoo (S. Korea) acquires DeWind from Composite Technology Corp (8/09) Suzlon increases stake in REpower to 90% (5/09) Other noteworthy investments Samsung/Korean Electric Power announce $7B investment in Ontario (1/10) GE announces $453M investment to develop and expand offshore wind facilities in Europe (3/10) 23

24 US Market Trends & Drivers Tailwinds Propelling US Wind Industry Overall growth remains robust Project financing options are recovering Federal stimulus money Projects, Manufacturing, R&D, Transmission Prevailing mindset toward Jobs, Jobs, Jobs More transmission & integration projects OEMs are expanding production footprints OEMS are building US production facilities New OEMS continue to enter US market New large players entering & expanding 24

25 US Market Trends and Drivers Tailwinds cont d More opportunities US onshore wind energy potential 3x previous Offshore growing in Europe; starting in N. America State & National? RPS Ontario Green Energy Act (with feed-in-tariff) Latin America market opening up More experience w/ larger wind loads 19% in Texas; >50% in Spain 25

26 US Market Trends and Drivers Headwinds Confronting the Industry Ongoing sobering effects of recession Financing is still a challenge Overall energy usage is down OEMs selling project by project Strong cost pressures US wind manufacturing supply chain growth stalled in 2009; pace of recovery is slow OEMs in Supply Chain holding pattern in US Relying more on established European suppliers 26

27 US Market Trends and Drivers Turbulent Crosswinds Transmission & integration challenges NIMBYism Pushback from conventional industry Lack of long-term national energy policy Increases caution of Foreign OEMs about US Not Made in USA concerns in Congress Growing Asian presence as both market & supply base (China & S. Korea) 27

28 Agenda About Shepherd Advisors Large Wind Market Update Federal Stimulus Allocations to Wind Sector Wind Industry Buy-Chain Survey Highlights Wrap-Up & Going Forward Questions Q & A Please type questions in box and we ll respond as we can in the time we have left 28

29 Federal Stimulus Dollar Allocations American Recovery and Reinvestment Act signed February 17, 2009 Key incentive programs under ARRA 1603: Payments for Specified Energy Property in Lieu of Tax Credits (power generation projects) 48C: Advanced Energy Manufacturing Tax Credits (clean energy manufacturing facilities) 29

30 1603 Program Overview Payments for power generation projects: Started construction in 2009 or 2010 In service by January 1, 2013 (large wind) if construction began during 2009 or 2010 Equal to 30% of basis of property (including equipment) 1603 Awards as of mid-march 2010 $2.7 billion 450 domestic renewable energy projects 41 states Expect to award estimated total of $5 billion, supporting nearly $15 billion in projects 30

31 1603: Wind vs. Other Clean Energy Energy Type Amount Funded ($M) % of Total $ Number of Projects % of Total Projects Average $/Project (M) Wind Facility $2,226 85% 47 11% $47 Geothermal $ % 9 2% $17 Solar Electricity $ % % $0.4 Biomass $54 2.1% 7 2% $8 Open Loop Biomass $18 0.7% 3 1% $6 Landfill $13 0.5% 4 1% $3 All Other Projects $9 0.3% 44 10% $0.2 Total $2, % % $6 Note: Total as of March 9, 2010 Source: Dept. of Treasury Wind has accounted for 11% of projects but 85% of funding Contrast to solar, with 73% of projects but only 5% of funding 31

32 1603: Wind Award Locations State Number of Awards Funding ($M) % of Funding Average $/Award (M) TX 8 $806 36% $101 IL 5 $249 11% $50 OR 4 $197 9% $49 IN 2 $183 8% $92 PA 3 $171 8% $57 CO 1 $100 4% $100 IA 1 $93 4% $93 MO 1 $85 4% $85 All Other States 22 $343 15% $16 Total 47 $2,226 $47 Source: Dept of Treasury TX has has received more than 3x funding of next closest state (IL) Together TX and IL have received nearly 50% of funding IN, CO, IA and MO each have one or two very large awards 32

33 1603: Developer Impact Developer MW (3,691 Total) % of Total Number of Projects (37 Total) % of Total Average MW/Project Iberdrola 1,042 28% 9 24% 116 E.On Climate & Renewables % 3 8% 171 Horizon-EDPR % 3 8% 132 NextEra Energy 341 9% 3 8% 114 Babcock & Brown 283 8% 1 3% 283 Canon 190 5% 1 3% 190 Eurus 180 5% 1 3% 180 Invenergy 111 3% 2 5% 56 enxco 106 3% 1 3% 106 NaturEner 104 3% 1 3% 104 Other Known Developers % 12 32% 36 Note: For 37 projects where developer was known Sources: Dept. of Treasury; AWEA Iberdrola captured about ¼ of the MW and projects Top five account for 70% of MW and 51% of projects 33

34 1603: OEM Impact OEM MW (3,449 Total) % of Total MW Turbines (2,035 Total) % of Total Turbines Number of Projects (32 Total*) Average MW/Project Mitsubishi % % GE Energy % % Gamesa % % Suzlon % 185 9% 6 65 Acciona 251 7% 136 7% Vestas 204 6% 121 6% Siemens 200 6% 109 5% REpower 120 3% 60 3% 2 60 Nordex 63 2% 25 1% 1 63 Note: For 32 projects where OEM was known; one project includes two OEMs Sources: Dept. of Treasury; AWEA Mitsubishi and GE were big winners, together accounting for 49% of MW and 55% of turbines 34

35 48C Program Overview Clean Energy Manufacturing Investment Tax Credits Qualifying facilities produce wind, solar, or other renewable and clean energy equipment Projects placed in service by 2014 Tax credits worth up to 30% of each planned project Tax credit awards in January 2010 $2.3 billion in tax credits 183 manufacturing projects 43 states Supporting company investments of nearly $7.7 billion and expected creation of over 17,000 jobs Additional $5 billion may be appropriated this year (included in administration s proposed budget) 35

36 48C: Wind Awards Wind awards represented approximately 27% of projects & 15% of total tax credit dollars Estimated 50 wind manufacturing projects totaling $341M in tax credits Averaging $6.8M of tax credit per project Of the wind tax credits, approximately $161M went to OEMs and $180M went to tier/component manufacturers Individual project awards ranged from less than $1M to more than $28M Sources: DOE; Dept. of Treasury 36

37 48C: OEM Impact OEM Tax Credits ($M) # Projects Average $/Project (M) Vestas $52 3 $17 Siemens $36 3 $12 Gamesa $31 3 $10 Nordex $22 1 $22 Fuhrlander $10 2 $5 Mitsubishi $5 1 $5 Nordic $3 1 $3 Alstom $3 1 $3 Total $ $11 Sources: DOE; Dept. of Treasury Wind OEMs received 47% of the $341M wind total Top four awards of $141M combined represent 41% of the wind total 37

38 48C: Tier/Component Manufacturers Top Five Tier/Component Manufacturer Tax Credit Awards Manufacturer Tax Credits ($M) Component Merrill Technologies Group $22 Nacelle Rotek $20 Bearings Winergy Drive Systems $13 Power transmission equipment/ gearbox Brevini Wind USA $13 Gearbox Vela Gear Systems $12 Gear sets Sources: DOE; Dept. of Treasury Top five tier/component manufacturer awards of $80M combined represent 23% of the wind total 38

39 Agenda About Shepherd Advisors Large Wind Market Update Federal Stimulus Allocation Wind Industry Buy-Chain Survey Highlights Wrap-Up & Going Forward Questions Q & A Please type questions in box and we ll respond as we can in the time we have left 39

40 Wind Buy-Chain Market Survey What is the Buy-Chain? Buy-Chain Framework Wind Buy-Chain Survey Highlights Overview Respondent Demographics Key Findings 40

41 What is the Buy-Chain? Series of purchasing decisions following the money from end user back to raw materials Want to understand the circumstances around buyers purchase decisions and key factors driving them Who is buying what? Why they are buying? How they are buying? 41

42 Buy Chain Supply Chain Buy-Chain Framework Supplier Customer s Customer Supplier s Customer Supplier Market/ External Forces Material Supply Labor Supply Technology Financing Economy Competition Regulation Policy Many factors influence purchase decisions at each link in the buy-chain 42

43 Buy Chain Supply Chain Wind Industry Buy-Chain Policy Makers Utility/ Power Producer Wind Developer Construction/ Installation Turbine (OEM) Tier 1/ Tier 2/ Components Raw Materials 43

44 Wind Buy-Chain Survey--Overview Collaboration between Shepherd Advisors and University of Michigan Ross School of Business Surveys were sent to more than 1,000 wind supply chain participants 94 respondents; 49 of these were manufacturers 73 completed surveys; 42 of these were manufacturers Solid overall response rate of 9% (7% for completed) Indicative though not statistically significant Survey was conducted during November

45 Respondent Demographics: Manufacturers Type of Wind Manufacturer 7 4 Wind Turbine OEM Tier 1 Supplier 14 Tier 2 Supplier 17 Component Supplier (non- Tier 1 or Tier 2) Equipment Supplier 7 Note: n = 49 45

46 Respondent Demographics: Manufacturers Broad spectrum of company size, from < 10 employees to > 500 employees Cross-section of wind industry experience 43% <= 2 years 29% > 10 years More than 2/3 have wind revenues below $10M 38% < $1M 31% > $10M For 74%, wind revenues represent < 20% of company revenue 55% have three or fewer wind industry suppliers 46

47 Key Survey Findings: Importance How important to your company are the following attributes when choosing your key wind industry suppliers (5 = High; 1 = Low)? Quality of product or service Ability to meet your company's specs Reliability of product or service Competitive pricing Rapid turnaround/delivery Ability to increase production to meet your Financial stability/strength of supplier Ability to collaborate on product development Innovation track record Experience in wind energy industry Geographic proximity to your company Degree of focus on wind energy

48 Key Survey Findings: Satisfaction Satisfaction with Suppliers Along Attributes (5 = High; 1 = Low) Quality of product or service Ability to meet your company's specs Relilability of product or service Competitive pricing Rapid turnatound/delivery Ability to increase production Financial stability/strength of supplier Abbility to collaborate on product development Innovation track record Experience in wind energy industry Geographic proximity to your company Degree of focus on wind energy

49 Key Survey Findings: Importance vs. Satisfaction Gap Quality of product or service Ability to meet your company's specs Reliability of product or service Competitive pricing Rapid turnaround/delivery Ability to increase production to meet your Financial stability/strength of supplier Ability to collaborate on product development Satisfaction Importance Innovation track record Experience in wind energy industry Geographic proximity to your company Degree of focus on wind energy

50 Key Survey Findings: Outlook 42% of manufacturing respondents expect their wind revenues to grow at least 20% annually over the next three years 24% expect their wind revenues to grow 5% or less annually 33% expect to add wind suppliers over the next year 50

51 Key Survey Findings: Summary Wind industry buyers want suppliers they can count on to deliver the fundamentals Quality; Reliability; Ability to Meet Spec; Competitive Pricing; Rapid Turnaround 55% have three or fewer suppliers Nevertheless, opportunities exist to establish new trusted supplier relationships Gaps between importance and satisfaction on key attributes 33% expect to add suppliers Respondents are cautiously optimistic about growth prospects in the wind industry 51

52 Agenda About Shepherd Advisors Large Wind Market Update Federal Stimulus Allocation Wind Industry Buy-Chain Survey Highlights Wrap-Up & Going Forward Questions Q & A Please type questions in box and we ll respond as we can in the time we have left 52

53 Key Takeaways US wind industry growth will continue Improving finances and overall economic activity Higher energy costs More wind than earlier thought Off shore is coming in next 3-5 years Growth is being tempered Transmission & integration constraints Push back as projects get closer to people & wind becomes larger share of energy pie Lack of national renewable energy policy US suppliers had a challenging

54 Key Takeaways OEM caution continues Financing for new projects is still a challenge OEMs can draw upon existing suppliers OEMs global focus is moving towards China Asia is rapidly building scale Many suppliers are optimistic US and World market continues to grow OEMs continue to build new US production Suppliers that meet rigorous quality standards, specifications, reliability, and competitive pricing requirements are well positioned 54

55 Some Going Forward Questions to Consider Are you as well positioned as you want to be to grow in this very challenging industry? What are the key questions, info and insights you need to evaluate how best to grow? Are you as well connected as you need to be? What is your growth financing strategy? How well are you tapping public resources? How does your firm align with the large wind Buy Chain? Shepherd Advisors can help! 55

56 Thank You from Shepherd Advisors Presenters: Tim Kumbier & Loch McCabe Clean energy business management consultancy Wind, Solar, Biomass, & Energy Efficiency Industries Clean energy developers, generators, manufacturers and suppliers Founded 2000 in Ann Arbor, Michigan Go ahead and call us! 56

57 Agenda About Shepherd Advisors Large Wind Market Update Federal Stimulus Allocation Wind Industry Buy-Chain Survey Highlights Industry Trends & Going Forward Questions Q & A 57

58 Questions? We ll Answer What Questions We Can In the Balance of the Hour We Appreciate Your Time & Attention Thank You! If you are interested in receiving a copy of this presentation, please contact Tim Kumbier or Dave Crumrine at Tim Kumbier tim@shepherdadvisors.com Loch McCabe loch@shepherdadvisors.com 58