DIS/CREADIS

WIND SUPPLY CHAIN EFFICIENCY

Connecting consolidation, partnerships & standardization

78 gw 

wind power capacity was added globally in 2022 

 

906 gw

is now the total global wind power capacity 

 

680 gw 

new capacity is forecasted to be added in the next five years 

 

150 gw 

or more has been pledged build in the North Sea by Germany, Belgium, The Netherlands & Denmark

The state of the industry

2022 was the third best year ever for new capacity with 78 GW added globally. This renewable productivity means we’ve achieved a total global wind power capacity of approximately 906 GW. This represents Year-on-Year growth of 9%. GWEC Market Intelligence forecasts 680 GW of new capacity in the next five years (2023-27), representing 136 GW per year to 2027.

Potential beyond  forecasts

Although already impressive, we believe it’s highly likely these forecasted stats could increase beyond prognostications.

 

Voluminous corporate, political, and societal pushes for climate resilience, carbon-neutral energy, and  decentralized power structures to offset geopolitical instability have not been considered – yet the whirlwinds of accelerated wind generation are clear from the news and multinational promises.

Global pledges and commitments

Germany, Belgium, the Netherlands and Denmark has pledged to build at least 150 gigawatts (GW) of offshore wind in the North Sea, a tenfold increase in the European Union’s offshore wind capacity2.

In August 2022, the US Senate approved plans to supply 40% of the country with clean energy by 2030 as part of the Inflation Reduction Act of 20223. And many other international private businesses, NGOs, academia, governments, and citizens are driving toward a shared objective of replacing fossil fuels with low-carbon energy sources. Research by WindEurope, for instance, shows the continent is expecting to establish 116 GW of new wind farms over the period from 2022-2026. This drive for wind power approximates 23 GW a year of new installations on average with three-quarters of these new capacity additions being onshore wind installations4.

2022 – 2026 new onshore and offshore wind installations in Europe – WindEurope’s scenarios.

WP Supply Chain graphic1

When Russia invaded Ukraine, it became even clearer that the EU needs alternative ways to secure its energy supply. In response to the challenges and disruptions in the global energy market caused by Russia’s invasion of Ukraine, the European Commission implementing the REPowerEU plan in 20225. REPowerEU was launched in May 2022 and assists the EU in conserving energy, producing clean energy, and diversifying its energy supplies. Since September 2022, Russian gas has only accounted for 8% of all the pipeline gas imported to the EU, which is a significant reduction compared to August 2021, when 41% of the EU’s import came from Russia6.

In addition to this market motion, the world’s leading organizations like the United Nations, World Economic Forum, World Bank, and others are sounding the alarm to ”Clean the core,” “Ac-celerate the transition,” and “Extend the fron-tier” into renewable sources like wind to supply zero-emission energy7.

Challenges and uncertainties

Europe faces a significant obstacle to achieving REPowerEU’s goals. According to GWEC’s Global Wind Report 2023, an average of 30 GW of new wind energy capacity must be added annually until 2030. However, only 16 GW was added by EU na-tions last year. Wind turbine orders decreased by 47% YOY, with minimal final investment decisions in offshore wind as a result of higher uncertainty for new wind energy investments in 20228

 

Inflation caused turbine prices to go up over the past two years and EU governments acted uncoordinated to cope with the energy crisis. Europe’s permitting process remains inadequate, complicating matters further for the region’s supply chain.

WP Supply Chain graphic2

The imperative ahead

As leaders in the wind industry, our obligation is to facilitate this transition by ensuring our value proposition, supply chains, and best practices make sense commercially and environmentally for this unique era. Otherwise, our inability to deliver cascades into substantial wind energy shortfalls that fail to achieve ‘Net Zero by 2050’ targets, which are imperative.

Lagging growth in the decade leads to wind energy shortfalls by 2030 – GWC (Global Wind Report)

WP Supply Chain graphic3

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… in tiny Denmark alone over 1,500 companies
supply components and modules for the OEM’s
wind turbines

Challenges

The wind sector’s goal is scaling the supply chain to meet these expectations – but the magnitude of the ask remains indeed a monumental challenge for Wind OEMs. For example, owners and developers of wind farms are reaping handsome profits whereas OEMs often struggle with slim margins, unprofitability, revenue loss, and unshakeable growing pains. While advancements have been made in how we equip our wind systems for maximum deployment, there are still direct impacts and mounting concerns about international geopolitics with the Russia-Ukraine war, global inflation, and the COVID-19 pandemic. 

 

 

Further, there are considerable variations and wasted opportunities within the wind energy supply chain that are a major cause of concern. 

 

 

Three principal complications include:

WP Supply Chain graphic4

Multiple-vendor sourcing

  • It is common knowledge that many leading wind OEMs often have thousands of different vendors for components – which also means negotiating, synchronizing, and managing numerous different companies causing significant overhead and administration costs.
  • It must also be noted that each vendor comes with its own specific business culture, practices, logistics, locations,  divisions, bureaucracy, regulations, which convolute the logistics.
  • Proof of this glaring disorganization was noted last year by Siemens Gamesa, the world’s second largest wind manufacturer, when they discovered in tiny Denmark alone over 1,500 companies supply components and modules for the OEM’s wind turbines7.
WP Supply Chain graphic5

Supply chain inefficeincies

  • Wind OEMs have been
    remarkably slow to push some of
    the responsibilities to the supply
    chain itself. This sluggishness
    means –especially in a time of
    great pressure and necessity – it’s
    difficult for companies to meet
    project demands for timely delivery,
    affordable prices, and speed to-
    market.

 

  • For instance, the world’s
    largest OEM has emphatically
    remarked on the complicated
    intricacies of dealing with the
    current wind supply chain: “The
    conventional approach to product
    development offered limited
    synergies between products, increasing
    complexity and resource
    management.”8
  • It must also be noted that each vendor comes with its own specific business culture, practices, logistics, locations,  divisions, bureaucracy, regulations, which convolute the logistics.
  • Proof of this glaring disorganization was noted last year by Siemens Gamesa, the world’s second largest wind manufacturer, when they discovered in tiny Denmark alone over 1,500 companies supply components and modules for the OEM’s wind turbines7.
WP Supply Chain graphic6

Non-core technical debt

  • Tier 1 suppliers are often build-to-print or build-to-spec suppliers meaning that OEMs own the design and the suppliers build accordingly.
  • With this practice, OEMs are wasting innumerable resources on the design of non-core, minor components that hinder industry progression and innovation. i.e. optimization, cost-out, etc.

     

    These obstacles create significant
    and divergent business conditions
    that make it tough if not impossible to scale at the pace urgently demanded by world markets.

  • The practices outlined above are also not fully commensurate with the Environment, Social, and Governance (ESG) objectives of the multinational corporates spearheading wind energy that are requiring greater sustainability performance and climate impact. 

    This type of noncompliance could affect their market attractiveness to investors and customers now incorporating material risk factors beyond financial metrics.

Solutions

The wind OEMs have wanted to push some of the responsibility to the supply chain for years and there is substantial evidence that shows it is time to accomplish this goal.

 

Several ideas rise to the surface when maximizing how to integrate these optimizations in the current market and political conditions.

 

These include:

WP Supply Chain graphic7

Supplier consolidation and strategic alliances

  • We should advocate and help orchestrate a widespread consolidation of Tier 1 and Tier 2 suppliers to be able to deliver full assemblies, modules and systems. We need a Top 50 list of suppliers rather than the thousands that exist today competing for basic components like ladders, cable trays, and platforms.
  • We should promote the standardization of noncore and no-competing sub-systems. And these very Tier1 suppliers need to own the transition of competing on modularity and speed-to-market to ensure all mechanisms are in place for scalability and
    enable cross OEM synergies.
  • We should build robust and active strategic alliances, partnerships, and associations between suppliers forged on complementary strengths for rapid and agile business frameworks, cooperation and information exchange.
WP Supply Chain graphic8

Global expansion partners

  • Wind OEMs should select partners that can function across timezones 24/7 and can take on all kinds of tasks while offering client contact to specialist knowledge and faster processes. These types of specialist organizations exist – and many have over 20+ years of experience managing offshore and onshore wind projects, engineering improvements, and supply chain logistics.
  • Whether it’s emerging wind markets throughout Europe, Japan, Taiwan, Australia, or the US, relying upon a dependable supplier able to grow alongside the manufacturer or have mobile production facilities established locally is key. In this way, wind OEMs can scale their technology organization nimbly with minimal onboarding and generate a higher ROI.

Conclusion

Onshore and offshore wind is going to skyrocket in demand due to broad pushes for renewable energy around key markets.

 

Powerhouse economic regions like Europe and the US are determined and poised to transition to wind power for increased domestic security, climate mitigation, and environmental objectives are given the riskiness of fossil fuels in the 21st century.

 

Wind OEMs will therefore be asked to produce bigger and greater machines at a tempo never seen in the industry.

 

It’s again no overstatement to say wind power is on the cusp of one of the biggest financial and innovation opportunities of the century. 

 

But, if and only if, the wind industry can drive successful consolidation and cooperation of globally-capable Tier 1 and Tier 2 wind suppliers to a manageable amount – and we do everything in our power to ensure the standardization and engineering delegation of non-core and no-competing subsystems within these suppliers.

 

Wind energy can scale to a level of efficiency that ensures sustainable business if we act to remedy these persistent but fixable challenges.

 

Hundreds upon hundreds of gigawatts demanded by governments and multinationals depend on our expertise and collective action. The opportunity and forward motion of our industry is ours to gain or to lose. It’s our choice to align and act that will make the difference

»

The opportunity and forward motion of our
industry is ours to gain or to lose. It’s our
choice to align and act that will make the
difference.

References

1GWEC’s Global Wind Report 2023

2REVE. “Germany, Belgium, the Netherlands and Denmark to increase offshore wind power capacity tenfold.” Madrid: REVE, May 2022.

3American Clean Power. “ACP Celebrates Historic Clean Energy and Climate Victory with Senate Passage of the Inflation Reduction Act of 2022.” Washington D.C.: ACP, 2022.

4WindEurope. “Wind energy in Europe: 2021 Statistics and the outlook for 2022-2026.” Brussels: WindEurope, 2022.

5The European Commission

6The European Commission

7World Economic Forum. “Fostering Effective Energy Transition.” Cologny: WEF, 2021.

8GWEC’s Global Wind Report 2023

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