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Wind energy market is consolidating - F&S

The wind energy market is poised for greater consolidation which will see the emergence of fewer, but stronger, participants, according to analysts Frost & Sullivan.

By Kari Williamson

The European wind energy market is just starting to recover from the economic downturn in 2009, and as demand stabilises, steady growth is forecast.

Th market earned revenue of US$19.18 billion in 2010 and Frost & Sullivan estimates this to reach US$42.48b in 2017.

"Europe's wind energy market is primarily driven by the European Union's renewable energy agenda to meet 20% of its energy needs through renewable sources by 2020," says Frost & Sullivan Research Analyst Neelam Patil.

"The high growth potential of offshore wind energy, coupled with the emerging markets of Central and Eastern Europe (CEE) are attracting investments in the European market."

Germany, Spain and France continue to install more wind power facilities and are planning to exceed their targets and provide the surplus energy to the other EU member states. The UK is relying heavily on offshore wind development to achieve the 2020 target.

Falling prices

The scenario was not so promising a year ago. Lowered demand for wind energy, due to the economic slowdown and overcapacity in the market, drove wind turbine energy prices to their lowest levels in 2010, the analyst says.

Additionally, escalating price wars between new entrants from Asia and European wind turbine manufacturers forced inefficient players to exit the market. Offshore wind technology remains a grey area, with practical aspects like operating, maintaining and servicing offshore wind turbines in winter yet to be proven.

The CEE region is set to emerge as a low-cost, low-technology market, which could make it an attractive market for Asian manufacturers.

"While the western European market is difficult to enter, the emerging markets of CEE will be driven more by price than by technology, thus posing low barriers to entry," adds Patil.

"For offshore technology, the timing is important; although having a track record is critical. Companies that wait too long for others to lead and prove the technology, run the risk of missing out on growth opportunities."

In the mature western European market, companies need to deliver not only the best technology, but also outstanding service packages to maintain or acquire market share, Frost & Sullivan predicts. In the emerging CEE markets, wind turbine manufacturers will need to be extremely efficient and cost-competitive to be able to sustain price wars.

Early movers

Early movers in the offshore wind segment will benefit from capturing a significant market share and building their track records. In addition, they will gain vital experience in seeking financing for offshore wind farms.

"European manufacturers will have to continue producing technologically superior wind turbines at competitive prices," advises Patil. "They can exploit their technology leadership position to develop advanced offshore wind turbines with higher capacities, which will allow them to reap benefits through market share leadership and economies of scale."

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