The Siemens Wind Power Business Unit is part of one of the world's leading engineering groups. This not only gives it a considerable edge when it comes to R&D, but also enviable access to a large balance sheet, a presence in many other renewable technologies, such as solar and biomass, and access to many of the components it uses in its turbines from other parts of the Siemens group.
But this position of strength doesn't make Andreas Nauen, ceo of Siemens Wind Power, at all complacent, and Siemens will need to take advantages of all its resources and scale if it is to sail through the current economic climate unscathed. Many are predicting a tough year for the windpower industry in 2009, certainly in the first six months, with less project activity and much tighter margins along the value chain. As clean energy investment specialists,' New Energy Finance predict, “the continued lack of credit investment finance worldwide, and tax equity in the US, means that turbine manufacturers will see sharp falls in their order backlogs for the first two quarters of 2009. Good deals will still go ahead, backed by club debt deals, but it will feel like hard work”.
One of the most sobering lessons of the credit crunch to date has been that even the world's largest institutions are not immune, so how does Siemens think it will be affected? “In recent years the wind power industry has seen an unprecedented growth phase,” begins Nauen, “but unfortunately the global economy is currently experiencing a slow down due to the financial crisis. This will also impact the wind power industry, including Siemens. Up until now, we have not had any cancellations of orders received. However, we are experiencing delays with future wind projects, because many of our customers are finding it more difficult to obtain financing. And as a consequence, the wind power industry will face lower growth rates than expected”.
Nevertheless, Nauen believes that Siemens Wind Power's diversification will help it weather the storm.
Siemens is commercially, geographically and technologically diversified. Not only is it active along the wind power value chain – from turbines to grid connection – but its operations are increasingly global, including recent expansion in the US where renewable energy is poised to take off under Barack Obama's presidency (developments in recent weeks have seen Obama throw the full weight of his political aspirations behind clean energy). Furthermore, Siemens has been establishing a leading position in offshore wind, building on its established track record onshore.
In October 2008, Siemens announced that it will supply E.ON with 90, 2.3MW wind turbines for the Rødsand II offshore wind farm in the Baltic Sea. With an installed capacity of 207MW, the project will be one of the largest offshore wind farms in the world and is due to be built in 2010. The deal, which includes a two-year service contract, is worth around €275 million.
Offshore the key?
Nauen believes that the E.ON deal is just one that is consolidating Siemens' position as a leader in the offshore wind industry. In August 2008, Siemens won the contract to supply (and grid connect) 140 turbines to the largest offshore wind farm in the world, the 500MW Greater Gabbard offshore wind farm off the UK coast, due to be completed in 2011. And in September 2008, Siemens was awarded a €87 million contract to connect the 300MW Thanet wind farm to the UK grid. Siemens' offshore success is based on strong sales of its 3.6 MW turbine, of which 245 will be installed in four projects between now and 2012 for customers such as Scottish and Southern Energy, Centrica plc, DONG Energy, and RWE AG.
Offshore wind is therefore something of a priority for Siemens. “Maybe we are the only ones who really foster and really try offshore because we believe there are completely different market rules,” says Nauen. It has dawned on the wind industry in recent times that simply taking offshore technology and dumping it 60 miles out in the sea isn't good enough – new, specific offshore technology is needed: “As a turbine supplier you need to be confident that your technology works offshore in harsh environments. Siemens has 17 years' experience in offshore wind power and we know that our turbines work reliably in the sea. Some competitors don't have the same experience with offshore wind power that we do”.
In addition to this approach, Nauen also believes that Siemens' ability to supply offshore turbines as well as connect them to the grid gives it an edge over other manufacturers. Recently, Siemens connected the Lillgrund wind farm in Sweden and the Lynn/Inner Dowsing wind farm in the UK to their respective power grids. For both projects Siemens also delivered the wind turbines. However, Siemens has also bid and won orders for offshore wind farms without Siemens turbines.
Siemens' share of the offshore market, based on turbines installed between 2000 and 2007, is currently 39%, second only to Vestas with a 56% share. However, its market share is expected to grow significantly based on installed turbines and firm orders up to 2012, overtaking Vestas, and climbing possibly even higher. Taking current order volumes and forecasting offshore growth, Emerging Energy Research believes Siemens could take as much as 47% of the offshore market by 2012.
Nauen's confidence that offshore will be increasingly important for Siemens reflects this statistic: “A round number would be for offshore to account for a quarter of our business and I see definitely that coming,” he says.
Direct Drive technology
Siemens' direct drive technology, currently under trial, has helped boost its profile in the onshore and offshore markets. Siemens acquired the technology in 2004, with its acquisition of Bonus Energy A/S, the wind turbine manufacturer, which had been working on direct drive for almost 10 years. However, it has taken several years to reach beta testing.
The appeal of direct drive is the absence of a gearbox, which means fewer moving parts in a turbine, making it more reliable and durable and less expensive to maintain (see ‘making wind more efficient’, Renewable Energy Focus November/December 2008). On the downside, direct drive turbines are around 20% heavier than their gearless counterparts, although Siemens expects to reduce this differential over time. Overall, though, lower O&M costs make direct drive turbines particularly attractive for offshore use, where operating costs are almost twice those of onshore turbines, and unplanned maintenance can cost as much as 10-15 times more.
Siemens is not the only turbine manufacturer investing in direct drive, but it is in the spotlight as it is in the process of testing two different direct drive 3.6MW turbines using permanent-magnet excited generators, one from Siemens Industry Sectors' Large Drives Business Unit, and the other from marine generator supplier Converteam. The first model started testing in July 2008, and the erection of the second turbine has been postponed because of the late delivery of some components. However, Siemens is confident that the second trial will begin soon. The trials will take two years, so it is hardly surprising that Nauen is reticent about early results on the technology, given what is at stake. “It just started, so it's too early to give any indications. We have to await the results of the tests,” he says.
Direct drive is by no means Siemens' only cutting edge technology. Nauen is particularly proud of the company's patented jointless blade manufacture. The bigger turbines get, the more their aerodynamics and robustness are pushed to the limit, all the more so when they are used offshore where wind speeds tend to be higher. And again when it comes to offshore turbines, low O&M is a prime consideration; there is little margin for error. Siemens' ‘one-shot’ fiberglass-coated blade technique not only means there are no joints to be put under stress, but also fewer adhesives and chemicals are used in the manufacturing process.
Nauen has plenty to look forward to in an uncertain world. His outlook for the business is positive. In spite of a slight slow-down in the US, Siemens is making inroads in North America, and recently completed its first onshore project in Canada, where it plans to expand.
“If you come to Europe, we see still the UK doing fine, especially in Scotland of course. Then there are some other countries picking up now; Italy, France. And Eastern Europe, with countries like Poland, Croatia and so on. Then you have all offshore, which we see progressing at the moment from the UK, Denmark, further south to Germany and then let's see how far along the European coast south we may get. So that is Europe.
"For the time being, Asia is mostly Australia and New Zealand, simply because we can compete there with imported technology. But we are analysing how we can get started in China and have some activities going on there; we are already very active on the supply chain side. So business is advancing,” he says.
You could say that.
|About the author
|David Hopwood is editor of renewable energy focus magazine. Alice Hohler is a freelance correspondent.