Competing in the wind industry is like playing in a professional soccer league. You need your star players, a tailored strategy and a drive to make your fans proud. And, while a decade ago wind may have been at the bottom of the power generation league, it’s rising up the table fast, almost catching up to the big players—traditional thermal power sources and natural gas.
Numbers say it all. Globally, progress in the wind sector continues to be strong with increasing annual installed capacity and growing investment in the sector. In 2015 alone, 63,013 megawatts of wind power capacity was installed globally, an annual market growth of 22 percent. It is continuing its progress towards becoming a mainstream, competitive and reliable power source in both developing and mature markets. In fact, wind is becoming cheap enough in many places in the U.S. and around the world to compete effectively with fossil fuels.
As wind energy continues to gain ground, let’s take a look at three main trends we’re seeing in the industry moving forward:
1) The formation of strategic partnerships
Thomas Edison may have been behind the invention of the electric light bulb, but he did not work alone. Edison worked alongside partners, both financial and commercial, to get his inventions off the ground, and without these partnerships, the light bulb as we know it today may never have taken off in the way that it did—and he’s not the only one. Some of the world's most effective business models and companies have been forged through complementary and long-standing partnerships, resulting in products and services that have defined completely new industries.
Throughout the wind sector, this type of partnership and collaboration is crucial. Battling challenging cost targets and the need to build wind power closer to urban areas, wind operators must form long-term strategic collaborations to maintain and increase wind’s competitive edge. Maintaining a long-term partnership with a supplier or original equipment manufacturer will not only save time, but can also save costs through economies of scale. What’s more, through working with one supplier, wind operators can decrease the admin and supply chain complexity and feel assured that all elements of their business are working together smoothly. This can help to standardize and rationalize components needed throughout the wind farm operational life cycle, reducing timely and costly re-engineering.
The formation of strategic partnerships can not only benefit the industry as a whole, but also advance a company’s position in the marketplace. They enable parties to tap into each other’s knowledge, accelerating innovation and supporting the development of new and improved technology. Right now, turbine manufacturers have to search for the best component to fit their turbine. In the future, however, we expect to see a shift to where operators no longer focus on repeat negotiations of contract and price, but instead move towards developing products together—in partnership. Through this collaboration, components and turbines could be designed together to ensure seamless integration and improved reliability and efficiency.
2) The demand for localization
The wind market is governed like no other. Countries globally have realized the rising potential of wind and its ability to create jobs and boost economic output, and they are not simply requesting the use of local suppliers, but are demanding it. In Brazil, products today need to meet the requirements of the Brazil Development Bank (BNDES), and import duties in India make importing products and components extremely costly. This localization not only boosts the local economy, but manufacturing components locally also helps to eliminate long-distance transport costs, for the large components in particular, and the associated emissions.
However, while positive for many, this change is not great news for certain suppliers. Companies without local manufacturing capabilities could find themselves at a disadvantage, as building local production and test facilities can be capital intensive and time consuming. Players with a global footprint in manufacturing and production, such as GE, however, are already equipped to handle the growing trend for localized products as they can utilize their local expertise and knowledge in each individual market.
This local expertise and knowledge is key because each market has differing targets and goals for wind power. For example, the Chinese government is actively spurring on wind development to meet rising electricity demands and limit its reliance on polluting coal-fired power stations. Therefore, projects move much faster there compared to many other countries. Understanding the nuances of the practices and policies that surround the industry is crucial to succeeding in each market, which is another reason why wind operators need to consider partnering with suppliers that have a truly global presence.
3) The move towards a more digital future
In the wind industry, performance improvements are mainly found through sourcing the lowest cost provider or moving to low-cost countries for the production of components. As we see the increased need for localization, it’s clear that we can no longer rely on this low-cost model. To move away from this, investment must be made in adopting new technologies and smart machines and in the training and development of engineers and innovators within the industry. As a whole, we must work together to develop world-class facilities and world-class people that can build state-of-the-art equipment, designed and engineered specifically for wind.
Digital technology sits at the heart of meeting this challenge. GE is continuing to collaborate with the industry to embrace a technology and data-driven approach, investing heavily in software and machines to transform the industry. For example, using its Industrial Internet expertise, GE has developed the world’s first digital wind farm.
As the wind industry continues its rise in the global energy production league, there are high hopes that it will become a star player in the power generation market in the not so distant future.