The wind tower is one of the most important components of a wind turbine system in terms of cost and size. Until 2008, this component was either in short supply or just about meeting demand. After the global recession of 2009, an oversupply situation was observed in the market. The fall in demand forced tower manufacturers to reduce production far below their capacity, and some manufacturers were forced to shut down their facilities, as it was not economical to continue operations at such low-capacity usage rates.
The global annual units installed increased from 10,744 units in 2006 to 24,657 units in 2009. This number fell to 22,152 in 2010 due to fewer capacity installations and the suspension of a number of projects in major wind power markets such as the US, Spain and Germany following the recession in 2009.
Despite the increase in annual capacity addition, the number of installations declined further, to 19,963, in 2013 due to the fact that average turbine size was increasing each year. Technological advancement has assured a further increase in the achievable capacity of a single wind turbine in the future. This could also result in a fall in the number of towers installed in the coming years until 2020, in spite of an expected increase in annual capacity installed throughout this period.
Unsurprisingly, the growth of the wind tower market is directly related to the growth of the wind energy industry, which is heavily influenced by favourable government policies, rising environmental concerns, increasing demand for power, and uncertain supply and prices of energy from conventional sources. China, the US, India, Germany and Canada are major wind energy markets, accounting for around 90% of global wind power and the same figure for the towers market in terms of installations in 2013.
The major global wind tower manufacturing hubs are the US, Germany, Spain, China, Vietnam, Korea and Mexico. However, Denmark and the Netherlands also manufacture towers on a significant scale, mostly for export to the US and European markets. The major wind turbine generator (WTG) manufacturers that produce towers in order to meet a significant share of their own demand are Vestas, Suzlon and Enercon. Other major tower manufacturers that fabricate towers for WTG manufacturers based on their design and requirements are DMI Industries, Trinity Towers and Katana Summit in the US; Windar Renovables in Spain; AMBAU and KGW in Germany; Shanghai Taisheng Wind Power Equipment and TSP Shanghai Engineering in China; and Win&P, Dongkuk S&C, SPECO and CS Wind Corporation in South Korea.
The majority of Asian tower manufacturers ship their wind towers to North American and European countries, as the production cost is low in Asian countries and they can offer towers at competitive prices to these markets. Wind tower manufacturing in Asian countries has become a threat for North American and European manufacturers, who appealed to the US International Trade Commission in late 2012 and convinced the US Department of Commerce to enforce anti-dumping duties against Chinese manufacturers exporting towers to the US by early 2013 (Federal Register, 2013). Similar actions were later taken against tower manufacturers in other Asian countries.
A global perspective
The number of global annual tower installations increased steadily from 2006 to 2008 due to the introduction of favourable governmental policies in a number of countries and an increase in environmental awareness. However, the financial recession in 2009 severely affected investment in most industries, including wind energy, leading to few planned projects reaching financial closure. This resulted in a decline in the number of towers installed in 2010.
There was a sharp increase in the amount of wind power capacity installed in 2011 and 2012, as most of the projects suspended in 2010 were completed in these years. However, this sharp rise is not evident in the number of towers installed, as average turbine capacity has been increasing, resulting in the decline of the number of turbine (and tower) installations that are required to achieve the same capacity.
A decline in capacity additions in terms of megawatts installed was observed in 2013. Along with this fall in capacity, the increased average turbine capacities led to a reduced number of towers being installed in 2013. From 2014 to 2020, the addition of wind energy capacity is expected to increase. Once again, the number of towers installed annually during this period will increase only slightly, due to the annual growth of average turbine capacity. Figure 1 illustrates the number of wind towers installed globally from 2006 to 2020.
In 2013, China continued to be the leading country in terms of the number of wind towers installed annually. The share accounted for by the US declined to 7.5% compared with a 17.5% share the previous year, due largely to reduced annual capacity additions in 2013. India, Canada, the UK and Germany followed with respective shares of 6.5, 5.8, 4.1 and 3.9%.
The share accounted for by Spain fell sharply in 2013 due to a fall in annual capacity additions, the result of withdrawal of government support for wind power in Spain in 2013 (Cala, 2013). Figure 2 illustrates the shares held by key wind power market countries of the total global annual capacity additions made in 2013.
The global average price of a wind tower increased sharply from $334.8 per kilowatt in 2006 to $431.3 in 2008, due to increasing steel prices and elevated global demand for wind towers. In 2009, once the demand and supply were balanced, the price came down to $377.4 per kilowatt, and this decreasing trend continued until 2013 when the price reached $293.5 per kilowatt, its lowest point since 2006. The global average price is expected to stay stable from 2014 to 2020.
Comparison: China vs the US
China is currently the largest manufacturer as well as the largest consumer of wind towers in the world. The number of annual tower installations in China increased rapidly from 1,392 in 2006 to more than 10,000 in 2009, when China became the largest wind power market in the world. China’s wind tower market registered substantial growth in 2009 and 2010, with installations reaching an all-time peak of 13,438 units in 2010.
China’s wind energy market emerged relatively late but has grown very rapidly and on a large scale. The Chinese wind-component manufacturing industry has also grown rapidly, and matched the world leaders in manufacturing and deployment such as Germany and the US. The country continues to offer lucrative commercial collaboration opportunities for leading companies in all aspects of wind power development.
Rapid industrialisation and high growth has resulted in substantial electricity demand and high CO2 emissions in China. In order to stabilise the power demand situation and reduce emissions, the Chinese Government has set goals for the generation of 15% of electricity from renewable sources and the reduction of CO2 emissions by 40-45% by 2020.
In this context, the Chinese Government found wind energy to be the most viable alternative energy source, enabling it to achieve a balanced energy mix, combat global warming and ensure energy security. In order to achieve this goal, the government aims to increase installed wind power capacity to 40GW by 2015. With demand for wind energy increasing, demand for wind components has increased sharply in the domestic market.
The Chinese Ministry of Finance has developed an incentive scheme to support Chinese manufacturers, and offer subsidies and funding to them in order to promote technological advancements, competition and branding. This resulted in manufacturers extending themselves into the total supply chain to provide all wind power requirements.
The genesis and growth of wind power in China began in 2006, when the Renewable Energy Law came into effect. The law specified long-term goals for the country’s installed wind capacities. This development, combined with a 50% reduction in value-added tax for wind farms, opened up opportunities for international wind market participants. In 2007, the National Development and Reform Commission implemented the ‘Medium and Long-Term Development Plan’ for renewable energy, which mandated that all power generators should generate at least 3% of their power from renewable sources. The law also set a target for the production of 10% of China’s primary energy consumption from renewable energy sources by 2010 and 15% by 2020.
The wind towers and other components produced in China are relatively cheap, and this has enabled an increasing number of medium and large companies in China to start new business units or create subsidiaries. Supported by favourable government policies and incentives, these manufacturing companies have thrived and are now in a position to supply low-cost wind towers to several countries, and some have even set up manufacturing units in other countries in order to capture the demand in these locations.
The number of wind towers installed in China increased from 1,392 in 2006 to a peak of 13,438 in 2010 in the initial years of wind power growth in the country. As the growth of the market stabilised, the number of towers fell to 9,454 in 2013. From 2015 to 2020, the number is expected to decline slightly to around 7,500. This decline is due to the increase in average turbine size in the country, meaning fewer turbines are required.
The US is the second-largest wind tower manufacturer in the world, as well as the second-largest purchaser of wind towers. In 2013, around 1,500 towers were installed in the country. The size of the wind tower market in the US increased steadily from 2006 to 2012. The value of the US wind tower market amounted to $0.8 billion in 2006, increased to $4.3 billion in 2012 and then declined to $1.0 billion in 2013 due to reduced annual capacity addition.
The US wind tower market is primarily driven by government policies such as federal tax incentives, tax credits, subsidies and individual state renewable portfolio standards.
Moreover, the financial backing provided by the federal government simplifies the issues associated with the high cost of wind power generation to a large extent, thereby driving the growth of wind tower manufacturing.
The growth of the wind tower market was restricted in 2010 by the 2009 global financial recession. At this point, the majority of the wind projects were delayed and order volume decreased, limiting the demand for turbines and towers. Five key wind industry financiers in the US – Lehman Brothers, Wachovia, AIG, JP Morgan and GE Energy Financial – suspended their participation in the wind power financing market. The revenue and number of installations within the wind industry were adversely affected, and, as a result, the industry experienced slow growth in 2009 and 2010. However, the market recovered in 2011 and 2012, with a record number of tower installations in Q4 2012.
Despite the significant reduction in the price of turbine installations due to technological advancement and market development, wind power generation is not yet as cost-efficient as with fossil fuel generation. As a result, the participation of the US Government has become necessary for the development of the wind power market.
The growth of the number of wind tower installations in the US has a postive effect upon the supply chain for the wind industry, and also upon the equipment and labour market, thereby opening up a large number of opportunities in the industry.
The number of wind towers installed in the US increased steadily from 1,510 in 2006 to 5,412 in 2009. The number declined to 3,089 in 2010 due to the financial recession but recovered slightly in 2011 to reach 3,435. The market registered an abnormal increase in the number of towers installed in 2012, with the majority of installations taking place in the last few months of the year. This was due to the impending expiry of the Production Tax Credit (PTC) scheme at the end of 2012, forcing several projects set for 2013 to accelerate construction and start operations before the expiry date. This resulted in a sharp rise in tower installations in 2012 and an immediate sharp fall in 2013.
Later, in January 2013, the PTC was extended for another year, but it failed to keep up the number of towers installed or the annual capacity additions, as a number of projects had been advanced and commissioned in 2012. The number is set to increase again in 2014 due to a return to the normal pace of constructions but is expected to register a sharp decline in 2016 due to the expiry of the Income Tax Credit scheme. From 2017 to 2020, the number of towers installed is expected to increase slowly to reach 2,066 towers in 2020.
