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Analyst PRESENTATION

Global Wind Power

Industry Update JSIM Committee Meeting

25/02/2015

Steen Broust Nielsen

[email protected]

Summary

A few words about MAKE

MAKE is one of the global wind industry's

premier strategic consulting and research

firms, serving the world’s leading wind

companies from all parts of the value chain

from raw material suppliers to IPPs and

utilities.

MAKE is based in Aarhus (DK) and has offices in

Hamburg (D), Chicago, Boston (U.S.) & Shanghai

(China).

Publish industry leading wind energy research

reports, analysis and databases

Consult on wind farm investments, market

assessment, supply chain dynamics, technology,

operations & maintenance, M&A advisory,

business & market modelling and offshore wind

Due-diligence partner for European and

international PE and industrial investors

Introduction

Steen Broust Nielsen - Partner at MAKE

More than 20 years of wind sector experience

including from LM Wind Power.

Has served on the Board of EWEA and GWEC.

Extensive due diligence, consulting and senior

management experience in the wind industry.

Track record for driving and enabling profitable

growth, through development and execution of

focused business strategies. Master of Science

in Economics and Business Administration

2 JSIM Committee Meeting

February 2015

MAKE Reports and Industry Insights

Through a series of annually

published reports, forecasts, research

notes and data MAKE’s Regional

Analysts provide comprehensive

analysis and data for the key wind

power markets globally, supply chain,

technology trends and industry

dynamics enabeling our subscribers

to:

Understand key drivers and

barriers in wind power development

at global, regional, and country

levels

Evaluate countries and regions of

interest based on detailed market

attractiveness assessments

Assess business opportunities for

product positioning, commercial

strategies and successful business

development

Leading insights into wind power industry dynamics Introduction


February 2015

Introduction

Global footprint and key milestones

MAKE’s strategically

placed global offices

Top 15 wind power

markets

2005

MAKE is founded in

Aarhus, Denmark,

with a focus on

offering high-quality

research products

for the wind power

industry.

2007

The first overseas

office is opened in

Shanghai, China.

2008

MAKE broadens its

global presence

through the

establishment of

another branch

office in Chicago,

U.S.

2010

Yet another office is

opened in the U.S.,

in Boston.

MAKE starts to

build its technology

team.

2011

The technology

team is fully formed

and launched for

both intelligence

and advisory

services.

2013

MAKE launches

new and improved

research product

portfolio.

2014

MAKE opens an

office in Hamburg,

Germany


February 2015

Introduction A sample of our clients


February 2015

http://www.vestas.com/

Delivering renewable energy insight TM

Global Wind Power

Industry Update

Outlook for electricity generation 1990-2035e (TWh)

Global electricity generation increases by ~65% before 2035

Source: MAKE, IEA

Growth in global installed electricity generation capacity from 2012 to 2035 from 5,649 GW to 9,760 GW, corresponding to 70% increase. 62% of global investments in new power plants are in renewables mainly wind, hydro and solar power

Global Market Trends

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

2030e 2025e 2020e

TWh

2035e

+2,2%

2011 1990

Eastern Europe/Eurasia

OECD Europe

Latin America

OECD Americas

Middle-East

OECD & Non-OECD APAC Africa


February 2015

2014 LCOE – Global ranges and baselines

Wind energy well positioned against other power sources Global Market Trends

Source: MAKE, IEA

Globally, wind power is making progress towards grid parity and is expected to become cost competitive even with coal generation.

100

700

350

300

250

200

150

50

0

Ma

rine

- W

ave

LC

OE

– E

uro

s/M

Wh

Ge

oth

erm

al

Nu

cle

ar

IGC

C

OC

GT

Win

d O

ffsh

ore

Pa

rity

Bio

ma

ss

Hydro

So

lar

PV

Win

d O

nsho

re

So

lar

To

we

r

Coal

CC

GT

Renewables global

Conventional global

Wind global

2014 Baseline

Note: Unsubsidized LCOE


February 2015

Global onshore grid parity timeline


Wind power grid parity increasingly a demand driver

Global offshore grid parity timeline

30% onshore LCOE reduction through evolution of turbine technology, development of supply chain and best practices. 40% offshore LCOE reduction driven by next generation of advanced technology turbines, substructures, economies of scale and cost control of execution and management

0

20

40

60

80

100

120

Eu

ro/M

Wh


Source: MAKE, IEA World energy outlook 2013 electricity price projections

2025

scenario

2020

scenario

2014

scenario

Onshore wind LCOE range

Global wholesale electricity prices

Defined scenarios

Eu

ro/M

Wh

0

50

100

150

200

250

300

2025

scenario

2020

scenario

2015

scenario

Onshore wind LCOE range

Global wholesale electricity prices

Defined scenarios


Source: MAKE, IEA World energy outlook 2013 electricity price projections


February 2015

Regional market dynamics impacting technology decisions

Competitive forces affecting wind turbine technology Global Market Trends

Source: MAKE

Continued evolution of platform-based products expected in order to leverage track record, decrease development cycles and cost optimize

Intense cost pressures increase

dependence on suppliers and

leaning of internal supply chains

Global policy uncertainty and

emergence of regional markets with

short installation windows

Installations centralized in

few established markets

with long-term (3-5 year)

policy uncertainty

OEMs with entrenched

domestic presence, few

major suppliers engaged in

emerging markets

OEMs seeking first mover

advantage in new markets; Asian

OEMs continue export push

Many OEMs with high

levels of vertical integration

and enjoying high profit

margins

Regional

policy and

demand

Global

competitive

presence

Profitability

and cost

pressures

Platform-based products

with mass customization

to suit local requirements

Rapid evolution of

existing platforms to

meet local

technology needs

Asset-light supply chains reliant

upon contract manufacturing and

economies of scale

Past Future trends


February 2015

2014 Technology

2020 Scenario

2025 Scenario

LCOE progress evident, further drops remain possible

Global Technology Trends

Wind energy nearing the critical

point of grid parity in many

markets, further progress will be

driven by technology

advancements

Source: MAKE

Onshore Offshore Onshore Offshore Onshore Offshore

Avg MW Rating 2MW 4MW 2.5MW 6MW 3MW 8MW

Avg Rotor Diam 100m 130m 120m 155m 138m 180m

Key technology High speed DFIG

traditional turbines

Scaled onshore

platforms

Medium speed

drivetrains

Direct drives for

reduced OPEX

Modular blades to

ease logistics

Advanced

substructures

Baseline LCOE

(Euro/Mwh) €58.5 €150 €48.4 €110 €40.1 €84


February 2015

Energy and cost LCOE impact

Technology roadmaps for LCOE improvement

Operational cost LCOE impact

Global Technology Trends

Source: MAKE

Sustained improvements in energy capture, cost position and operational expenses are possible through technical innovation

+50%

-50%

0

80

58.5

€/MWh

(Baseline)

70

50

Ch

an

ge

in

ca

pa

city F

acto

r (%

)

Change in total CAPEX

(Euros/MW) -20% +20%

40

Improved (lower) LCOE

0

2014

2020

+100%

0

-100%

70

58.5 €/MWh

(Baseline)

65

Ch

an

ge

in

an

nua

l O

PE

X c

ost

(Eu

ros/M

W/y

ear)

Change in total CAPEX

(Euros/MW) -20% +20%

55 50

Improved (lower) LCOE

0

2014

2020


February 2015

Major influencers to LCOE reduction LCOE reduction opportunities

Technology improvements

Larger MW ratings experience

plant-level economies of scale

Advanced blades reduce loading

with more swept area, improving

AEP while reducing CAPEX

Advanced tall towers access higher

winds with lower CAPEX

Robust drivetrains reduce failure

rates and unplanned OPEX

Operational improvements

Improved siting allows for larger

rotors in higher wind speeds,

extended plant life beyond 20 years

Lean supply chains, robust install

procedures and refined O&M

practices reduce cost incrementally

Onshore LCOE will improve through technology evolution Global Technology Trends


Source: MAKE

30% reduction in onshore LCOE is possible through continued evolution of turbine technology and development of supply chain and best practices

0 45 50 55 60

40.1

Wind plant best practices 2.4

Lean supply chains 1.2

O&M best practices 1.2

Drivetrain reliability

2025 LCOE

1.9

Advanced towers 1.1 2.6

Advanced blades 5.1 0.4

Larger turbines 2.5

2014 LCOE 58.5

OPEX

AEP

CAPEX

Te

chn

olo

gy

Op

era

tion

al


February 2015

Major influencers to LCOE reduction LCOE reduction opportunities

Technology improvements

Larger turbines, advanced low

OPEX drivetrains on larger wind

plants further from shore

Significant cost scale economies on

new foundations enabled by

advanced jacket structures

Technical availability improvements

due to higher reliability and

operational excellence

Operational improvements

Reduced perceived risk allows for

reduced debt and equity cost

Operational excellence and lessons

learned allow for shorter

development cycles and less costly

project execution costs

Offshore LCOE improvement requires larger step change Global Technology Trends


Source: MAKE

40% reduction in offshore LCOE is will be driven by next generation of advanced technology turbines, substructures and cost control of execution and management

150 140 130 120 110 100 0 90

8.0

12.8

2025 LCOE 84.3

Lead time reduction

7.6 Low cost substructures

3.1 Higher technical availability

5.0 Low cost HVDC

4.2 Reduced cost of capital

4.0

Contingency/cost overruns 5.7 2.8

150.0 2014 LCOE

Larger turbines and farms

12.2

OPEX

AEP

CAPEX

Te

chn

olo

gy

Op

era

tion

al


February 2015

Carbon fiber use expected to decline with

ramp-up in 2018

Direct drives expected to make modest

gains in each region

Partial power converters expected to

maintain over 50% market share

Controls technology a hotbed of innovation

Key component technology trends Global Technology Trends

15 25 February 2015

Tower technologies are diversifying and

growing taller

Detailed anaysis and date in the latest

edition of Global Wind Turbine Trends

Offshore substructures experience

innovation boom

Key component technology trends Global Technology Trends

16 25 February 2015

Global grid-connected forecast: 2013-2023e

Global wind power market to see sustained growth

Source: MAKE

Americas and China drive market comeback in 2014/15 with global growth to stagnate until 2017 as North American and European onshore demand reduction balance emerging market and offshore growth. Wind power grid parity to drive post-17 onshore growth despite lower expected subsidies.

80

60

40

20

0

´21e ´20e ´19e ´18e ´17e ´16e ´15e ´14e ´13

(GW)

´23e ´22e

+4.8%

Asia Pacific (excl. China)

China

Africa and Middle East

Eastern Europe

Southern Europe

Northern Europe

Latin America

North America



February 2015

Global grid-connected forecast: 2013-2023e

Offshore wind segment to more than triple in share of global market

Source: MAKE

Offshore growth largely to be European until 2017 after which Chinese offshore is expected to be a key driver for global offshore

80

60

40

20

0

(GW)

´23e ´22e ´21e ´20e ´19e ´18e ´17e ´16e ´15e ´14e ´13

Onshore markets Offshore markets



February 2015

Global offshore wind grid-connected forecast: 2013-2023e

Europe key market for offshore in the medium term Global Market Trends

Source: MAKE

European near term offshore wind growth, technology development and scaling and industrialisation of supply chain is key for reducing offshore wind LCOE

19 Global Offshore Wind Power Market

12 January 2015

7

14

12

10

8

6

4

2

0

9

13

11

3

5

1

+22% CAGR

’23e

13.5

’22e

12.4

’21e

12.1

’20e

9.9

’19e ’15e

3.5

’14e

2.3

Cum. 2013

7.1

’18e

6.0

’17e

5.2

’16e

2.7

7.4

EMEA APAC AMER

Source: MAKE

Offshore wind market will require investments of approximately €47 billion in 2023, mainly concentrated in Asia-Pacific and Europe

20 Global Offshore Wind Power Market

12 January 2015

[51%]

5.1

’17

[39%]

2.0

’14

[21%]

0.5

’23

[66%]

8.9

’20

Grid connected

capacity, GW p.a. [% of

global market]

Asia-Pacific

Global offshore grid-connections

Development will remain concentrated in a few markets

’23

[25%]

5.1

’14 ’20 ’17

[49%]

40.4

[11%]

1.0

[39%]

17.1

Grid connected

capacity, GW

cumulated [% of

global market]

[45%]

4.4

’17

[60%]

3.1

’14

[79%]

1.8

’23

[31%]

4.2

’20

Grid connected


global market]

Europe

’23

[73%]

15.2

’14 ’20 ’17

[48%]

39.4

[89%]

8.4

[59%]

25.8

Grid connected

capacity, GW

cumulated [% of

global market]

[4%]

0.4

’17

[1%]

0.1

’14

[0%]

0.0

’23

[3%]

0.5

’20

Grid connected


global market]

Americas Grid connected

capacity, GW

cumulated [% of

global market]

’23

[2%]

0.5

’14 ’20 ’17

[3%]

2.2 [0%]

0.0

[3%]

1.1


Installed base to exceed 700MW by 2020

Global O&M revenue to exceed USD 13 Billion by 2020

Off warranty expected to exceed 300 GW

Source: MAKE Source: MAKE

A decade of strong growth in wind installations has led to a sizable market for O&M services outside of OEM warranty or service agreement

900

750

450

150

75

50

25

0

600

300

0

100

Cu

mu

lative In

stalls (GW

)

+319GW

20e 18e 16e 14e 2012

An

nu

al In

stal

ls (G

W)

APAC

EMEA

AMER

Global Cumulative

150

0

300

450

750

900

600

20e

APAC off-warranty

17e 16e 15e 14e 2013

Global OEM service

+371 GW

19e

AMER off-warranty

EMEA off-warranty

18e



February 2015

2014 supply as % of demand, 2014-2016e

Consolidation and market exits ease overcapacity, though

additional action is required

Source: MAKE

Global Supply Chain Dynamics

0 50 100 150 200 250

(%) 187%

Nacelles

183% 190%

Main bearings 133% 138%

Pitch/yaw bearings 115% 118%

Generators 111% 115%

Gearboxes 147% 152%

Towers

193%

Blades 116% 120%

Castings 194% 201%

Main shafts 104% 108%

Rolled rings 170% 176%

2016e demand 2014e demand

Profit margins squeezed throughout

the value chain

Heavy competition driving rapid

product evolutions

Global demand growth only at ~1%

from 2014-2016e

Further consolidation/attrition is

likely and needed, especially in China

Market abandonment enabling supply

contraction (U.S.)

Consolidation rationalizing expansion

in growth markets (EU offshore)


February 2015

Regional supply v. demand highlights changes in U.S. market Global Supply Chain Dynamics

Source: MAKE 0 10 20 30 40 50

Rolled rings

Main shafts

Castings

Pitch/yaw bearings

Main bearings

Towers

Generators

Gearboxes

Blades

Nacelles

Demand 2014e Demand 2015e Demand 2016e

50 40 30 20 10 0 100 0 40 80 20 60

AMER EMEA APAC


February 2015

Regional supply capacity v. demand (GW)

Interactive_World_Map_Europe.ppt

Interactive_World_Map_North_America.ppt

Interactive_World_Map_South_America.ppt

Interactive_World_Map_Africa.ppt

Interactive_World_Map_Australia.ppt

Interactive_World_Map_Asia.ppt

Projected regional nacelle sourcing origins, 2014e-2016e

Europe remain a central supply hub for regional and global markets


Source: MAKE

Global supply chain adjusts procurement strategies in face of stagnant markets and emerging opportunities. Supply chain footprint continue to be heavily influenced by policy incl. local content requirements and incentives

Global

Asia/Europe

Europe

S. Europe

N. Europe

Brazil

China

India

MEA region is the

primary battleground

between European and

Chinese turbine OEMs

Americas-based

nacelle plants primarily

confined to intra-

regional procurement

Facilities in Western

Europe continue to

dominate Europe and

Northern Africa


February 2015

Market size comparison

Domestic manufacturing expectations too high in new markets Global Supply Chain Dynamics

Investment in nacelle and subcomponent

manufacture on a large scale has occurred historically

in markets averaging over 2GW per year

Russia, Ukraine, Saudi Arabia and South Africa are

all attractive growth markets considering local content

policies

Unfortunately, these markets are project to be less

than a third of the size of traditional wind

manufacturing markets that have significant supply

chain capacity

Brazil is an exception as the market is forecast to

surpass 2GW annually and likely would have

attracted multiple OEMs

Source: MAKE

Forecast demand is not sufficient to support an organic supply chain in several markets exploring local content policies. Focusing on specific opportunities is recommended

14.0 7.0 2.0 0.5 1.0 1.5 0.0

Spain

Germany

South Africa

Saudi Arabia

Ukraine

Russia

India

GW

United States

China

Five-year average 2009-2013

Three-year average market peak through 2022


February 2015

Onshore turbine MW ratings

MW ratings continue to rise in all global regions

Offshore turbine MW ratings


Source: MAKE Note: Past averages based on identified wind projects.

Future averages based on product market share modelling

N. America expected to graduate past the 2MW benchmark, following GE new products

Offshore MW rating growth will accelerate with installation of 2016+ projects

1,0

1,5

2,0

2,5

3,0

On

sho

re a

vera

ge M

W r

atin

g

2020e 2018e 2016e 2014e 2012 2010

AMER APAC EMEA

2,5

3,0

3,5

4,0

4,5

5,0

5,5

6,0

2020e 2018e 2014e 2016e 2012

Off

sho

re a

vera

ge M

W r

atin

g

2010

Offshore


February 2015

Opportunity for M&A activities across selected segments


Analysis of M&A opportunities for market entry or expansion

Partnerships

Buyer segment

Component segment

Asset owners

Non-wind industrial

conglomerates

Conglomerate competitor

Pure-play competitor

Private equity funds

Opportunity for M&A activity in

short/medium term

Generation assets

Onshore turbines

Offshore turbines

Blades

Generators

Gearboxes

Bearings

Towers

Foundations

Offshore vessels

O&M/ISPs

Controls/Tech

Source: MAKE M&A


February 2015

Delivering renewable energy insight

TM

About MAKE

29

An introduction to MAKE

Local knowledge Global advantage

The renewable energy industry is evolving

constantly. New markets are developing and

market conditions are changing.

Technological advances and global supply

chain transformation are lowering the cost of

energy day by day. For true and timely

insight, you have to be where the action is.

That’s why we have experts in key renewable

energy markets, providing a global advantage

to our clients.

30


Powerful Data Accurate Predictions

In today’s environment of intensifying

competition and shifting demand, staying

ahead of the curve is the key to success.

MAKE supports businesses across the globe

to achieve this by providing in-depth data and

forecasts – which have proved to be

industry’s most accurate, year after year.

31


Through years of working with companies

across the renewables value chain, MAKE

has developed a global network of

professional experts and decision makers.

Our close relationship and interaction with

leading investors, utilities, OEMs, suppliers,

service providers, government institutions

and NGOs provides a multifaceted view of

the industry. It keeps us abreast of the

newest developments and produces powerful

insights.

Extensive network Leading insights

32


Our global team of analysts and consultants

offers deep knowledge of renewables, gained

during years of working at leading companies

in the business. Our team has been carefully

assembled to offer the right blend of

expertise about markets, the supply chain,

technology and finance to accelerate results

for our clients.

Industry experience Accelerated results

33

The MAKE knowledge model

Markets

Value Chain

Technology

Finance

To fully understand the current status and development of the global wind power industry – it is essential to have multi-

faceted insights into burning issues that will impact the industry’s future. MAKE’s team of experts constantly analyzes

global and regional data to provide a full spectrum of analytics that cuts across the 4 key drivers / barriers for growth:

markets, value chain, technology and finance.

34


Markets

MAKE’s global team of analysts closely monitor macro-economic, policy and project developments, order placements and installations in over 140 key and emerging onshore and offshore wind power markets worldwide.

Tier I Markets:

China

U.S.

India

Germany

United Kingdom

Brazil

Canada

Tier III Markets:

Italy

Poland

Ireland

Japan

South Africa

Chile

Denmark

Belgium

Finland

Greece

Russia

Romania

Ukraine

Norway

Egypt

Argentina

Austria

Morocco

Pakistan

South Korea

Ethiopia

Spain

Peru

Venezuela

Saudi Arabia

Uruguay

+ 100 more markets

Tier II Markets:

Mexico

France

Turkey

Australia

Sweden

Netherlands

35


Value Chain

The ever-evolving dynamics of supply and demand impact companies across the wind power value chain. MAKE constantly monitors all value chain segments for interesting developments, such as supply-demand imbalances, sourcing strategies, key company positions, M&A activity and much more.

Wind plant development

Raw material supply

Component supply

Wind turbine manufacturing

Logistics

Engineering, procurement and construction

Asset ownership

Operations & maintainance

36


Technology

MAKE’s technology team closely monitors individual partners in the supply chain and their technical innovation and product development and forecasts technological trends in key areas, including:

Wind Turbine

Rotor

Nacelle

Tower

Control systems

Components

Offshore

Installation vessels

Cable-laying vessels

Foundations

Substations

Transmission cables

Balance of Plant

Foundations

Substations

Electrical work

Installation equipment

37


Finance

As the demand for wind power ultimately depends on economic viability and cost-competitiveness, understanding the financial and cost developments is key. Our team studies various financial aspects of the industry:

Renewable power generation

portfolio strategies of global

asset owners

Regional financing

mechanisms and structures

for both onshore and offshore

Capital markets and finance

availability

Competitiveness of wind versus

other sources of energy, power

pricing and levelised cost of

energy by region and

technology

Understanding the key drivers

of cost including technology,

logistics and raw materials

38

Wind Power

Research Products To make the right decisions for your wind business and

investments in today’s environment of intensifying competition and

shifting demand, you need access to reliable and timely industry

insights. MAKE delivers research, forecasts, data and a multi-

faceted view of the global wind-power industry with unrivaled

depth and accuracy, offering you a competitive advantage in

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The BASIC subscription

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The PREMIUM+

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Semi-annual forecast

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39

MAKE offers tiered subscription plans for varying market intelligence needs

An introduction to MAKE research subscriptions

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The SUPERIOR subscription is our most elite research package, containing all of MAKE’s research products. It is the most complete toolbox of wind power research, insights, data, and analytical support. It contains all products inside the PREMIUM+ subscription

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Semi-annual Wind Turbine OEM Market Share Forecast B

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Global Wind Turbine Technology Database The definitive global wind turbine model database complete with technical specifications and data

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Quarterly Market Outlook Updates + Webinars Updates of global forecasts for onshore and offshore markets, order flow and turbine pricing

Flash Notes Instant analysis and insight into the latest industry developments

Sector Reports + Webinars Special reports on global offshore wind power and global wind turbine O&M sectors

Semiannual Market Outlook Updates + Webinars Updates of global forecasts for onshore and offshore markets, order flow and turbine pricing

Research Notes Expert analysis of key strategic wind power industry topics

Annual Market Outlook Updates + Webinar Global forecasts for onshore and offshore markets, order flow and turbine pricing

Company Database Profiles of leading wind turbine supply chain and asset owner companies

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46

MAKE’s Consulting services

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47


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48


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49

A sample of our wind industry due diligence engagements

Commercial due diligence on a global top-5 wind turbine manufacturer (conducted for a large private equity

fund, 2014/15)

Commercial and technical due diligence on a global fleet of wind power asset (conducted for an industrial

buyer, 2014)

Commercial due diligence on a leading gearbox manufacturer (conducted for a large private equity fund,

2014)

Vendor due diligence on a globally leading blade manufacturer (conducted for the owner, 2014)

Vendor due diligence on a globally leading tower internals suppliers (conducted for the owner, 2014)

Technical due diligence on leading wind turbine manufacturer (conducted for the owner, 2014)

Commercial due diligence on an offshore project pipeline (conducted for a large financial institution, 2014)

Commercial and technical due diligence on a smaller European wind turbine manufacturer (conducted for a

Chinese industrial company, 2013)

Commercial due diligence on a leading sub-sea services provider conducted for a medium sized private

equity fund (2013)

Commercial and technical due diligence on a leading offshore cable protection system supplier conducted for

a medium sized private equity fund (2013)

Commercial due diligence on a leading blade core material supplier conducted for a medium sized private

equity fund (2013)

Commercial and technical due diligence on a Chinese wind turbine manufacturer conducted for a medium

sized private equity fund (2013)

50

Business principles and code of conduct

We are a reliable and professional company

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Our material is based upon our own extensive databases, and supported by structured analysis and

research processes

Our sources are well-known and reliable industry experts with proven success in the wind industry

We only take on tasks that we are capable of completing to the expectations of our clients

We operate with honesty and integrity

We are committed to conduct our business with the highest degree of integrity and ethics and in compliance

with all applicable laws and regulations

We protect the intellectual property of all of our clients in all of our business activities

We maintain complete confidentiality of all data sourced from our global network of industry experts

We require our employees to act lawfully, honestly and with integrity

We do not tolerate bribery, corruption, improper payments, facilitation payments or fraudulent practices of

any kind

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own interests and those of the company. For example, our employees cannot undertake board work in other

companies within the industry and cannot hold shares in any company within the industry

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socially responsible manner

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Contact

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© 2014 MAKE Consulting A/S. All rights reserved. Reproduction or distribution of this report in any form without prior written permission is strictly forbidden. Violation of the above restrictions will be subjects to legal action under the Danish Arbitration Act. The information herein is taken from sources considered reliable, but its accuracy and completeness are not warranted, nor are the opinions, analyses and forecasts on which they are based. MAKE Consulting A/S cannot be held liable for any errors in this report, neither can MAKE Consulting A/S be liable for any financial loss or damage caused by the use of the information presented in this report.

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51

Steen Broust Nielsen

[email protected]

Delivering renewable energy insight

TM

Backup slides

Flat onshore market

Germany and UK offshore will drive European market development

Source: MAKE Q4/2014 Market Outlook Update

Note: Capacity numbers are based on annual installed capacity except for offshore which is grid-connected capacity

Europe onshore (GW)

Consistent growth from 2014 to 2020e

Germany, UK and Turkey are the largest onshore markets totaling 39% of onshore installations from 2014 to 2020e

Northern Europe accounts for 56% of total European installations in the period 2014-20e while Eastern Europe and Southern Europe make up 15% and 29% of total European installations, respectively

Slow recovery in Southern Europe expected post 2015e

Significant offshore growth

Europe leads the offshore segment with 1.8GW installed in year to date

Overall significant growth expected in the sector from 2014-2020e with a CAGR of 16%

Despite some regulatory uncertainty in the key offshore markets, investments in offshore assets are still expected to remain attractive enough to encourage growth in the sector

Europe offshore (GW)

5

15

10

0

2015e 2014e 2013 2012 2011 2010

GW

2018e 2017e 2016e

+8% CAGR +1%

CAGR -5%

2020e 2019e

Rest of Europe

Turkey

France

Sweden

UK

Germany

5.0

4.0

3.0

2.0

1.0

0.0

2012 2010 2011

GW

2015e 2014e 2013

+44%

-25% +17%

2020e 2019e 2018e 2017e 2016e

Rest of Europe Germany UK

Europe wind power market outlook

53 53 January, 2015

Wind Power Industry Update

54 January, 2015


N. Europe – UK and Germany upgraded

European onshore upgraded in the North, South and in the East

Northern Europe forecast: 2013 to 2023e

Source: MAKE

Southern Europe forecast: 2013 to 2023e

Onshore and offshore upgrades result in net 4GW

upgrade in the subregion, mostly thanks to German

onshore - driven by enhanced regulatory clarity - and

Swedish offshore growth, due to new political support

MAKE upgraded Swedish onshore by 100MW for 2014

based on accelerated activity; we have downgraded it

by 175MW for 2015 due to investor uncertainty

stemming from low power and green certificate (GC)

prices. GC prices to pick up again for 2016

Dutch onshore has been downgraded by 100MW for

2014 due to licence delays. Upgrades have been made

for Austria (50MW) and Belgium (40MW), following the

expected connection of a higher amount of projects

10

8

6

4

2

0

12

(GW)

-0.7%

‘23e ‘22e ‘21e ‘20e ’19e ’18e ’17e ’16e ’15e ’14e ’13

Germany UK Sweden Others

5

4

3

2

1

0

(GW)

+6.6%

‘23e ‘22e ‘21e ‘20e ’19e ’18e ’17e ’16e ’15e ’14e ’13

France Italy Turkey Spain Others


S. Europe, France to drive growth

We project an overall 254MW upgrade in Southern

Europe over the 10-year outlook thanks to France

Very modest activity in Spain in the aftermath of the

subsidy crisis

A 400MW upgrade in France in 2014 and 2015 is due to

more favorable regulatory conditions for wind growth

established by the Energy Transition Bill

A 150MW downgrade in Italy for 2014 reflects slower

activity and increased investor uncertanty as to the

future of renewable energy subsidies

E. Europe – Croatia and Romania upgraded

Eastern Europe marks slight growth

Eastern Europe forecast: 2013 to 2023e

Source: MAKE

Uncertainty in MEA leads to downgrade

Middle East & Africa forecast: 2013 to 2023e

A 241MW upgrade in Eastern Europe driven by

Romania and Croatia

A 160MW upgrade for 2014 in Romania based on

increased activity

Croatia, Czech Republic and Montenegro have been

upgraded due to commissioning of new projects from

2014 to 2020

Ukraine downgraded by 31MW due to prolonged unrest

in the eastern part of the country

MAKE has redistributed new capacity in Russia (51MW

in 2015, 70MW in 2016 and 150MW in 2017), with a

slight downgrade

A significant 10% downgrade from the Q3 outlook

Significant downgrade (800MW) in Saudi Arabia due to

lower confidence in the government’s intention to

support wind development, as solar becomes more

likely to get priority

A 500MW downgrade in South Africa after REIPPPP

Round3 financial close delays due to grid issues, which

creates uncertainty for the 4th round

Despite a very ambitious plan, MAKE has downgraded

its forecast for Ethiopia (300MW) due to slow progress

Announcement of a 225MW project for Mainstream

Renewable in Ghana results in an upgrade in 2017

2

0

1

3

(GW)

+5.5%

‘23e

‘22e ‘21e

‘20e ’19e ’18e ’17e ’16e ’15e ’14e ’13

Poland Romania Ukraine Others

4

3

2

1

0

(GW)

+21.8%

‘23e

‘22e

‘21e

‘20e ’19e ’18e ’17e ’16e ’15e ’14e ’13

Morocco South Africa Egypt Others


55 55 January, 2015


Market forecast, 2014e – 2020e – Installed capacity

Source: MAKE

Note*: EEG - Erneuerbare Energien Gesetz (Renewable energy source act)

Drivers and barriers

Drivers

The new EEG* 2014 has set a target of 35% of gross electricity production derived from renewables in 2020

Similarly, there are interim targets of 40-45% by 2025 and 55-60% by 2035

12GW of nuclear energy is to be shutdown by 2022. Additional renewable energy will be necessary to fill the gap

Although the tariffs offered through the EEG 2014 are slightly lower than those offered through the EEG 2012, MAKE expects them to be sufficient to deliver stable growth in the market

Development plans for expansion of German grid both to integrate onshore and offshore wind exist, and continuous discussions about further plans continue

Barriers

Regulatory uncertainty post 2017 creates difficulties in planning forward

There is an annual expansion cap set at 2.5GW for onshore wind in 2016

Grid expansion needs to further adapt to transition from nuclear to wind energy

Germany Review of key wind power markets

3.8002.400 2.400

1.600 1.800

784

1.971690

970 828

2.0001.800

0

1.000

2.000

3.000

4.000

5.000

(MW)

-11%

2018e 2017e 2016e 2015e 2014e 2019e 2020e

250 492

Onshore Offshore

Market evaluation

Macro and policy related criteria Evaluation

Macro conditions

Regulatory framework

Transmission

Order backlog

Overall assessment

56 56 January, 2015



Source: MAKE

Note*: CfD - Contract for difference, RO - Renewables obligation, ROC – Renewables obligation certificate, NREAP - National renewable energy action plan


Drivers

Wind specific NREAP* target is around 27.9GW by 2020 (14.9GW of onshore and 13GW of offshore)

NREAP* target is to achieve 15% of energy consumption from renewables by 2020

U.K. has increased its national target for offshore to 18GW by 2020

A guaranteed revenue stream is one of the clear advantages of the CfD* compared to the RO*, as generators under the RO are exposed to fluctuations in power prices and ROC* prices

Barriers

Concerns over the budget pertaining to the CfD allocation has created a certain amount of uncertainty in the market. Fearing many projects may not be able to secure funding

Discontinuation of the intended export deal between Ireland and the UK will hit onshore drastically

The power mix in the UK still primarily consists of fossil fuels

UK Review of key wind power markets

808 870 900600

870 551 1.536 1.356

800500 700

1.2801.132

0

500

1.000

1.500

2.000

2.500

2018e 2017e

+4%

2016e

(MW)

12

2015e 2014e 2019e 2020e

Onshore Offshore

Market evaluation


Macro conditions


Transmission

Order backlog

Overall assessment

57 57 January, 2015



Source: MAKE

Note*: FIT – Feed in Tariff


Drivers

France has a target of 25GW by 2020 –

19GW onshore and 6GW offshore in

order to reduce its reliance on nuclear

power from the current 75% to 50% by

2025

Introduction of carbon tax with

proceeds going towards energy

transition

Restoration in the French FIT* scheme

will create certainty amongst investors

Growth expected from energy transition

bill:

o 23% renewables share of gross

final consumption 2020

o 40% reduction of greenhouse gas

emission from 1990 to 2030

o 30% reduction of fossil fuels

consumption by 2030

Barriers

Lengthy permitting procedures create

bottlenecks in construction of wind

projects

Grid delays as well are main concern

France Review of key wind power markets

900 1.000800 800

1.000 1.0001.000

0

500

1.000

1.500

2018e 2016e

(MW)

2017e

+8%

2015e 2014e

2

2019e 2020e

Offshore Onshore

Market evaluation


Macro conditions


Transmission

Order backlog

Overall assessment

58 58 January, 2015



Source: MAKE

Note: EML – Electricity market law


Drivers

Ambitious wind target of 20GW by

2023. The potential for wind energy is

48GW

Target of 30% of energy to be

produced from renewables sources by

2023

Strong dependence on oil (93 to 94%)

and gas (98 to 99%) for its domestic

consumption

The new EML to create favourable

conditions for future wind investments

and as a step towards increased

renewable energy integration

Significant local content bonus of up to

2.95 ct/kWh for fully locally produced

wind turbine

Barriers

Duration of preliminary license of 24

months under new EML puts a great

deal of pressure on investors

concerned about bureaucratic

processes

Entrance of nuclear power in the will

have an impact on the generation mix

Turkey Review of key wind power markets

850600

800 850 9001.2001.200

0

500

1.000

1.500

(MW)

2016e 2015e 2017e 2020e 2018e

+6%

2014e

5

2019e

Offshore Onshore

Market evaluation


Macro conditions


Transmission

Order backlog

Overall assessment

59 59 January, 2015



Source: MAKE

Note*: NREAP – National renewable energy action plan


Drivers

NREAP* target is to achieve 49% of

energy consumption from renewables

by 2020

Wind specific NREAP target is around

4.5GW by 2020 (4.4GW of onshore

and 0.2GW of offshore)

Joint GC system with Norway, where a

combined target has been set for

13.2TWh by 2020

Strong renewable energy support

mechanisms in the form of tax

incentives as well as the possibility of

GC quota increase drive growth of wind

Barriers

Strong dominance by nuclear and

hydro power drive power in Norway

Low electricity prices at present deter

renewables investment

Compliance with renewable energy

target could lead to slower growth

Sweden Review of key wind power markets

850600 800 850 900 1.000950

586

0

500

1.000

1.500

2.000

2017e 2015e 2016e 2018e

+11%

(MW)

2014e

5

2019e 2020e

Offshore Onshore

Market evaluation


Macro conditions


Transmission

Order backlog

Overall assessment

60 60 January, 2015


Carbon fiber utilization

Carbon fiber use expected to decline with ramp-up in 2018

Blade technology roadmap

Component technology trends

Note: Penetration as % of Global MW installed

Source: MAKE

Glass alternatives to carbon fiber increasingly used to avoid quality issues

Truss structure blades and AT show promise to grow rotors while reducing loads and cost

61 Wind Turbine Technology Trends 2014

25 February 2015

10

12

14

16

18

20

Mark

et penetr

ation

Ca

rbo

n f

ibe

r b

lad

es

-8%

2020e 2018e 2016e 2014e 2012 2010

0

High

LCOE

58.5

€/MWh

(Baseline)

Ch

an

ge

in

En

erg

y

Pro

du

ction

(M

wh)

Improved LCOE

-5%

+5%

0 -5% +5%

Slender airfoils

Polyeurethane

Polyester

H-Glass

Carbon fiber

Baseline

Truss structure Pultrusions

Flatback airfoils

Jet actuators

Flaps Swept blade

MW experience

Manufacture Materials Aerodynamics

Low LCOE

Change in Turbine CAPEX

($/MW)

20

14

e In

sta

lls 2

02

0e In

sta

lls

2014e drivetrain segmentation

Direct drives expected to make modest gains in each region

2020e drivetrain segmentation


Source: MAKE

Direct drive growth expected in all regions, high speed gearboxes will maintain majority

Offshore expected to converge on direct drive with 50% marketshare by 2020


25 February 2015

Offshore

2.3

72%

9%

19%

EMEA

11.8

62%

38%

APAC

18.9

71%

29%

AMER

11.4

89%

11%

Medium Speed High Speed Direct Drive

Offshore

50%

8.6

28%

22%

EMEA

14.4

59%

33%

8%

APAC

28.7

64%

33%

AMER

11.2

74%

25%

Generator technology roadmap

Direct drive commercial uptake is lagging geared systems

Dual drivetrain OEMs – orders (2012-14)


Source: MAKE

Note: 2012-2014 announced orders only

Cancelled orders removed

Source: MAKE

Direct drive technology shows lots of innovation potential

Cost control of heavy generators will be critical to commercial adoption


25 February 2015

Geared 12,590

Direct Drive 8,884

Alstom UP

Dongfang Siemens CCWE

High

LCOE

58.5 €/MWh

(Baseline)

Ch

an

ge

in

An

nu

al O

PE

X c

ost

(Eu

ros/M

W/y

ear)

Change in total CAPEX cost

(Euros/MW)

Low LCOE

Improved LCOE

-25%

-5%

0

0

+25%

+5%

Superconducting

Ironless Core

PMG - External PMG - Internal

Baseline

MW experience

2014 converter segmentation

Global converter segmentation – architecture and location

2020 projection – converters


Source: MAKE

Partial power converters expected to maintain over 50% marketshare due to cost, reliability and efficiency advantages over full power converter systems


25 February 2015

20

20

e In

sta

lls

20

14

e In

sta

lls

Offshore

2.3

4%

5%

84%

EMEA

11.8

26%

10%

18%

30%

APAC

18.9

63%

6%

AMER

11.4

34%

32%

30% 30%

15%

7%

Partial Downtower Partial Uptower Full Uptower Split Up/Downt tower Slip Resistor Full Downtower

Total GW:

Offshore

5%

8.6

15%

48%

17%

EMEA

14.4

26%

26%

8%

17%

APAC

28.7

55%

4%

AMER

11.2

38%

23%

3%

14%

37% 30%

6%

24%

Controls technology roadmap

Controls technology a hotbed of innovation

Evolution path for CMS technology



Significant opportunity for controls technology to reduce loads, increase energy production and improve operations and maintenance expenses


25 February 2015

<5 Rotor

loads

Gearbox oil

particles 25

60 Drivetrain vibration

95+ Temperatures (oil, coolant, bearings)

CMS success stories will

translate to increased

adoption of complex

CMS technologies

Adoption rates of various CMS technologies

High

LCOE

58.5 €/MWh

(Baseline)

Ch

an

ge

in

An

nu

al O

PE

X c

ost

(Eu

ros/M

W/y

ear)

Change in total CAPEX cost

(Euros/MW)

Low LCOE

Improved LCOE

0

+5%

-25%

0

25

-5%

Optical blade

LIDAR

SCADA only FBG blade roo

Shaft deflection

Ultrasonic anem

Drivetrain vibration

Baseline

Oil particle

MW experience

Drivetrain Loads

Average hub height trends

Tower technologies are diversifying and growing taller

Global tower type segmentation



Steel towers will continue to provide lions share of global installations

Demand for taller towers will stimulate innovation in steel alternatives and concrete


25 February 2015

70

75

80

85

90

95

100

105

110

On

shro

e a

ve

rag

e h

ub

heig

hts

(m

ete

rs)

2020e 2018e 2016e 2014e 2012 2010

AMER

APAC

EMEA

95,7% 91,8%

4,2% 5,0%0,1% 3,2%

2014e 2020e

Alt. steel Concrete Steel tubular

global wind power industry update - jwpajwpa.jp › pdf › 20150227_make_industry.pdf2015/02/27...

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