the future wind turbine supply chain · 2019-06-27 · north america wind energy advisory – may...

Presentation

North America Wind Energy Advisory

Wind Turbine OEMs Struggle to Remain Competitive

25 May 2011

Matthew Kaplan+1 617 866 [email protected]

© 2011 IHS EMERGING ENERGY RESEARCH, LLC. All rights reserved. Reproduction of this publication in any form without prior written permission is strictly forbidden. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it.

North America Wind Energy Advisory – May 2011

The top three North American OEMs faced market share erosion between 2005 and 2009, but this trend reversed course in 2010

Wind Turbine OEMs Struggle to Remain CompetitiveTurbine Deliveries Slow

North America Market Share Evolution: 2001–2010

Source: Manufacturers, IHS Emerging Energy Research

Top Three vs. Other (MW)Annual Deliveries: 2001–2010 (MW)


Wind Turbine OEMs Struggle to Remain CompetitiveLower Power Price Environment: Wind Must Become More Competitive

Note: Represents projects online between 2007 and 2010 with contracts executed between January 2007 and June 2010; projects online during the same period but with earlier contract execution dates are omitted. Prices represent realized price for full year 2010, where available, excluding test energy or other pre-COD arrangements. Wholesale power price taken as monthly median of representative sample of US hubsSource: FERC, IHS Emerging Energy Research

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60

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Jan.07 Jan.08 Jan.09 Jan.10 Jan.11

PP

A/ W

ho

lesa

le P

ow

er P

rice

(U

S$

/ M

Wh

)

Contract Execution Date

Wind PPA PricesPPA TrendMedian US Wholesale Power Price

Lower natural gas prices and increased competition is pushing wind power PPA prices down

2010 Realized Renewable PPA Prices


PA

IL

MO

Wind Turbine OEMs Struggle to Remain CompetitiveWind OEM Competition Segmentation

Competition Within the US Wind Market

Diversified GlobalHeavy IndustryConglomerates

Europe- or US-Based Wind/Renewables

Companies

Market Leaders

New/Potential Entrants

US

Win

d M

arke

t S

har

eM

ost

Leas

t

Significant Utility-Scale USInstallations

Asia-Based WindCompetitors

As competition heats up, there is an ever-increasing gap emerging between leading heavy industrials and new market entrants


Wind Turbine OEMs Struggle to Remain CompetitiveTechnology Key Industry Focus

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100 102 104 106 108 110 112 114 116 118 120 122 124 126 128 130

Cap

acit

y R

atin

g (

MW

)

Rotor Size (meters)

GE

Vestas

Siemens

Gamesa

Mitsubishi

Clipper

Suzlon

Acciona

DeWind

REpower

Nordex

Northern Power

Goldwind

Alstom

High level of product competition

Market trajectory

GE, Acciona, Goldwind

GE

Vestas, Gamesa, Dewind Siemens

Acciona

Source: Utilities, Developers, IHS Emerging Energy ResearchNote: OEMs added to exhibits where similar rotor sizes overlap and may not be visible within exhibit

OEMs are rapidly introducing new products aimed at increased efficiency and overall cost reduction

Wind Product Rotor Size vs. Nameplate Capacity


Wind Turbine OEMs Struggle to Remain CompetitiveUS Wind Manufacturing Map

Major Wind Manufacturing Map (Select Recent Investments)

OEM

Towers

Blades

Gearboxes

Bearings

Towers TowersGenerators

Blades

Tower Bases

Blades

BladesTowers

Castings

Suppliers are forced to respond to customer demand for lower costs


Wind Turbine OEMs Struggle to Remain CompetitiveNorth America Wind MW Added by Country: 2005–2025

Historical Forecast

Note: *IHS EER preliminary forecasts subject to revisionSource: IHS Emerging Energy Research

United States Wind Capacity Added: 2005–2025*

Between 2011 and 2025, IHS EER forecasts 7.5 GW in average wind installations per year in the United States

Riding the WindDomesticating the Supply Chain – One Part at a Time

Tom WaggonerManagerSupply ChainAcciona Windpower North America

AGENDA

› Market Demands

› The Strategic Approach

› GloCal Sourcing

› Key Partners

Market Demands

WIND ECONOMIC FUNDAMENTALS 2008 VERSUS 2011

MARKET DEMANDS

Market Indicator 2008 2011

Natural Gas $11/MMBtu $4.3/MMBtu

Steel $1200/ton $850/ton

PPA Pricing $65/MWh $35/MWh

Electricity Demand Growing 2%/year At pre-recession levels

RPS ComplianceStatus Short of targets Meeting obligations

WTG Lead Time 2+ years 6-9 months

› Market power has shifted from the OEMs/suppliers to the Utilities given weak demand, low natural gas prices, and weak policies for renewable energy

The market demands attention to mitigate Cost Drivers. Localization of the Supply Chain can play a key role.

MARKET DEMANDS IN NORTH AMERICA

› Cost Highly competitive with pricing dropping 40% since 2008 due to excess

capacity

› Lead Time 6 to 9 months vs. 12 to 18 months requires flexibility

› Quality Rapid innovation and increased Warranty period demands drive higher Quality

Standards and ability to control

› Service Rapid turn-around of Service to maintain Maximum availability

So how do we decide on localization?

MARKET DEMANDS

The Strategic Approach

THE STRATEGIC APPROACH

LOCALIZATION MUST BRING VALUE

› When Foreign Exchange fluctuation brings instability

› Lowest Landed Cost: Consistent and Repeatable

› Rapid proto-type, Component Complexity – Participative Quality Management

› Immediate Service and Repair turn-around, Local expertise

› TCO – Total Cost of Ownership

Competitive on a GLOBAL scale?

“GloCal” Sourcing

“GLOCAL” SOURCING


THE ABILITY TO RESPOND TO LOCAL DEMANDS ON A GLOBAL BASIS

Global Footprint – Design Partners

Regional 1 – Rapid Proto-type

Regional 2 – Critical Component

Limited – Commercial Components

The Capability to Respond Globally, within a Localized Supply Chain at a Consistently Competitive Price is a Key Decision Point

CURRENT STATUS IN NORTH AMERICA


Non-U.S. Source

23%

U.S. Source 77%

Localized Supply AWNA

North American Suppliers / Subsidiaries are proving the ability to bring value on a consistent basis

Long Term Success requires Development of Key Partners

Key Partners for the Future

KEY PARTNERS

BECOMING A KEY PARTNER – PERFORMANCE AND INTEGRATION

Selection

Quality

Key Partner

Cont. Imp.

Integration

Technology

Delivery

Supplier

HOMOLOGATION DECISION MADE ONE PART AT A TIME

LOCALIZING THE SUPPLY CHAIN – ONE PART AT A TIME

Cost

Bring value at globally competitive cost –Lowest Landed and Total Cost of Ownership

Quality

Strict Quality Controls to assure Industry Leading reliability and availability

Delivery

Ability to provide components and service when and where needed

Technology

The capability to grow and improve utilizing a systematic approach to continuous improvement

RobustRepeatable

Relevant

MANY THANKS

Tom WaggonerManager, Supply Chain

Acciona Windpower N.A.

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AWEA WINDPOWER 2011 Conference Supply Chain Development at Gamesa

May 25, 2011

James BuddelmeyerVice-President, Purchasing

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3 business units dedicated to wind power

GAMESA BUSINESS UNITS 2010 Statistics

WIND TURBINE MANUFACTURING

OPERATIONSAND MAINTENANCE

WIND FARMS

REVENUE:

GLOBAL HEADQUARTERS

STAFF:

$3.5 B

BILBAO, SPAIN

7,200 EMPLOYEES

GLOBAL RANKING 2010U.S. RANKING 2010

43

MANUFACTURING CENTERS:

SPAIN/USA/CHINA/INDIA/BRAZIL IN DEVELOPMENT

GLOBAL INSTALLED BASE 21,000MW

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Growth – 30 Countries and growing

Americas2,766 MW

Europe14,586 MW

Asia1,726 MW

INSTALLATIONS

N. Africa756 MW

2010 Total Global Sales : 2,405 MW

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Global Manufacturing

30 Production Centers

Components

Nacelle AssembliesBlades

GearboxesGenerators

Electrical Control Boxes

CAPACITY

USA > 1,200 MW

EUROPE > 2,000 MW

ASIA > 1,200 MW

Brazil in development

UK in development

ANNUAL > 4,400 MW

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Significant investments in R&D…focused on new technology and product improvements

7 R&D centers in Spain, US, Singapore & China.

Planned centers:United Kingdom, India (Chennai), & Brazil.

Over $395 Million invested over last 5 years

Investment to exceed $220 Million over the next 3 years

162 registered patents at the end of 2009

Gamesa leads and takes part in advanced R&D Wind Energy programs in Spain, the U.S. and the rest of Europe

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Gamesa US Overview

US Headquarters, Langhorne, PA

Design, manufacture, and development of wind turbines and farms

Nacelle Center of Excellence , Fairless Hills PABlade Center of Excellence , Ebensburg, PA

Offshore Wind Technology Center, Chesapeake VA

900+ employees

2,400 MW installed in the U.S.

$200M invested since 2005 in PA

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Commitment to the US Market

R&D G80 Wind farm Henry

Hills

G87 Wind Farm at Kumeyaay

Gamesa opens US Headquarters in Philadelphia, PA

GWUS opens office in Austin, TX

GEUSA purchases Navitas Energy

2002 2003 2004 2005 2007

First Wind Farm at Mendota Hills (63xG52)

GTC, Inc shifts headquarters to Oxford

Valley, PA

1.000 MW installed

2.000 MW installed

Fairless Hills & Ebensburg

manufacturing facilities

groundbreaking

Sales and Development

Offices in 7 US Cities

Gamesa/Northrop Grumman

20112008 2009

3.000 MW

installed

30

Commitment to the US MarketNacelle Center of Excellence Fairless Hills, PA

Brownfield site rehabilitation in 2005-6 (Formerly US Steel Fairless Hills Site)

235,000 sq. ft. Factory in three production bays and 75,000 sq. ft. Warehouse.

93 acres of land.

Access to Rail & Deepwater Port

Gross investment > $70 MM

Currently produce nacelles & hubs.

Additional bays available for expansion

US Steel Fairless Works, circa 1960

31

Commitment to the US MarketBlade Center of ExcellenceEbensburg, PA

Greenfield site installed in 2005-6.

Plant produces wind turbine blades

168,000 sq. ft. Factory with offices and warehouse included in plant.

Total of approximately 29 acres of land - ample FG storage

Gross investment > $65 MM including land, building, equipment.

Upgraded from G87 to G90 blades in 2009-10.

Additional $20MM invested in North American Facilities in 2009

32

Over 2,400 MW installed in the US…900+ under construction

BEAR CREEK

CAYUGA RIDGE

FAIRLESS HILLSEBENSBURG

MESQUITE & POST OAK

SANDBLUFF BARTON CHAPEL

MENDOTA HILLS & GSG

KUMEYAAY

LOCUST RIDGEALLEGHENY

RIDGE

P.HEIGHTS

TOP OF IOWA &

BARTONAIRFORCE

FARMER CITY

LEMPSTER

MT. STORM

WINNEBAGOBUFFALO RIDGE II

BIG HORN

HARDSCRABBLE

CHESTNUT FLATS

FIRST MARINE

WINDSTARKINGMAN

SLYINA

DE,MPSEY

24 Wind Farmsin 17 States

VALEY VIEW

33

Gamesa Logistics & Service Support Resources

On-Site Spare parts and tooling warehouses

Major Regional Warehouses

3 Service Centers3 Regional Warehouses25 On-Site Warehouses

Regional Service Centers

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1

o Regulatory uncertainty in USo Growth in Asia and other emerging markets o Offshore growth will accelerate after 2013o Wind turbine technology changing rapidly

MARKET:

THE SLOWDOWN OF 2009 & 2010 HAS TRANSFORMED THE WIND INDUSTRY

2 CLIENTS: o Increasing demands by operators–utilities and large developers

o Wind power internationalization requires WTM global support

o Competition based on offering the lowest CoE and availability over the wind farm's life

3 SUPPLIERS o Large industrial conglomerates increasing their market share

o Smaller, local players are reducing their presence

Wind industry is transforming rapidly

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Games is Responding to the Changing Market

Competitive CoE

Superior reliability and service offering

The right products with superior technology

Extensive geographical presence

Flexible response times17

Gamesa Value Proposition:

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Gamesa US Overview

2010: 100 Meter Tower & Seismic towers Introduction of 90 meter rotor – Class IIIA winds High altitude package designed for 2000 meters (6000 ft) Cold weather package designed for -40C Gamesa NRS (Noise Reduction System) O&M Services - Improvements and expanded coverage

2011: G9X 2.0 MW wind turbine – Designed for Class I, IIA & IIIA winds G10X – 4.5 MW wind turbine

Introduction of New Products:

37

Technology Leadership…G10X 4.5MW

State of the Art Technologies

• Compact power train

• 2 sectioned blade

• 1,300,000 engineering hours been dedicated exclusively to the G10X 4.5MW turbine

• 240,000 hours specifically to testing

• 350+ tests on components and sub-systems

• Designed in collaboration with our suppliers

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Ambitious product innovation roadmap

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Gamesa Goes Offshore ..UK & US

Global Offshore Headquarters in London

Sites in Scotland,

Total investment of €50MM

R&D engineering center in Glasgow

U.S Offshore Wind Technology Center…..In Partnership with Northrop Grumman

U.S . Center opened February 2011, Chesapeake, Va

60 engineers jointly working to design the G11X

Design, development, and testing of the G11X prototype

Installation of 2 prototypes by 2012 along the Mid-Atlantic coast

First offshore turbine to be developed in the US

2 New platforms: G11X 5.0MW & G14X 6.0/7.0MW

Gov Bob McDonnell

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Gamesa Global Purchasing

Global purchasing presenceResources in EU/NA/ASIA/INDIA

Strategic purchasing approachTotal cost of ownership

Focus on local supply chainsReduce cycle time to meet customer needs

Optimized logistics patternsSupplier development program

Performance metrics & feedback

Introduction of lean techniquesImprove process & eliminate waste

41

Gamesa Global Purchasing

Opportunities for NA suppliers exist in several areas: Specific quality inspection providers:

Electrical & electro mechanical Gear box inspection

Firms that can do Operations & Maintenance work up tower in the wind farms Preventative maintenance and/or “punch-list” work Requires extensive certifications

Suppliers of large industrial portable generators

Fabricators of large, machined weldments

Electrical cabling

Metallurgical towers

42

Gamesa US Purchasing

Opportunities for NA suppliers exist in several areas:

Engineered tools, fixtures and inspection devices for maintenance of wind turbines

Transport of major assemblies to the wind farms

Environmental inspection services

Construction contractors to complete the civil work on the wind farms

Support the erection of wind turbines

Needs: suppliers that can bring technological solutions to improve wind turbine availability and reduce COE!

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Gamesa Supplier Requirements

Successfully pass initial supplier quality assessment

ISO9000 Certification

ISO14001 Certification plan to achieve

World class competitive cost structure

Advance technological capabilities

Advance product quality planning (APQP) system implemented

Production part approval process (PPAP) implemented

Successful Homologation in Gamesa system

Lean culture and techniques utilized

Manufacturing & administration

Healthy Financial Status

44

Certification & Homologation Process:

Homologation Process Steps:

Phase 1: Supplier’s Qualification Assessment

Phase 2: Supplier Feasibility(Capability & Capacity)

Phase 3: Process and Product Design

Phase 4: Process Validation and Serial Mfg. Approval

Phase 5: Initial Samples

Phase 6: PPAP Closing. Start of Mass Production

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o Quality (SQA):

o Delivery (Planning): o Technology (Eng.):

Material cost reduction as a % of spend

Acceptance of contract terms

Long Term Agreement in place

Productivity reduction plan in place?

Supplier currently in Gamesa SIP program?

Supplier Balanced Score Cardo Cost (Purchasing)

Delivery performance to due on dock dates

Participation in Gamesa pull system?

Following packaging instructions?

Lead time reduction plan in place?

Line disruption deduction

NCR’s # at production

NCR’s cost percentage

NCR’s # at wind farm

Advance quality planning

Lack of notification deduction

Catia/Cad facilities

Bench mark technology

Best practices design

Design capabilities/DFSS

Design failure deduction

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Growth fundamentals are in place:

Why Wind??

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7

Attractive opportunities mostly in Emerging markets:

7

48

Aligned with the main international ethical corporate principles

49

Corporate perspective…simply “globalization” 1,600MW sold in 2004 Top markets: Spain, Italy, Portugal, & China

U.S. Market receptive to wind (2004)

Dynamic market conditions

Positive signs…Estimates showed the U.S. could top 15,000 MW of total installed capacity by the end of 2009

7 states plus DC legislated RPS’s

500 utilities in 34 states offered green pricing programs

Early 2005 Project announcements of large projects, 4 of the top 5 were 200+MW

PTC

Gamesa: Global Presence, Local Focus

Developing a Supply Chain as aWind Industry Start-up Company

Bill BerghoffDIRECTOR OF MANUFACTURING

Permanent Magnet Generators and Power Converters

Full design and manufacturing• Only PMG manufacturer in USA

Industries• Wind

• Industrial

• Transportation

Company• Partnerships

• Right people doing the right things

• Innovation driven

How a Start-Up Differs From an Established Company

Growth from technology or industry need

Incomplete organizational competencies

Investment funded by active partners

Historical relationships

Reputation

Strategy

Core Competencies

Vertical Integration vs. Assembly Competencies

Vertical Integration

• Machining• Fabrication• Stator Winding

Assembly

• Design• Sourcing• Assembly Processes

Supplier Value Proposition

Danotek Supply Base Strategy

Supply Base Development Strategy Differences

Typical Progression

• Self evaluation• Quote• Review of technical

specifications• Revised quote• Supplier evaluation• Supplier fit

determination

Danotek Progression

• Supplier discussions• On-site visit• Ownership introduction• Alignment discussions• Competency evaluation• Program management

evaluation• Quote

Privately owned

Domestic facility headquarters, often Midwest

Strategy to enter wind industry

Military, medical or industrial product critical mass

Advanced technology or competency expertise

Global outreach

Danotek Typical Supplier

Danotek Supplier Interaction

Assessment during design and quote phaseFull design reviews

• Mating parts and full assembly

• Functional use

Complete open door exchange at facilities• Designers, engineers, floor technicians and quality personnel

Customer• On-site customer review of facilities and capabilities

• Suppliers are partners through to our customer

Expertise: Machining complex rotating assembly parts• Military final drive• Turbo assemblies

Danotek Partnership Example:Loc Performance

Danotek design• Max run-out 0.004”

Loc Performance Solution• Max stack-up run-out surface 0.0002”• 20 Times less run-out with No Added Cost

Expertise: Design, machining, fabrication and assembly• Machine tools• Assembly cells

Danotek Partnership Example:Merrill Technologies

Danotek situation• MFG medium speed generator

Merrill Technologies solution• Prototype assembly process• Re-locatable MFG cell

Danotek Supply-Base Partnership Take-Away

Complementary skill sets

Advanced technology or industry offerings

Understand cost structure prior to quoting

Understand partnerships and start-up companies

Transition from prototype to production

Passion for wind diversification

Three PhasesThroughout Production

•Local/Domestic Expertise•Design & Engineering Driven•Prototype Production•Fast Turnaround•Higher Cost•Selected Partnership•Contingency Support

Start Up Phase

•Global & Local Sourcing•Quality & Cost Driven•Established Organizations•Technical Partnerships•Volume Capability

Production Phase

•Design Improvements•Supplier Re-Alignment•Logistics Optimization

CI / CR Phase

Danotek Supply BasePartnerships Evolving

Competitive through product manufacturing

Competitive through global outreach

Competitive through bundled global buy

Follow and support Danotek in low cost regions

New low cost partners for CI/CR phase

Partners continue involvement with new product development

Danotek Motion Technologies - Confidential

Questions?

www.danotekmotion.com

Bill BerghoffDIRECTOR OF MANUFACTURING

[email protected] ext 401

Maureen DempseyGLOBAL SUPPLY CHAIN MANAGER

[email protected] ext 178

Questions and Answers

the future wind turbine supply chain · 2019-06-27 · north america wind energy advisory – may...

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