Speaker 1: Hi everyone. Today we're going to talk about wind. Twenty
Speaker 1: twenty was a record year in this sector, with nearly
Speaker 1: one hundred gigawatts of new capacity coming online globally. But
Speaker 1: from the looks of it, this record year appears to
Speaker 1: be only the start. In our twenty twenty new Energy outlook,
Speaker 1: which we discussed in our January twenty ninth show titled
Speaker 1: Modeling the Energy Future, Ants Birds and Doctor Strange, being
Speaker 1: if projects wind to grow on average five point seven
Speaker 1: percent per year to twenty fifty, this means about hundred
Speaker 1: and forty seven gigawats per year, beating last year's record
Speaker 1: every year and growing from six percent to power supply
Speaker 1: today to thirty three percent to twenty fifty. And to
Speaker 1: put a bit of a point on it, on March
Speaker 1: twenty ninth, the Biden administration announced a target to install
Speaker 1: thirty gigawatts offshore wind in the US by twenty thirty,
Speaker 1: up from about zero today. In short, wind is growing.
Speaker 1: This weekend the show, we've got two bloom Bergunna f
Speaker 1: wind analysts, Isabel Edwards and Leo Wong. They're here to
Speaker 1: tell us about what happened in twenty twenty to achieve
Speaker 1: record installations where the growth of the sector is happening
Speaker 1: and who is winning is supplying all those turbines. Our
Speaker 1: discussion is based on our report titled twenty twenty Global
Speaker 1: Turbine Market Shares being i fusers can get this report
Speaker 1: on benef go in the Bloomberg terminal, BNF dot com
Speaker 1: in the BNF mobile app. As a reminder, BENIF does
Speaker 1: not provide investment or strategy advice, and you can hear
Speaker 1: the full disclaimer at the end of the show. I'm
Speaker 1: Mark Taylor and you're listening to switch down the BENF podcast.
Speaker 1: He is he Mark hay Leo, Hi, Mark, thanks for joining.
Speaker 1: Today is a year in London. Leo, you're in Beijing.
Speaker 1: I'm in London and today we're going to talk about
Speaker 1: global wind. So can you start us off by telling
Speaker 1: us what's happening in wind? So there was a huge
Speaker 1: growth last year in year on year and almost a
Speaker 1: hundred gigawatts of new capacity was put online. Can you
Speaker 1: tell us how that happened? Yep, So was a bit
Speaker 1: of a crazy year for the wind industry. We saw
Speaker 1: two giga watts added in the onshore wind market, which
Speaker 1: is increase on last year, and then six point five
Speaker 1: gigawatts added in the offshore wind industry. But really, when
Speaker 1: we look at where that growth happened, it's down to
Speaker 1: two markets, which are the U S and China, and
Speaker 1: both had subsidy schemes that were due to change at
Speaker 1: the end of So in the US, developers at the
Speaker 1: beginning of the year thought that production tax credit would
Speaker 1: begin to be phased out at the end of twenties,
Speaker 1: so they were rushing to get their projects online by
Speaker 1: the end of the year. And then in China was
Speaker 1: the last year we're going to see significant built for
Speaker 1: projects that qualify for the onshore wind feed in tariff Leo.
Speaker 1: Do you do you want to say anything more about that? Yeah, sure,
Speaker 1: absolutely so looking back in the past ten years, actually
Speaker 1: China's tremendous growth has largely been filled by the supporter
Speaker 1: of government subsidies andies really the last year for the
Speaker 1: onshore wind projects to qualify for the fair in Paris
Speaker 1: so on that regard, since everyone needs to capture the
Speaker 1: lucrative subsidies, they essentially just rushed everything and that's how
Speaker 1: we get to this tremendous amount of capacities built in
Speaker 1: twenty just really quick, can we do a quick parenthetical?
Speaker 1: Can you explain what the production tax credit is and
Speaker 1: what a feed in tariff is for the uninitiated. The
Speaker 1: production tax credit is a federal income tax credit that's
Speaker 1: awarded to project owners based on electricity sales. And so
Speaker 1: this year ends last year projects can qualify for of
Speaker 1: the production tax credit, but it is going to be
Speaker 1: phased out every year until leo, do you want to
Speaker 1: explain how does the feed in tarifforic in China? So
Speaker 1: the fit entire scheme in China allows the developers as
Speaker 1: owners to sell their power at the fixed rate. And
Speaker 1: essentially the income comes with two parts. So the first
Speaker 1: part is essentially paid by the local credy companies, which
Speaker 1: is usually equal to the local coal power prices, right.
Speaker 1: And then then the second part, which is intially the gap,
Speaker 1: is paid by the central government's budget. So when you
Speaker 1: add those two components together, that will be the total
Speaker 1: volume for for the in tires. Okay, So they're racing
Speaker 1: to get guaranteed income or a tax credit or a
Speaker 1: tax break on the production electricity exactly. These are just
Speaker 1: some of the different ways that projects owners can guarantee
Speaker 1: revenue from electricity sales on their projects, and in many
Speaker 1: markets they're getting fased out or the governments are changing
Speaker 1: the level of seity that they're awarding to projects, and
Speaker 1: so there is a push among developers worldwide to qualify
Speaker 1: for the kind of highest level of government support before
Speaker 1: that is phased out. Cool okay and Leo, you mentioned
Speaker 1: that there's like some crazy activity going on in China
Speaker 1: to try to meet that deadline. Can you describe some
Speaker 1: of that essentially in China? Added fifty seven point eight
Speaker 1: was of new win forms, And to just put that
Speaker 1: into context, that's the number doubling from the twenty nineteen level,
Speaker 1: which is another big year for China. And if you're
Speaker 1: actually comparing that number fifteen seven point eight to the
Speaker 1: global win installations, that's only two gigglewards the shine off
Speaker 1: the total wind capacity at it in twent nineteen globally, right,
Speaker 1: So that just put everything into the perspective. And what
Speaker 1: happened in is UH joint efforts from the supply side
Speaker 1: as well as the demand side. So on the supply side,
Speaker 1: we're seeing manufacturers working there in the night, and then
Speaker 1: they were even able to reduce the amount of time
Speaker 1: to produce a single blade from seventy two hours all
Speaker 1: the way down to twenty four hours. And then you're
Speaker 1: seeing the developers sending their employees to stay in the
Speaker 1: wind turbine makers factories so that they were making sure
Speaker 1: their towbins get to be first. On the demand side,
Speaker 1: what we're saying that those developers were also building like
Speaker 1: crazy in the central part of China. Some teams were
Speaker 1: trying to transport the wind installation cranes to a wind
Speaker 1: farm and it breaks down in the middle of the night,
Speaker 1: So these construction crews were driving five hundred kilometers away
Speaker 1: to a service center to get the spare parts and
Speaker 1: then then get back to the construction site the second day.
Speaker 1: So that just tells us like whole heart those folks
Speaker 1: on the grill on a twin to get those winter
Speaker 1: been spilt. That's amazing. We'll get into this, but like
Speaker 1: the supply side alone is just really incredible. To build
Speaker 1: double the capacity that you put in the ground last year,
Speaker 1: that's quite a jolt to the supply chain, right, Yeah,
Speaker 1: that's that's something we would never imagine. Okay, so we'll
Speaker 1: get into that in a second. But there's two more
Speaker 1: things I want to touch on on the context of
Speaker 1: global wind. So one is that it seems really undeterred
Speaker 1: by COVID nineteen, right, so the world kind of shut down,
Speaker 1: but it seems not to have affected wind at all.
Speaker 1: Can you describe why it looks like it hasn't affected
Speaker 1: wind at all? When you look at the year end installations,
Speaker 1: there isn't a single region worldwide where installations didn't grow
Speaker 1: compared to But when we look earlier in the year,
Speaker 1: there are a number of national lockdowns that delayed farms
Speaker 1: from being built. So there were restrictions on the movement
Speaker 1: of goods so the turbines to actually get to the sites,
Speaker 1: and then on the movement of people so like workers
Speaker 1: to go and build the wind farms. But that was
Speaker 1: relatively short lived because construction projects were some of the
Speaker 1: first to be prioritized in terms of the people that
Speaker 1: could go back to work throughout the pandemic. So now
Speaker 1: we we really don't see that much of an impact
Speaker 1: when we look at global installations. So the projects that
Speaker 1: were in the pipeline got built, but did the pipeline
Speaker 1: keep growing? You know, our more projects being financed as
Speaker 1: well through the pandemic, So that's where we start to
Speaker 1: see the impact of COVID nineteen on the wind sector.
Speaker 1: We recorded a record here for offshore wind investments with
Speaker 1: fifty billion invested worldwide and new projects and actually mean MIA.
Speaker 1: We saw about about half of that was in EMA,
Speaker 1: which is actually equal to the same amount that we
Speaker 1: saw invested in the onshore wind sector and AMIA. But
Speaker 1: when we look at global offshore wind financing, it was
Speaker 1: down to you about ninety billion last year, down from
Speaker 1: about a hundred and twenty billion in twenty nineteen. And
Speaker 1: we think that's both just because it was maybe more
Speaker 1: challenging to get parties together in order to agree on
Speaker 1: a financing agreement for a project, but also some parties
Speaker 1: that might have been willing to finance a win farm
Speaker 1: at the start of the pandemic might have had a
Speaker 1: lower appetite for the risks posed by some of these
Speaker 1: projects by the end of the year. How is that
Speaker 1: looking for one and beyond, so we expect one to
Speaker 1: be another large year for for wind. We currently are
Speaker 1: forecasting about eighty four giga watts of new wind capacity
Speaker 1: to come online, so not as much as last year,
Speaker 1: though not as much as last year. It's gonna be
Speaker 1: difficult to top twenty, but still a big year. So
Speaker 1: about seventy had gig watson the onshore wind industry and
Speaker 1: nine gigg wats in the afshowin industry, which is a
Speaker 1: bit of an increase an offshore based on twenty twenty.
Speaker 1: There's one more thing I want to touch on context
Speaker 1: before we get into the supply chain. President Biden in
Speaker 1: the US announced, you know, on what tenty ninth of March.
Speaker 1: I believe that they want to build out thirty gigawatts
Speaker 1: of offshore wind by in the US, up from I
Speaker 1: think forty two now in the area between New Jersey
Speaker 1: and Long Island. That seems huge, is it, or is
Speaker 1: that you know, just a few wind farms. It's pretty big.
Speaker 1: So we currently estimate that about twenty three gigawatts of
Speaker 1: offshore wind capacity will be added in the US by
Speaker 1: So that's a further seven giga watts. And right now
Speaker 1: there is no large scale offshore wind installation in the US.
Speaker 1: The first one to come online, we think is only
Speaker 1: going to come online. So all of that thirty gigga
Speaker 1: watts would have to be built within a six year period,
Speaker 1: so about four point nine giga watts added each year
Speaker 1: over six years, which is really kind of logistically challenging.
Speaker 1: UM some of those new projects will need to secure permits,
Speaker 1: which in the US has been challenging to date. And
Speaker 1: really all of that off shore capacity has to be
Speaker 1: built in the northeast UM where the waters are shallow
Speaker 1: enough to accommodate bottom fixed offshore wind turbines. If we
Speaker 1: look to the other markets in the US that have
Speaker 1: set offshore wind targets, they're on the west coasts and
Speaker 1: have deeper waters, so those installations are more reliant on
Speaker 1: floating wind technology, which hasn't benefited from the same cost
Speaker 1: reductions due to large deployment of commercial offshore wind installations
Speaker 1: in Europe. And if I'm remembering correctly from your report,
Speaker 1: there currently is not a US based offshore wind equipment supplier.
Speaker 1: Is that right, Yes, that's quite right. So we're looking
Speaker 1: at the global off your wind supply chains, so instantially
Speaker 1: today Europe and the China and other actually two major
Speaker 1: regions where actually they're able to produce the off your
Speaker 1: wind turbines as well as the the other equipmenting need
Speaker 1: to build a wind farm. And for you, as yes,
Speaker 1: we don't have a ready to go wind turbine manufacturing
Speaker 1: facility yet, But that doesn't necessarily mean that the existing
Speaker 1: facilities might not have a second chance to expand their facilities,
Speaker 1: upgrade the producing increments and they get ready for the
Speaker 1: for the future production. So we think right now the
Speaker 1: industry have the confidence that the marketing will boom very soon.
Speaker 1: And besides, the local content rules just but just to
Speaker 1: be able to sift the transportation costs will be another
Speaker 1: strong driver for them to think about sitting up the
Speaker 1: local facilities. When we look at who has secured orders
Speaker 1: so far in the US, only about six gigawats of
Speaker 1: the thirty gig a wats that these government is targeting
Speaker 1: has signed preferential supplier agreements, So there is a lot
Speaker 1: of potential for new sales um for offshore wind turbans
Speaker 1: among all of the determined players. Most of the orders
Speaker 1: to date have gone to Semens, Comma and Geo Security
Speaker 1: in order as well Investors right now is the only
Speaker 1: company that doesn't have a US preferential supplier agreement for
Speaker 1: a project the US. Okay, wow, So there's gonna be
Speaker 1: a lot to do there. So thirty giga watts in
Speaker 1: the US of offshore by six globally predicted or projected
Speaker 1: by bloomguin e F and then our new Energy outlook,
Speaker 1: our outlooked to predicts somewhere on the order of a
Speaker 1: hundred giga watts per year, so matching the number roughly
Speaker 1: every year out a call from the report. Let's leave
Speaker 1: that there. The point is that wind is growing. We're
Speaker 1: going to take a short break and when we come back,
Speaker 1: we're going to talk about who is supplying the wind sector,
Speaker 1: who's building the turbines, who's winning, who's losing. So stay
Speaker 1: with us. So this report we're talking about today is
Speaker 1: the global wind turbine market shares you know, who is
Speaker 1: supplying the wind sector with well turbines? Can you tell
Speaker 1: us a bit more just about who's playing and who
Speaker 1: is winning in global wind? So it depends on where
Speaker 1: you look in the world. So outside of China, we're
Speaker 1: we're currently looking at about five have major companies. Some
Speaker 1: of those are best to us, the Danish turbine maker
Speaker 1: General Electric, which is an American conglomerate, and then seems Lasso,
Speaker 1: which is the leader in offshore wind. But about five
Speaker 1: to ten years ago there were many more players in
Speaker 1: the kind of ex China market. But so we're really
Speaker 1: seeing strong market consolidation outside of China, and right now
Speaker 1: the top five companies account for about ninety four percent
Speaker 1: of all onshore wind installations outside of China. That's huge, right,
Speaker 1: That's not a lot of room for others. And if
Speaker 1: you're looking China, then the story is totally different. Right.
Speaker 1: So in China is actually today one of the most
Speaker 1: fragmented wind marketing in the world despite the huge volume.
Speaker 1: So looking back in the past, when we are looking
Speaker 1: at the top three companies, their market shares pually around
Speaker 1: and the living tremendous space for the other players. And
Speaker 1: in just in last year, we have more than twenty
Speaker 1: companies supplying win turbines in China. So that's a huge market.
Speaker 1: Who is so many players active in it? So today
Speaker 1: go to wind Envision and the Mania are the three
Speaker 1: top players in the market, whereas a few others that
Speaker 1: belonged to a larger state owned enterprises. So I note
Speaker 1: the global wind turbine supply market has been relatively hard
Speaker 1: to track over the years. Player, remember that correctly, how
Speaker 1: did you actually go about doing this? Can you tell
Speaker 1: us a bit about your process or methodology for determining
Speaker 1: the market shares of these players. Bloomber Getting have win
Speaker 1: teams strives to track every wind farm that was brought
Speaker 1: online in a given year and a database of projects
Speaker 1: that currently accounts about forty wind farms and who supplied
Speaker 1: the turbines to those projects. So what we look for
Speaker 1: is in this exercises projects that are in the construction phase,
Speaker 1: that are entering the commercial operation phase within and we
Speaker 1: work in collaboration with the wind turbine manufacturers to come
Speaker 1: up with the final numbers for the report. So doing
Speaker 1: this work, you know, this is the laborious process. We've
Speaker 1: been doing this since we've been at We've been tracking
Speaker 1: renewable energy projects in two four. It's a it's a
Speaker 1: labor of love. I guess you could say. The results
Speaker 1: are really interesting and they allow us to draw insights
Speaker 1: or conclusions about the market. LEO, as you were doing
Speaker 1: this last year, what did you find most surprising as
Speaker 1: you look through the data. What we're looking back for,
Speaker 1: you know, for the numbers, obviously we're all stunded by
Speaker 1: the total amount of capacity at twenty but one more
Speaker 1: fine interesting detail that already surprised all of us. It's
Speaker 1: really how the market share of the top three players
Speaker 1: has come down a bit so asas they pointed out, globally,
Speaker 1: the wind marketing has been going through some marketing consolidation
Speaker 1: process and it's cause a true for China as well.
Speaker 1: And for the past few years the market share of
Speaker 1: the three leaders have been growing all the way, but
Speaker 1: this year their market shing has come down by thirteen
Speaker 1: percentage points. And what happened behind the curtains really a
Speaker 1: boom of performance from the small that will ended about
Speaker 1: makers who are able to double or even triple their installations,
Speaker 1: you know a year because the smaller players who are
Speaker 1: able to utilize their id only manufacturing capacity when the
Speaker 1: other books of the leading players will full, so in
Speaker 1: this way the capacity will doubling or even tripling. So
Speaker 1: really it's just a rising tide raises all boats in
Speaker 1: this case, right that there's more demand for projects and
Speaker 1: then the orders get filled up for the big ones
Speaker 1: and then there's room for the small players. That's really cool.
Speaker 1: Is that the same outside of China as well? Or
Speaker 1: do you see you know that top ownership amongst five players?
Speaker 1: I think you said, is there room for smaller players
Speaker 1: outside China? Less and less So when we look at
Speaker 1: the global picture, G E. Goldwyn and best Us are
Speaker 1: in the lead with over twelve gig awats at it
Speaker 1: last year, and then Envision at it over ten gig awats,
Speaker 1: and then we see all the smaller players to ring
Speaker 1: behind those top four. So we're really starting to see
Speaker 1: the gap widen between the the top few players and
Speaker 1: then the smaller players. And there's the instance of send Beyond,
Speaker 1: which filed for insolvency in because it was not able
Speaker 1: to kind of compete on a turbine crising basis with
Speaker 1: the larger players and had a high degree of market
Speaker 1: concentration risk um. And so the larger players, particularly Siemens Comessa,
Speaker 1: were able to absorb sem Beyond business units. So Siemens
Speaker 1: Comessa acquired Semyon's i P and its service portfolio which
Speaker 1: is the high margin business, and its manufacturing facilities. So
Speaker 1: now it seems we're getting into a very different type
Speaker 1: of consolidation, right, players that can't keep up, they get
Speaker 1: you know, solver parts on the cheap, I guess right, exactly,
Speaker 1: they get priced out, and then the larger players are
Speaker 1: able to absorb their their businesses. Fascinating, So we've touched
Speaker 1: on this a bit, you know, when we talked about
Speaker 1: supplying the US offshore market, But can you tell us
Speaker 1: a bit about the regional aspect of supply, so you know,
Speaker 1: we know the Goldwin supplies in China, g E in
Speaker 1: the US. Is the market mostly or entirely regional or
Speaker 1: is there any cross pollination or cross geography supply going on?
Speaker 1: It is mostly regional. So about East twenty installations came
Speaker 1: from the US, and for Goldwin, more than of them
Speaker 1: came from China, and those two companies placed first and
Speaker 1: second this year really by relying on growing demand in
Speaker 1: their home markets. Best LS, which placed third, takes a
Speaker 1: very different approach. So the U s it's largest market,
Speaker 1: only accounts of its twin twenty installations, and instead Best
Speaker 1: US supplied wind turbines to over thirty markets worldwide, just
Speaker 1: more than double the number of countries that g East
Speaker 1: By turbines too, and we are starting to see some
Speaker 1: of the Chinese players grow their business outside of China,
Speaker 1: and in turn the Western turbine makers for their business
Speaker 1: within China. So vest for just Invest US and gi Eat,
Speaker 1: China was the second largest market after the US for
Speaker 1: last year's Win installations. So Leo to your point earlier
Speaker 1: about you know, the smaller players in China being able
Speaker 1: to gain a foothold, it's sounding like it's true. Also
Speaker 1: for players outside of China, there's room for them too,
Speaker 1: Is that right, Yeah, exactly. So we are looking at
Speaker 1: the numbers in tween twenties. So gvestwesoms Commiss, those three
Speaker 1: companies combined they added around to point full kick awards.
Speaker 1: It might know it sounds like a lot compared to
Speaker 1: the total number in China, but still that's doubling from
Speaker 1: the level in twenty ten. Again, so looking into the future,
Speaker 1: which the presidentsen Pain's announcements on combinationality, the Chinese, the
Speaker 1: most of players, developers, and the government agencies were also
Speaker 1: looking at additional growth in the next five years. So
Speaker 1: obviously there's still a bounding room for actual turbans to
Speaker 1: be built. Let's continue to look to the future. There's
Speaker 1: a tool on BNF dot com that you guys built
Speaker 1: that looks at future market shares, which to me, honestly,
Speaker 1: I think is one of the coolest tools we have
Speaker 1: that I love that it's not just backward looking, but
Speaker 1: it's forward looking at who is going to own the
Speaker 1: future of the market? Chairs can you tell us based
Speaker 1: on that? You know, who has the strongest pipeline and
Speaker 1: what do you see one? You know, I think you've
Speaker 1: said another eighties six gig watts for this year, but
Speaker 1: who's looking to own that? So it's looking like it
Speaker 1: will be a similar story to this year, and that's
Speaker 1: not very surprising. So among the top five will be
Speaker 1: best s Ge, Goldwyn, Envision and Semens Comessa. And right
Speaker 1: now we have a project level data for about seventy
Speaker 1: percent of all of the capacity that we expect will
Speaker 1: come online, so there is some room for the kind
Speaker 1: of top players to shuffle around. We don't expect too
Speaker 1: many surprises from so in China this year actually something
Speaker 1: new will happen. So that's the first year for the
Speaker 1: unshaw win to go completely substidi free. And right now
Speaker 1: we're seeing a price wall going on with so many
Speaker 1: tebet makers testing again and again the bottom of the
Speaker 1: topam prices. So right now more and more companies are
Speaker 1: looking for potentially going to the public, meaning that they
Speaker 1: need the market to share to tell a good story
Speaker 1: to their investors. So now the war's still going on
Speaker 1: and with think as possible that the ranking will still
Speaker 1: reshuffle little bates at the end of one Okay, cool,
Speaker 1: So I guess one final question. We've talked a lot
Speaker 1: about China, the US, Europe today, but we haven't talked about,
Speaker 1: you know where else growth might occur, Latin America, Africa.
Speaker 1: Can you tell us a bit more about what the
Speaker 1: prospects are in in those markets. Sure, Africa has actually
Speaker 1: a reagioned that I'm watching pretty closely. So last year
Speaker 1: we saw that giga wat added across the Middle East
Speaker 1: and Africa region, most of that being in North Africa
Speaker 1: and South Africa, but there were a number of countries
Speaker 1: that financed some of their first wind farms. So Sambique
Speaker 1: is one, and there's a wind from being built in
Speaker 1: Ethiopia and Jibouti. So there is growing interest in and
Speaker 1: wind across the continents. And South Africa is now planning
Speaker 1: its next renewable energy auctions, so the government will auction
Speaker 1: about four point eight gig watts of entra wind capacity
Speaker 1: over the next three years. So I expect the market
Speaker 1: and Africa to grow. So it seems to be a
Speaker 1: theme that wind is growing. Leo is he thanks for
Speaker 1: joining us? So we'll be back. I think we should
Speaker 1: have you one you know next year to check in
Speaker 1: on the market. Leo is See. Thanks for joining us.
Speaker 1: Thank you Mark. Great to be on the show. Thanks
Speaker 1: for Today's episode of Switched On was edited by Rex
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