Global Wind Operations and Maintenance (O&M) Market is Estimated at $5.8 billion in 2011

Friday 20 January 2012, Amsterdam

The research provides an understanding of the technology, key drivers and challenges in the global wind power market. It also provides historical and forecast data to 2020 for installed capacity and power generation. The report details global market size of wind O&M market, market share by company type (Original Equipment Manufacturers, Independent Service Providers and In-house), O&M market share by onshore - offshore wind market and key company analysis. The report also provides market data on out of warranty turbines (in MW), gearbox repairs and refurbishment market (in units) and blade repairs (in units) during the period of 2011-2020. Major countries analyzed in the report include China, the US, Germany, Spain, and India.

Global Wind Power Market will Post Steady Growth during the Forecast Period

Global wind energy installed capacity is expected to increase at a CAGR of 26.2% from 74,107 MW in 2006 to 237,354 MW in 2011 of which 39,151 MW is expected to come online in 2011. Global wind power markets recovered in 2011 after a 10.9% fall in annual additions in 2010 as major wind markets such as the US, Germany and Spain faced economic problems following the global economic crisis. Wind power has become an important player in the global energy market, with the growing equipment market creating many employment opportunities. Wind turbine installations in 2010 amounted to more than $38.3 billion. The industry also provides employment to over 450,000 people worldwide. The exponential growth of the wind energy market is fueled by depleting fossil fuel reserves, the declining cost of wind power generation and a growing sensitivity for the environment supported by financial incentives by various governments across the world. China, the US, Germany, Spain and India are the major wind markets in the world accounting for a 72.3% share of the global cumulative installed capacity in 2011.

The growth of major wind power markets (the US, Germany, Spain, France, Italy, India and China) is expected to slow down during the forecast period 2011–2020. Emerging markets from Asia-Pacific and South and Central America will gain a considerable market share. The growing Asia-Pacific wind power market powered by India, China and other emerging countries such as Republic of Korea, Thailand and Philippines will continue to drive the market in the region. Countries such as Argentina, South Africa, Philippines, Ukraine, Brazil, Republic of Korea and Mexico are some of the nascent wind markets which are set to expand rapidly in the forecast period. Against this backdrop the global wind power installed capacity will reach 718,052 MW by 2020.

China Emerged as the Largest Wind Power Market in Terms of Cumulative Installed Capacity in 2010

China’s wind power market is growing at an enormous pace and emerged as the largest wind market in the world in 2010 when it surpassed the US. The country has transformed its position in the wind industry from a mere player in 2001 to a market leader in 2010 on the basis of strong government support for the industry. The cumulative installed capacity of wind power in China has increased from 2,604 MW in 2006 to 60,307 MW in 2011 at a CAGR of 87.5%. Government support in the form of favorable rules and regulations and a speedy approval process drove the Chinese wind market to achieve a Y-o-Y growth rate exceeding 100% during 2006–2009. The country added 13.8 GW of installed capacity in 2009, doubling the capacity for the fourth year in a row to 25.9 GW. In 2010, China added 18.8 GW of annual capacity at an annual growth rate of 72.4% and in 2011 the growth in annual growth rate further slipped down to 34.8%. Supportive government policies which include an attractive concessional program and the availability of low cost financing from government banks are critical reasons for the success of the Chinese wind power market. It is expected that China will continue to promote wind power in order to reduce its carbon footprint and increase rural electrification.

The US is the second largest wind power market with a cumulative global share of 20.3% in 2011. Germany is the third largest wind power market in the world with a share of 12.1% in 2011 (13.7% in 2010). Spain, which is the fourth largest wind power market with a cumulative share of 9.4% in 2011. The other major wind power markets include India with a share of 6.2% (6.6% in 2010), the UK with a cumulative share of 2.9% (2.6% in 2010), Italy and France with a share of 2.8% each (2.9% each in 2010), Canada with a share of 2.1% (2% in 2010) and Portugal with a share of 2.0% in 2011 (2.1% in 2010).

Offshore Wind Power Market Development to Gaining Momentum

The offshore wind market is expected to become one of the major market segments of wind power generation during the forecast period. Offshore wind power installations accounted for 1.6% of the global wind power market in 2010. It is being increasingly explored across the world for its high yield due to stronger and more consistent winds compared to onshore with scope to construct massive GW-scale projects. The UK, Germany, the Netherlands, the US and China are the biggest offshore wind power markets in the world with a number of projects currently in planning and under construction. With an increasing number of countries exploiting offshore wind potential during the forecast period 2011–2020 it is expected that its share in the global wind power market will reach 9% by 2020.

Global Wind Operations and Maintenance (O&M) Market is Estimated at $5.8 billion in 2011

The global wind operations and maintenance (O&M) market grew from an estimated $2.6 billion in 2006 to $5.8 billion in 2011 at a CAGR of 17.8%. The key drivers for the increase in revenues are increasing installations backed by financial incentives, capital subsidies and tax rebates. The other major market drivers are component failure rates and ageing wind turbines in operation. The O&M market growth is restrained by a lack of skilled manpower and the cost of logistics. Against this backdrop, the global wind O&M market will reach $13.1 billion in 2020 at a CAGR of 9.4%.

Offshore Wind Accounts for 6.3% of the Total Wind O&M Market

Offshore wind accounts for 6.3% of the total wind O&M market in 2011. Offshore wind attracts higher O&M costs in comparison to onshore wind. Lower turbine availability, high logistics costs and a lack of skilled manpower makes offshore wind service more challenging than onshore wind. Although onshore wind also faces logistics and manpower issues, the impact of these factors on the offshore segment is higher. It is estimated that revenues from the offshore wind O&M market segment will continue to grow and the share of offshore wind O&M market will be 19% of the total market in 2020.

Independent Service Providers (ISPs) Gaining Market Share in the Wind O&M Market

Original equipment manufacturers (OEM) dominate the wind O&M market with a share of 72.2% in 2011. It is expected that the share will fall 5.2% by 2015 as there will be increased competition from Independent Service Providers (ISP) in major wind O&M markets such as Germany, Spain, the UK, the US and China. Vestas, Gamesa, GE Energy, Enercon, Siemens, GoldWind and Sinovel are some of the main OEMs that account for the majority of market share in 2011. Large OEMs such as Vestas, Gamesa, GE and Siemens are signing long term service contracts to negate the impact of ISPs in the wind O&M market. ISPs will continue to gain market share in the post-warranty market as they are accessible, study local conditions well and are cost efficient. By 2015, ISPs will have a 20% share of the total wind O&M market. Wind farm owners’ (WFO) share in the wind O&M market accounts for 11.7% in 2011 and most of the owners who perform O&M in-house are utilities with vast experience in handling large power projects.

Competition among ISPs and OEMs to Intensify to Gain Considerable Market Share in Post Warranty Maintenance Market

The post-warranty maintenance market is one of the major drivers for the increase in revenue of the wind O&M market. Many turbine sales before 2009 had short service contracts from OEMs. Most of these contracts signed in the last five to six years are nearing completion and Wind Farm Owners (WFOs) will be looking for new vendors. It is estimated that 70% of the wind capacity that was online until the end of 2010 was under manufacturer’s warranty. About 139.2 GW of capacity of the 198.2 GW cumulative wind capacity by the end of 2010 was online for less than five years. In the US alone around $40 billion worth of wind installations will be out of warranty in 2011, which is a huge market opportunity for ISPs and OEMs. Most ISPs are entering the wind O&M market to gain market share in the post-warranty market. On the other hand OEMs are signing long term contracts ranging from five years to 20 years (for new and existing customers) to outsmart ISPs in the O&M market. It is expected that there will be increased competition among OEMs and ISPs in the near future. GlobalData estimates that the out of warranty or out of service contracts turbines market will increase from 25,118 MW in 2011 to 80,592 MW in 2020.

Availability of Skilled Technicians for Wind Farm Service is a Key Challenge in the O&M Market

The availability of skilled technicians and training technicians to perform O&M on-site of a wind farm is a critical challenge. On-site O&M work introduces challenges to technicians such as working at more than 200 feet in the air, harsh weather conditions and working inside nacelle’s tight quarters. The wind O&M market needs workers with specific skill sets. Manpower hired for on-site wind O&M must be highly responsible, able to manage and understand the technology, organized to face challenges such as heights, harsh weather conditions and perform tasks in tight quarters.

Technicians need lengthy and comprehensive training to be equipped to work in such a business environment. Many wind OEMs, ISPs and WFOs are planning to double or triple their workforce in the next three to four years. According to American Wind Energy Association (AWEA), the US wind O&M market will require 80,000 highly trained technicians in the next 20 years. Siemens, a leading turbine manufacturer, employs 1,500 people in its global service organization. The company has plans to triple its headcount in the next four years as it expects to expand its foothold in the market from 11 GW of installed wind power to 55 GW in the next five years. Therefore, the availability of skilled manpower in such a fast growing market will be a daunting task for companies in the future.

The US is the Largest Wind O&M Market in the World in 2011

The US is the largest wind O&M market in the world and accounts for 20.2% of the total market size in 2011. It is expected that the share of the US in the global O&M market will increase to 23.8% in 2020. Germany is the second largest wind O&M market in the world and accounts for 18.3%, followed by China with a 14.6% share in 2011. China is expected to surpass Germany to emerge as the second largest wind O&M market by 2013 and in 2020 China will account for 18.8% of the global market size. Spain is the second largest wind O&M market in Europe in 2011. The country accounts for 13.9% of the global market share in 2011, followed by the UK which accounts for 6.4% of the global market. The UK will surpass Spain to emerge as the second largest wind O&M market in Europe by 2015 and will account for 11% of the global market in 2020. India accounts for 4.5% of the global market in 2011 and others contribute 22.1%.