In 2018, 4.5 GW offshore were installed worldwide and this figure is expected to double in 5 years and exceed 20 GW/year by 2030…in a sector with onshore business at historic lows of profitability, offshore is one of the trains of future profitability that many want to jump on but which is becoming a real battle of giants.
And if we talk about offshore giants, the classic graph comparing the size of today’s turbines with the Eiffel Tower could not be missed,
Offshore has been resolutely engaged in the path of growth in size and power as a way to reduce the costs of civil works, construction and maintenance and thereby reduce the LCoE to levels that make future projects without subsidies or with low levels of remuneration, become profitable.
And since there has been a lot of movement of new turbines in the market lately, what better than to review all the new developments and why not, try to guess where the business will go in the coming years:
- Haliade-X 12 MW: it is the most powerful turbine in history with the largest rotor ever built. As if that wasn’t enough, it recently added another record to its list: highest production in one day as it was at rated power for 24h in a row. Its dimensions are dizzying and what seemed like science fiction a few years ago, is already a prototype that is in the middle of the certification phase. This development project is the decided commitment of the giant GE to offshore. And it sure isn’t cheap. We don’t know how many of the $666mill GE has lost in 2019 has gone into this development, but I’m sure quite a few. This is undoubtedly the most worrying competitor for the undisputed leader SGRE as it has begun to win large contracts such as the 1.2 GW Dogger Bank in the UK. The big question is how much is GE willing to spend as the first projects will not be easy (or profitable) but if GE has patience and deep pockets and once the supply chain is adapted to this giant, we may be looking at the next star of the offshore.
- SG11-193: SGRE is the undisputed market leader. With almost 70% of all installations in Europe, its turbines have always set the trend in the sector. Its extensive experience allows it to pursue a strategy of constant growth without compromising the reliability of the platform. Its new turbine follows this premise as it grows from 8 MW to 10 MW (up to 11 MW under certain conditions) and with a 193m rotor. The prototype has just been installed in Denmark. It remains to be seen how GE‘s aggressive market entry strategy will impact on its market share and, in particular, its future profitability; but in a business where reliability, experience and confidence are almost everything, SiemensGamesa will continue to have a privileged position.
- V174-9.5 MW: the prototype was installed a couple of weeks ago in Denmark and already has almost 1 GW in contracts. But unlike onshore and services, the offshore at Vestas is not fully working. The 2019 order intake has been really poor and it does not seem that this turbine can compete with the GE and SGRE turbines unless the price is very low. It seems inevitable that, if Vestas wants to stay in the race, it will have to launch a new development with a rotor above 200m but with this model just launched to the market, they will have to wait at least 2 years to amortize the development. We will see how it evolves but it seems that difficult times are coming for the offshore at MHI-Vestas.
- GW175-8.0MW: Goldwind finally makes its landing in the offshore and does so with a turbine that clearly wants to compete directly with Shanghai Electric‘s SE8-167, which has been the Chinese market leader so far.
- MySE8-10: one of the surprises of the year. The manufacturer MingYang announced in November that it is developing a 10MW offshore turbine and +190m rotor. It seems that the development is quite advanced and the turbine is aimed at the local market and compete with Shanghai Electric and GoldWind.
- DEC 10 MW: It has the honor of being the first Chinese 10MW turbine and is also under development. It will have a 185m rotor and will compete in the soon to be crowded Chinese offshore market. Dongfang Electric already has some offshore experience with smaller turbines so it will try to build on that experience in the new turbine
- H210-10: undoubtedly the most surprising announcement of these last months. The Chinese company CSIC is developing a 10MW turbine and 210m rotor. Not many more details are known apart from the fact that they have a super aggressive development plan that aims to have a working prototype in 2020.
All these announcements of new models will undoubtedly change the market in the coming years. Let’s look at some possible consequences:
- The Chinese and Western markets are very sealed, so turbines from Chinese OEMs can only aspire to compete in Chinese projects. And being the Chinese market of less than 2 GW per year, there doesn’t seem to be room for 5 manufacturers. I am afraid that as happened with Korean and Japanese companies a few years ago, some of these developments will die before they have a commercial outlet.
- As mentioned above, it is almost impossible to see a Western project with a Chinese turbine so the strong competition that is coming will only have marginal consequences on Western manufacturers:
- Shanghai Electric will lose market share so that the license revenue (SE markets SGRE turbines under license) for SiemensGamesa will be reduced
- It is possible that in some Asian market with Chinese influence (Vietnam, Thailand, etc), some offshore or inter-state project will be equipped with Chinese turbines but it will be few MW
- SGRE, MHI-Vestas and GE will be the OEMs that will fight for all the projects outside China. As long as the market remains at 2-3 GW per year, everyone will have a hard time so the growth of markets such as USA, Taiwan, Japan or France is urgent for the 3 to survive.
- The evolution of the new turbines will be done in small steps of power increase, especially platforms such as the Haliade-X that clearly (as the power density graph shows) has room for growth up to 13-14 MW. Vestas is the one that is seen with more limitations since it is a very stretched platform already and with a small rotor so I bet on the development in 2 years of a new rotor in the area of 200m.
In conclusion, many new turbines with very high development costs for a currently small market…the bet on the rapid growth of offshore is very high and if this growth is delayed, we will see few winners and many losers.