Shepherd Advisors

At the Supply Chain Workshop of the AWEA Small and Community Wind Conference in Detroit last month, there was quite a bit of discussion about the current pace -- or lack thereof -- of growth in the  US large wind turbine manufacturing sector.  Supply chain managers from several established European OEMs (Vestas, Nordex, and Nordic Windpower) said that building their US supply chains are a priority.  Yet, it's clear that the current pace of domestic supply chain expansion in the US is very slow.

Contributing factors include:

• The decline of new orders for turbines in the US  has been pronounced, from nearly 8500 MW of new capacity in 2008 to an estimated 5800 MW through 3Q09.  The slower US market has lowered OEM production forecasts compared to a year ago.
• The wind market has declined globally, creating excess production capacity in Europe. 
• European OEMs are in a very conservative stance right now, driving to get better pricing and more fully utilizing current (mostly European) supplier capacity.  OEM attention is now focused more on improving current production systems, and less on future expansion.
• In addition, some OEMs are digging through a financial squeeze caused by customer pressure for lower prices and high costs for steel that OEMs locked-in a year or two ago.

All of the OEMs presenting at the conference asked suppliers to nonetheless contact them, to be persistent, and not to be discouraged if OEMs do not call back in a timely manner.  They just don't have much offer right now.  

While it was not stated as such, it looks like most established utility wind OEMs will not be adding too many new US suppliers until financing becomes easier and there is clear evidence of a solid rebound in the US wind turbine market.  

There are encouraging signs to be sure. For instance, Nordex broke ground on its Jonesboro, Arkansas assembly facility in September, with production scheduled to begin in mid-2010.  In October, Mitsubishi announced its intention to build a wind turbine manufacturing facility near Ft. Smith, Arkansas, with construction scheduled to begin in early 2011.

This speaks well for the long term. Yet, it's probably safe to assume that it may be not be till 2Q10 or later before most OEMs start to return the phone calls.