The prices of wind turbines are expected to increase by up to 10% over the next 12 to 18 months because of the rise in commodity prices, logistic costs, and Covid 19-related challenges, Wood Mackenzie has said in a recent report.
The report noted that turbine prices had gone up in the last six months due to increased steel, copper, aluminum, and fiber prices and a four-fold rise in logistics costs. The trend is expected to continue for the next four to five quarters.
Shashi Barla, the Principal Analyst at Wood Mackenzie, said, “Turbine original equipment manufacturers (OEMs) and component suppliers face a double whammy of cost increases and demand softening over the coming two years due to the US Production Tax Credit (PTC) and China feed-in-tariff (FiT) phase-outs. Despite this rise in costs, we expect turbine prices to return to normal levels by the end of 2022.”
The report stated that OEMs like Vestas, SGRE, and Nordex are forced to explore alternative supply hubs like India and face further cost pressures due to the ongoing US-China trade tussle. It added that supply chain strategies like the ‘India for India’ and ‘India for Global’ encouraged turbine component suppliers to follow their turbine OEM consumers into the Asia-Pacific nation.
“As expected, demand increases in India have failed to materialize therefore allowing OEMs and suppliers to leverage excess production capacity to serve export markets cost-effectively. As OEMs continue to manufacture the latest generation turbine in India, component suppliers are expanding within the market to produce components closer to their clients’ nacelle facilities,” Barla added.
Wood Mackenzie suggested that OEMs and turbine suppliers adopt next-generation technologies and materials as supply chain bottlenecks for import materials emerge over four to five years.
As per the report, the wind turbine industry will encounter supply constraints that could pose issues for country-level decarbonization targets if critical capital components and raw materials’ capacity will not be expanded over the next two years.
Mercom reported that wind installations in India in the second quarter (Q2) of 2021 were down by 62% quarter-over-quarter, with 239 MW added in Q2 2021, compared to 623 MW added in Q1 2021.
The Global Wind Energy Council and MEC Intelligence, in a recent report ‘India Wind Energy Market Outlook 2025,’ predicted that the world’s fourth-largest wind power market would add nearly 20.2 GW of new wind power capacity between 2021 and 2025. The capacity addition would increase India’s existing 39.2 GW wind market by 50%, paving the way for growth after recent years of slowdown.
Harsh is a staff reporter at Mercom India. Previously with Indian Express, he has covered general interest stories. He holds a Masters Degree in Journalism from Symbiosis Institute of Media and Communication, Pune.