Chapter 3 Wind Power Industrys3.amazonaws.com/zanran_storage/ Taiwan Industrial Outlook 《Emerging Industry》Wind Power Industry 409 Chapter 3 Wind Power Industry ITIS Program, IEK/ITRI

2010 Taiwan Industrial Outlook 《Emerging Industry》Wind Power Industry2010 Taiwan Industrial Outlook 《Emerging Industry》Wind Power Industry

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Chapter 3 Wind Power Industry

ITIS Program, IEK/ITRI

Li-Yen Ma

Introduction Wind turbines are machines that convert kinetic energy from the wind into electrical

energy. Wind turbines are classified by their output power either as large or small. A large turbine has an output power above 750kW and is connected to the grid; a small turbine has an output power below 100kW, and is mostly for domestic and off-grid applications either independently or in conjunction with diesel generators or solar panels. Structurally, wind turbines are divided into horizontal axis and vertical axis. Due to structural limitations, the height of vertical-axis wind turbines cannot be too great. This type of design is mainly used by small turbines. Higher above the ground, the wind speed is higher and air flow is more stable hence large turbines are designed with a horizontal-axis rotor shaft to take advantage of this fact.

Modern wind power technology began taking shape in the 1980’s with 25kW turbines in the early days. Current commercial turbines can reach 5 MW for one single unit. Rapid technology development in this area has brought down the power generation cost to less than 200% of the conventional power generation cost. Furthermore, wind power has the lowest environmental impact amongst all renewable energies. In terms of CO2, each 100 GWh of wind power means 600 tons less carbon dioxide are being released into the atmosphere. In terms of energy payback, it can be as low as 3~4 months for a wind turbine to recoup its energy expenditure incurred from production, packaging and maintenance (average lifetime of 20 years). Its development is fully supported by governments due to low generation cost and low environmental impact.

Global accumulated wind power installed capacity reached 122.16 GW in 2008, an increase of 30% over 94 GW in 2007. Newly installed capacity in 2008 was 28.19 GW, a 42% increase over 19.79 GW in 2007. The compound annual growth rate of accumulated wind power installed capacity was 24.8% from 2003 to 2008. The same figure for newly installed capacity is 27.6%. Up until the end of 2008, the top 3 countries for accumulated

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installed wind power capacity were the US, Germany and Spain with 25.2 GW, 23.9 GW and 16.5 GW respectively. However, in terms of newly installed capacity, US, China and India are the top 3 for 2008. The newly installed capacities for the US and China are 8.35 GW & 6.24 GW respectively which represents 51.8% of the global newly installed capacity for 2008.

The application of renewable energy has become the focus of Taiwan government policy in the 21st century. The domestic wind power capacity installed between 2000~2004 was 12.5 MW, most of which is demonstrative off-grid systems for local self-sufficiency (usage). Starting from 2005, bigger scale grid-connected wind farms are beginning to operate. Taiwan’s installed wind power capacity reached 436 MW by the end of 2009.

Overview of the Wind Power Industry in 2009 Taiwan has plentiful wind resources on the west coast and offshore islands, with

annual average wind speed reaching 5~6 m/sec and greater than 2500 hours a year of equivalent full load generation. Conservative estimates show that there are at least 1,600 MW of onshore and 3,200 MW of offshore wind power to be developed. The following wind power milestones have been set in the industry strategic meeting of the Executive Yuan in November of 2007: accumulated installed capacity is to reach 980 MW in 2010, 1480 MW by 2015 and 3000 MW by 2025. The accumulated capacity for onshore wind power in Taiwan had reached 436.05 MW by the end of 2009. Taipower & InfraVest GmbH are the major developers, both of whom use imported wind turbines. Apart from onshore wind power, offshore wind farms are also being planned. In September 2007, The Ministry of Economic Affairs approved “phase one of the offshore wind farm development proposal", with a planned capacity of 300 MW.

On June 12th of 2009 the "renewable energy development bill" was passed into legislation to allow the government to offer incentives to further encourage the development of renewable energies via feed-in-tariff mechanism, demonstrative reward program, and a relaxation of regulations. The capacity of Taiwan’s renewable energy generation is going to expand by an additional 6.5 GW to 10 GW in the next 20 years. The government is going to promote the application of renewable energy by providing a reasonable profit to the operator via the guaranteed buy-back of electricity generated from renewable sources such as solar, wind, biomass, oceanic energy etc. The Ministry of Economic Affairs invited relevant departments, expert scholars and citizen groups to form a committee to validate & announce


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installed wind power capacity were the US, Germany and Spain with 25.2 GW, 23.9 GW and 16.5 GW respectively. However, in terms of newly installed capacity, US, China and India are the top 3 for 2008. The newly installed capacities for the US and China are 8.35 GW & 6.24 GW respectively which represents 51.8% of the global newly installed capacity for 2008.

The application of renewable energy has become the focus of Taiwan government policy in the 21st century. The domestic wind power capacity installed between 2000~2004 was 12.5 MW, most of which is demonstrative off-grid systems for local self-sufficiency (usage). Starting from 2005, bigger scale grid-connected wind farms are beginning to operate. Taiwan’s installed wind power capacity reached 436 MW by the end of 2009.

Overview of the Wind Power Industry in 2009 Taiwan has plentiful wind resources on the west coast and offshore islands, with

annual average wind speed reaching 5~6 m/sec and greater than 2500 hours a year of equivalent full load generation. Conservative estimates show that there are at least 1,600 MW of onshore and 3,200 MW of offshore wind power to be developed. The following wind power milestones have been set in the industry strategic meeting of the Executive Yuan in November of 2007: accumulated installed capacity is to reach 980 MW in 2010, 1480 MW by 2015 and 3000 MW by 2025. The accumulated capacity for onshore wind power in Taiwan had reached 436.05 MW by the end of 2009. Taipower & InfraVest GmbH are the major developers, both of whom use imported wind turbines. Apart from onshore wind power, offshore wind farms are also being planned. In September 2007, The Ministry of Economic Affairs approved “phase one of the offshore wind farm development proposal", with a planned capacity of 300 MW.

On June 12th of 2009 the "renewable energy development bill" was passed into legislation to allow the government to offer incentives to further encourage the development of renewable energies via feed-in-tariff mechanism, demonstrative reward program, and a relaxation of regulations. The capacity of Taiwan’s renewable energy generation is going to expand by an additional 6.5 GW to 10 GW in the next 20 years. The government is going to promote the application of renewable energy by providing a reasonable profit to the operator via the guaranteed buy-back of electricity generated from renewable sources such as solar, wind, biomass, oceanic energy etc. The Ministry of Economic Affairs invited relevant departments, expert scholars and citizen groups to form a committee to validate & announce

the wholesale buy-back price and review it on an annual basis. On Dec 18th of 2009, the Ministry of Economic Affairs announced the applicable wholesale buy-back rates for 2010. The buy-back rate for 1kW~10kW wind power is 7.2714 NTD/kWh; for wind power greater than 10kW, the rate is 2.3834 NTD/kWh; and the rate for offshore wind power is 4.1982 NTD/kWh.

Taiwan has an excellent industry base and capability in electrical control and mechanical manufacturing, and relevant industry players are keen to enter the emerging wind power industry. The government is also keen to promote the manufacturing of wind power equipment and components via the growth of the domestic market with the long term goal of entering the international supply chain to promote exports. The "Taiwan Wind Energy Association" was formed by the Industrial Technology Research Institute of Taiwan (ITRI) in Jan 2006. ITRI’s Mechanical and Systems Research Laboratories made use of the MoEA Bureau of Energy’s project plan to help manufacturers develop technology, and is responsible for industry promotion. Figure 3-3-1 shows Taiwan’s wind power industry supply chain, of which component and system manufacturing are the key parts of the industry supply chain. TECO Electric & Machinery Co. Ltd. (TECO) is the third largest electric motor manufacturer in the world. It has extensive experience in the manufacturing of high power motors. Its 1.5 MW & 850 kW generators are certified by renowned wind turbine manufacturers. TECO’s US subsidiary TECO-Westinghouse has been assembling wind turbine modules for Germany’s DeWind since 2007. It decided to branch into wind turbine system design and manufacturing after having accumulated enough experience in its assembly. In June of 2008 it signed a contract with American Superconductor Corporation to jointly develop the FC 2000 2 MW full power wind turbine module. TECO Taiwan also formed the “Taiwan Wind Power System Development Alliance” with Formosa Heavy Industries Corp., China Steel Machinery Corporation, Atech Composites Co. Ltd. & ITRI in the same month, and is expecting to establish the first domestically produced wind turbine in 2010. In terms of small wind turbines, there are around ten manufacturers focusing predominantly on European and Chinese markets.


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Source: ITIS Program, IEK/ITRI (2009/12).

Figure 3-3-1 Taiwan’s Wind Power Industry Supply Chain

Taiwan’s wind power industrial output (including overseas production output) reached USD 121 million in 2009; a 13% increase over 2008. Production items include generators, transformers, towers, power converter modules, the components for the above items, and also the manufacturing of small wind turbines.

Table 3-3-1 Taiwan’s Wind Power Industrial Output Trend, 2005 - 2010 Unit: USD Million

Industry 2005 2006 2007 2008 2009(e) 2010(f) Wind power 3.7 16.6 48.7 105.9 121.0A 151.3B

Output growth rate 86% 349% 193% 117% 14% 25% Note: 1. 60% of A is from overseas; 50% of B is from overseas.


Raw material/component

Glass fiber, carbon fiber, epoxy Large wind turbine Engineering consultancy

Taiwan Glass Industry Corp. Formosa PlasticsCorp. SWAncor Eternal Chemical TECO

Sinotech Engineering Consultants LtdWELLRANGE ENGINEERING LIMITED

REDblades Atech Composites Co. LtdYih Guang Machine Pattern Maker Co Ltd.Golden Connections Corp. Cotech

HiVAWTAEROFORTIS ENERGYCell Power Co LtdFUKUTA Elec & Mach Co LtdWindTek Boltun CorpJETPODelta ElectronicsHIWINTECO

Blade, mould Small wind turbine Primary contractor

Generator, power converter, transformer

Wind farm developmentand operation

TECOLIAYE Electric Co Ltd.Fortune ElectricShihlin Electric & Engineering Corporation

Taipower, INFRAVEST CO., LTD., TAIWAN GENERATIONS CORPORATIONSTAR ENERGY POWER CORPORATIONWELLRANGE ENGINEERING LIMITED

SOLVENT GMBH, TAIWAN BRANCH(GERMANY)Mei Cui Power Engineering

Gearbox

Maintenance service

Formosa Heavy Industries Corp

Casting/forging

Yeong Guann casting iron factory co ltdYuan Jun Fong Casting Co LtdTaiwan Cheng Sheng Nan Lung Steel & Iron Corp

Tower

China Steel Machinery Corp

Fastener

Boltun Corp Fang ShengScrew Co Ltd

System manufacturing Wind farm development

CHUNG HSIN ELECTRIC & MACHINERYSTAR ENERGY POWER CORPORATIONLuxeAIDC/AEROSPACE INDUSTRIALDEVELOPMENT CORP.WELLRANGE ENGINEERING LIMITED


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Figure 3-3-1 Taiwan’s Wind Power Industry Supply Chain

Taiwan’s wind power industrial output (including overseas production output) reached USD 121 million in 2009; a 13% increase over 2008. Production items include generators, transformers, towers, power converter modules, the components for the above items, and also the manufacturing of small wind turbines.

Table 3-3-1 Taiwan’s Wind Power Industrial Output Trend, 2005 - 2010 Unit: USD Million

Industry 2005 2006 2007 2008 2009(e) 2010(f) Wind power 3.7 16.6 48.7 105.9 121.0A 151.3B

Output growth rate 86% 349% 193% 117% 14% 25% Note: 1. 60% of A is from overseas; 50% of B is from overseas.


Important Issues in the Wind Power Industry Financial Crisis to Ease the Supply Shortage

The global financial crisis that began in the second half of 2008 started to affect the wind power industry from the beginning of 2009. The most obvious evidence is in the following areas:

Investors became more prudent

According to statistics from New Energy Finance, global investment in new energy between 2004 and 2008 grew from USD 35 billion to USD 155 billion, an annual compound growth rate of 45%. This includes money from banks, venture capital (VC), private equity, public listing etc. The investment in new energy dropped to USD 13.3 billion in Q1 of 2009 due to the financial crisis, a drop of 53% compared with Q1 of 2008. As politicians everywhere try to jump on the green bandwagon by including green policies in their economic revival plans, the long term outlook for new energy is very promising. Wind power stands out because the technology is mature and has low generation cost and low environmental impact. It looks set to become the mainstream renewable energy source for the next ten years. However, after the financial crisis, investors became more prudent and pragmatic. When evaluating wind farm development loans, banks and other financial institutions have become stricter and more interested in the actual electricity output, the developer’s track record, and the wind turbine’s brand and quality.

Upward trend of wind farm M&A with small developers being squeezed

Most wind farm developments have asset-based finances; meaning that wind farm assets and income from power generation are used as loan collateral. The loan ratio was around 80% in general. This method of financing is not overly concerned about the debtor’s size or the balance sheet, and so benefits small to medium-sized wind farm developers. However, banks are now more prudent as a result of the financial crisis. Not only are they reducing the loan amount, they are also paying more attention to debtor’s size and repayment ability (or credit rating). All this has led to a scarcity of funding for small to medium-sized developers. Many wind farm developers started to sell their wind farms to obtain cash in order to keep the wind farm development business going. Bigger power companies or developers with deep pockets are using this opportunity to grow by buying wind farm assets at low prices. According to BTM Consulting, 2008 had the highest number of wind farm


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M&A in history, 70% of which took place in the second half of 2008.

Easing of wind turbine supply shortage

Global supply of wind turbines has been tight since 2005. Most orders have a lead time of at least two years. However, many wind farm development projects in North America have been delayed or cancelled due to lack of financing after the financial crisis. Consequently there is an abundance of wind turbines, and this has created a "resale" market. The severe shortage in the wind turbine supply chain has finally seen an about-face after years of tight demand. As the price of raw materials slid, and the supply vs. demand imbalance was restored, the price of wind turbines also dropped. According to statistics from New Energy Finance, the order price from 2009 and the end of 2008 is on average 18% lower than the first half of 2008.

China industry growing against all odds

China has become the "star" of the wind power industry since 2007 through the enormous domestic market created by the "renewable energy bill" & the "mid- to long-term renewable energy development plan". Wind power brings about the opportunity for the local heavy electric machinery industry to transform itself. The growth in the European and the US market will slow in 2009 due to the financial crisis. China will still see a high growth rate due to the support of the Chinese government’s economic revitalization plan. The expected newly installed capacity will reach 8 GW, grabbing the top spot in one leap. As other areas slow down, companies will shift their focus to China.

Even though China is a gigantic market, opportunities for foreign companies are limited. Local governments have a policy of "local markets are for the promotion of local industry". As local companies grow under a favorable policy, the market share of the foreign brands has declined from 80% in 2004 to 26.5% in 2008.

Figure 3-3-2 shows the growth of newly installed capacity of local and international companies in the last three years. The top 3 local companies (Goldwind, Sinovel, Dongqi) grew exponentially in the last three years while other local companies (around 6 companies) are also growing at a respectable pace. The top six foreign companies had significant growth in 2007, but stalled in 2008. This implies that as the Chinese manufacturers catch up with production capacity, the market for foreign companies will be limited.


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M&A in history, 70% of which took place in the second half of 2008.

Easing of wind turbine supply shortage

Global supply of wind turbines has been tight since 2005. Most orders have a lead time of at least two years. However, many wind farm development projects in North America have been delayed or cancelled due to lack of financing after the financial crisis. Consequently there is an abundance of wind turbines, and this has created a "resale" market. The severe shortage in the wind turbine supply chain has finally seen an about-face after years of tight demand. As the price of raw materials slid, and the supply vs. demand imbalance was restored, the price of wind turbines also dropped. According to statistics from New Energy Finance, the order price from 2009 and the end of 2008 is on average 18% lower than the first half of 2008.

China industry growing against all odds

China has become the "star" of the wind power industry since 2007 through the enormous domestic market created by the "renewable energy bill" & the "mid- to long-term renewable energy development plan". Wind power brings about the opportunity for the local heavy electric machinery industry to transform itself. The growth in the European and the US market will slow in 2009 due to the financial crisis. China will still see a high growth rate due to the support of the Chinese government’s economic revitalization plan. The expected newly installed capacity will reach 8 GW, grabbing the top spot in one leap. As other areas slow down, companies will shift their focus to China.

Even though China is a gigantic market, opportunities for foreign companies are limited. Local governments have a policy of "local markets are for the promotion of local industry". As local companies grow under a favorable policy, the market share of the foreign brands has declined from 80% in 2004 to 26.5% in 2008.

Figure 3-3-2 shows the growth of newly installed capacity of local and international companies in the last three years. The top 3 local companies (Goldwind, Sinovel, Dongqi) grew exponentially in the last three years while other local companies (around 6 companies) are also growing at a respectable pace. The top six foreign companies had significant growth in 2007, but stalled in 2008. This implies that as the Chinese manufacturers catch up with production capacity, the market for foreign companies will be limited.


Figure 3-3-2 Wind Turbine Newly Installed Capacity for Chinese and Foreign Companies, 2006 - 2008.

Offshore Wind Farms are becoming the New Focus

Up until the end of 2008, there were 23 commercially operational offshore wind farms around the globe (excluding experimental set ups) with accumulated capacity of 1,423 MW; an additional 15 are expected to become operational by 2011 with a total capacity of 2,806 MW.

Britain & Germany have the highest installation target for offshore wind power in the EU. The British government’s goal is to reach 33 GW in offshore wind power by 2020. The German government announced targets of 15 GW by 2020 and 25 GW by 2030. To encourage the development of offshore wind power, the British treasury announced in April of 2009 that for all such projects with loan applications near the approval stage & for purchase of wind turbines before 1st of April 2010, the “renewable obligation certificate” (ROC) for each MWh generated would be increased from the current level of 1.5 ROC (effective 1st of April 2009) to 2.0 ROC. This would be reduced to 1.75 ROC from April 2011 and then back to 1.5 ROC. Germany introduced a new renewable energy bill on 1st of January 2009. The buy-back tariff for offshore wind power will increase from 6.19~9.10 euro-cents/kWh to 13 euro-cents/kWh. For offshore wind farms becoming operational before 1st of January 2016, the buy-back price will be 15 euro-cents/kWh and the undersea cable to the mainland grid will be paid for by the grid company. Furthermore, Britain, Germany,

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France, Belgium, The Netherlands, Luxembourg, Denmark, Sweden and Iceland agreed to establish the North Sea offshore electric grid in December 2009 for use by offshore wind power.

In April of 2009, US president Obama requested the Department of the Interior to issue an implementation report on the renewable energy development plan on the US continental shelf carried out by all relevant departments and government agencies, including offshore wind power site selection and construction. The scope of the implementation report covers the establishment of a lease plan, conservation issues related to the development of the renewable energy and the governing legislation for land preservation. It is expected that such a policy will encourage the development of offshore wind power on the continental shelf by various state governments.

Asia’s first offshore wind farm will be completed by April 2010 ahead of the opening of "Shanghai World Expo". It is situated by the Shanghai Donghai bridge, 8~13 km away from the coastline with an average water depth of 10m. The wind farm’s installed capacity is 102 MW composed of 34 Sinovel 3 MW wind turbines.

The Korean government plans to invest 400 billion Korean Won (~USD 30 million) in the Saemangeum coastal area after 2011 to set up Korea’s first 100 MW scale offshore wind farm. In order to promote this business, the Korean government and Hyundai Heavy Industries, Doosan Heavy Industries and other private sector wind turbine manufacturers will join forces with the Korean Power Company as well as other power companies to form the “offshore wind power promotion committee”. Apart from establishing a clear action plan for offshore wind power by the end of 2009, 5 billion Korean Won will be invested by 2011 for feasibility studies.

Japan expects to gradually increase its off-shore wind power from 2011 onwards. The goal is to achieve an installed capacity of 140 MW in 2014, 1400 MW by 2020 and 5600 MW by 2030.

Development Trends for the Wind Power Industry in 2010 Offshore Wind Power’s Cost Reduction Challenge

Cost reduction is the most crucial factor in the popularization of renewable energy. According to Danish wind power consultancy BTM Consulting, the onshore type wind farm had a construction cost of 1,380 euro/kW in 2008; roughly the same as for 2007. The offshore wind farm’s construction cost climbed from 2,380 euro/kW in 2007 to 3,000


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France, Belgium, The Netherlands, Luxembourg, Denmark, Sweden and Iceland agreed to establish the North Sea offshore electric grid in December 2009 for use by offshore wind power.

In April of 2009, US president Obama requested the Department of the Interior to issue an implementation report on the renewable energy development plan on the US continental shelf carried out by all relevant departments and government agencies, including offshore wind power site selection and construction. The scope of the implementation report covers the establishment of a lease plan, conservation issues related to the development of the renewable energy and the governing legislation for land preservation. It is expected that such a policy will encourage the development of offshore wind power on the continental shelf by various state governments.

Asia’s first offshore wind farm will be completed by April 2010 ahead of the opening of "Shanghai World Expo". It is situated by the Shanghai Donghai bridge, 8~13 km away from the coastline with an average water depth of 10m. The wind farm’s installed capacity is 102 MW composed of 34 Sinovel 3 MW wind turbines.

The Korean government plans to invest 400 billion Korean Won (~USD 30 million) in the Saemangeum coastal area after 2011 to set up Korea’s first 100 MW scale offshore wind farm. In order to promote this business, the Korean government and Hyundai Heavy Industries, Doosan Heavy Industries and other private sector wind turbine manufacturers will join forces with the Korean Power Company as well as other power companies to form the “offshore wind power promotion committee”. Apart from establishing a clear action plan for offshore wind power by the end of 2009, 5 billion Korean Won will be invested by 2011 for feasibility studies.

Japan expects to gradually increase its off-shore wind power from 2011 onwards. The goal is to achieve an installed capacity of 140 MW in 2014, 1400 MW by 2020 and 5600 MW by 2030.

Development Trends for the Wind Power Industry in 2010 Offshore Wind Power’s Cost Reduction Challenge

Cost reduction is the most crucial factor in the popularization of renewable energy. According to Danish wind power consultancy BTM Consulting, the onshore type wind farm had a construction cost of 1,380 euro/kW in 2008; roughly the same as for 2007. The offshore wind farm’s construction cost climbed from 2,380 euro/kW in 2007 to 3,000

euro/kW in 2008. British consultancy company Garrad Hassan carried out a construction cost analysis since 2000, and discovered that although the scale of the offshore wind farm has grown in recent years, the expected benefits from economy of scale were not forthcoming. Costs started to rise after 2005 due to the following reasons:

Shortage of Offshore Wind Turbines

North America and Asian onshore type wind power has grown at a fast pace since 2005, while the European onshore type electricity market has grown at a stable pace. The watershed event was the Vestas Horns Rev offshore wind farm accident. Subsequently, most wind turbine manufacturers have focused on the onshore type wind power market, while staying away from the risky offshore wind power market.

Before 2005, wind turbine suppliers for offshore wind farms included Vestas, NEG Micon, GE and Siemens. Vestas bought NEG Micon at the end of 2003. GE Wind withdrew from the offshore wind power market in 2004. The market was left with only Vestas and Siemens. Vestas was forced out of the offshore market in 2007 because gearbox problems were found on several of its offshore specific V90 models. Therefore Siemens had no competition between 2007 and 2008 in the offshore wind farm market. Consequently wind turbine price has stayed high.

Vestas re-launched its V90 after improvements were made, while Nordex & Sinovel showed an interest in the offshore market. 5 MW turbines from Multibrid, Repower & Bard will gradually enter mass production after in 2010. If all goes well, the price of the offshore wind turbine is expected to drop after 2011.

Price Hike of Raw Materials

Wind turbines and offshore support structures need copious amounts of steel. The high steel price between early 2007 to mid 2008 was part of the reason for the high construction costs for offshore wind farms. The steel price dropped sharply in the second half of 2008 due to lower demand caused by the financial crisis. However, most offshore wind farms currently being constructed are in shallow seas and most are supported by a monopole structure. As future wind farms move away from the coastline into deeper water (>25m) and use bigger wind turbines, jacket & tripod type support structures will increase, hence placing greater demand on steel consumption.


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Shortage of Sea Cranes Keeps the Rent High

Setting up an off-shore wind turbine requires a large sea crane. The shortage of these is also a key factor affecting the cost of offshore wind farm installation. There are less than 10 specialized crane vessels for offshore wind turbine installation globally. Limited supply has been irrelevant in past years because the number of new offshore wind farm installation projects was also low. For this precise reason, few vessel operators are willing to invest in additional capacity, hence the status quo.

The current going rate for offshore wind turbine crane vessels is about EUR 95,000 per day (USD 133,000). The cost of rent consists of technical and commercial components. Technical considerations include water depth, distance from the shore, seabed condition, support structure, weight & quantity, and weather conditions etc. Commercial considerations include vessel supply, seabed condition or risk derived from weather conditions, and construction contractor’s contractual strategy etc.

Depreciation of the Pound Sterling against the Euro

Recent development of offshore wind farms is mainly focused in Britain. However, Britain has no domestic wind turbine manufacturing industry, hence all wind turbines are imported from continental Europe, which means the cost is greatly influenced by the exchange rate. The second half of 2008 was particularly tough for the British currency due to the financial crisis. The pound sterling depreciated by more than 20% against the euro, which meant higher turbine costs.

In order to encourage the development of offshore wind energy, Germany & Britain increased the off-shore wind power buy-back price in 2009. Judging from the progress of development projects, the new policy has been effective. More operators are expected to invest in the development of offshore wind turbines. A competitive market should bring down the average price of wind turbines. In terms of wind turbine installation, the traditional method is to place the tower and cabin separately on the barge then assemble it on the spot. This method requires a longer time at sea, hence the high vessel rent. The new method is to assemble the entire turbine on shore, transport it to the spot, and then hoist it onto the support structure. This has the advantage of less sea time, but places a higher demand on the crane vessel’s hoist capability. As the offshore wind power market grows, more operators are expected to invest in the development of specialized construction equipment for the offshore wind power market, hence reducing vessel rent.


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Shortage of Sea Cranes Keeps the Rent High

Setting up an off-shore wind turbine requires a large sea crane. The shortage of these is also a key factor affecting the cost of offshore wind farm installation. There are less than 10 specialized crane vessels for offshore wind turbine installation globally. Limited supply has been irrelevant in past years because the number of new offshore wind farm installation projects was also low. For this precise reason, few vessel operators are willing to invest in additional capacity, hence the status quo.

The current going rate for offshore wind turbine crane vessels is about EUR 95,000 per day (USD 133,000). The cost of rent consists of technical and commercial components. Technical considerations include water depth, distance from the shore, seabed condition, support structure, weight & quantity, and weather conditions etc. Commercial considerations include vessel supply, seabed condition or risk derived from weather conditions, and construction contractor’s contractual strategy etc.

Depreciation of the Pound Sterling against the Euro

Recent development of offshore wind farms is mainly focused in Britain. However, Britain has no domestic wind turbine manufacturing industry, hence all wind turbines are imported from continental Europe, which means the cost is greatly influenced by the exchange rate. The second half of 2008 was particularly tough for the British currency due to the financial crisis. The pound sterling depreciated by more than 20% against the euro, which meant higher turbine costs.

In order to encourage the development of offshore wind energy, Germany & Britain increased the off-shore wind power buy-back price in 2009. Judging from the progress of development projects, the new policy has been effective. More operators are expected to invest in the development of offshore wind turbines. A competitive market should bring down the average price of wind turbines. In terms of wind turbine installation, the traditional method is to place the tower and cabin separately on the barge then assemble it on the spot. This method requires a longer time at sea, hence the high vessel rent. The new method is to assemble the entire turbine on shore, transport it to the spot, and then hoist it onto the support structure. This has the advantage of less sea time, but places a higher demand on the crane vessel’s hoist capability. As the offshore wind power market grows, more operators are expected to invest in the development of specialized construction equipment for the offshore wind power market, hence reducing vessel rent.

Electricity Grid & Export become the Focus of the Chinese Wind Power Industry

Up until the end of 2008, wind power capacity represented 1.13% of the total generation capacity in China but only or 0.3% of the actual power generation. In pure number terms, this is unlikely to have any impact on the electricity grid. However, China’s wind energy resources are concentrated in the North-East and North-West where the population is sparse, and electricity loading is light. The electricity grid capacity in those regions is small and independent of each other therefore cannot transfer excess power to regions of greater demand (such as the East), which means the grid connection is a serious problem. According to statistics from wind power market research company Azure International, there was 2 GW of wind power in China that could not be connected to the grid at the beginning of 2008. This number had risen to 3.6 GW by Q1 of 2009.

If the main focus of China’s wind power industry between 2004 and 2009 is equipment manufacturing, then it will switch to the electricity grid after 2010; the electricity grid is becoming a critical limiting factor for the development of the equipment manufacturing industry. China’s National Development and Reform Commission, Energy Research Institute indicated that solving the electricity grid problem should be a two pronged approach. Technology-wise, a super grid should be formed by combining the North, Central and Eastern grids. After which the intelligent grid can be planned. Work on wind power forecasting and energy storage can also begin; Policy-wise the revision of the "renewable energy bill" will bring forth the cost-sharing method for the acceptance of renewable energy by the electricity grid".

September 2009 saw the announcement of two crucial policies (directives) by China’s National Development and Reform Commission. These were "Guidance on healthy industry development and ideas on how to prevent excess capacity and over investment in certain industries" and the declared goal of "strict control of wind power capacity expansion, promotion of the superior operators, and ending the establishment of any new manufacturing plants". There are currently more than 80 Chinese companies engaged in the manufacturing of complete wind turbines. If the minimum capacity is 500 MW in order to achieve economy of scale then the potential total capacity will exceed 40 GW. The global installed capacity for 2008 was 28 GW with future demand for 30~40 GW per year, of which China represents 10 GW. Based on these figures, China’s wind power equipment manufacturing industry does face over capacity problems. The reality, however, is a little bit different. Of the 80


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companies in the sector, 30~40 claimed to be investing in the manufacturing of wind turbine modules, but with no real follow up action. Only 10 companies have real production. Of these ten, only three have an annual capacity of 1000 units (equivalent to 1,500 MW): GoldWind, Sinovel & Dongfan Turbine Co., LTD (DFSTW). Compared with the global leader Vestas’ 2008 annual sales of 5,580 MW, it is still quite a long way off.

For Chinese companies, the financial crisis is an opportunity for local industry. Financing in China does not represent an issue; therefore a few large corporations have expanded their capacity in the past year. For example, China’s leader Sinovel expanded capacity from 1,500 MW in 2008, to 3,300 MW in 2009. It is expected to continue to expand the capacity to 7,000 MW. The purpose is to achieve economy of scale and increase the entry barrier for newcomers. However, bigger production capacity requires a bigger market to absorb it, i.e. the overseas market. Sinovel is already working on a European center and a US center. GoldWind & XEMC wind power acquired Germany’s Vensys & the Netherlands’ Darwind, respectively, not only to acquire advanced technology and RD capability, but also to pave the way for overseas expansion.

Apart from the equipment manufacturers’ overseas market strategy, China is also actively engaging in wind farm investment abroad to promote equipment export. An example of such was announced on 29th of October for a USD 45.4 million deal between Shenyang, China Energy Group and a US energy operator to construct a wind farm in Texas. China’s government is also developing wind farms in Africa using Chinese made turbine modules via development aid or low interest loans.

New Products and Technologies in the Wind Power Industry Variable speed wind turbines represent the dominant product on the global wind power

market and also the direction of technology development for domestic companies. Below is an introduction of this technology framework and development trend. In the course of wind power technical development, the variable speed wind turbine is, no doubt, the driving force for the market growth of the large wind turbine. Variable speed wind turbines can allow the blades to rotate at variable speeds according to wind speed within the rated speed range. This is done via the transmission mechanism or electrical control. Its main advantages compared with traditional fixed speed turbines are: (1) higher wind energy extraction within rated wind speed; (2) can reduce the impact of gusts on the transmission system and mechanism; (3) can maintain power quality and voltage stability and reduce the impact on the electricity grid.


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companies in the sector, 30~40 claimed to be investing in the manufacturing of wind turbine modules, but with no real follow up action. Only 10 companies have real production. Of these ten, only three have an annual capacity of 1000 units (equivalent to 1,500 MW): GoldWind, Sinovel & Dongfan Turbine Co., LTD (DFSTW). Compared with the global leader Vestas’ 2008 annual sales of 5,580 MW, it is still quite a long way off.

For Chinese companies, the financial crisis is an opportunity for local industry. Financing in China does not represent an issue; therefore a few large corporations have expanded their capacity in the past year. For example, China’s leader Sinovel expanded capacity from 1,500 MW in 2008, to 3,300 MW in 2009. It is expected to continue to expand the capacity to 7,000 MW. The purpose is to achieve economy of scale and increase the entry barrier for newcomers. However, bigger production capacity requires a bigger market to absorb it, i.e. the overseas market. Sinovel is already working on a European center and a US center. GoldWind & XEMC wind power acquired Germany’s Vensys & the Netherlands’ Darwind, respectively, not only to acquire advanced technology and RD capability, but also to pave the way for overseas expansion.

Apart from the equipment manufacturers’ overseas market strategy, China is also actively engaging in wind farm investment abroad to promote equipment export. An example of such was announced on 29th of October for a USD 45.4 million deal between Shenyang, China Energy Group and a US energy operator to construct a wind farm in Texas. China’s government is also developing wind farms in Africa using Chinese made turbine modules via development aid or low interest loans.

New Products and Technologies in the Wind Power Industry Variable speed wind turbines represent the dominant product on the global wind power

market and also the direction of technology development for domestic companies. Below is an introduction of this technology framework and development trend. In the course of wind power technical development, the variable speed wind turbine is, no doubt, the driving force for the market growth of the large wind turbine. Variable speed wind turbines can allow the blades to rotate at variable speeds according to wind speed within the rated speed range. This is done via the transmission mechanism or electrical control. Its main advantages compared with traditional fixed speed turbines are: (1) higher wind energy extraction within rated wind speed; (2) can reduce the impact of gusts on the transmission system and mechanism; (3) can maintain power quality and voltage stability and reduce the impact on the electricity grid.

As shown in Figure 3-3-3, there are four types of wind turbine system structure on the market:

Source: Hansen & Hansen (2007).

Figure 3-3-3 Wind Turbine System Structure

Type A—fixed speed: also called the "Danish Concept". This structure uses a

squirrel cage induction generator (SCIG) and is connected in parallel to the electricity grid. The maximum permissible speed deviation range is within 5% of the rated rotation speed. Even though it is not totally constant, its rotation speed will not deviate by more than 2% even if wind speed or torque is changed. Therefore it is considered as a constant speed turbine. Because it uses an induction motor, a soft starter must be used to suppress surge current or voltage flicker from parallel connection. Furthermore, an induction generator requires reactive power for excitation, therefore an external capacitor bank is required to improve the voltage level and stability of the power fed into the electricity grid.

Type B—change rotor side resistance to change speed: this structure uses a winding rotor type induction generator (WRIG). By changing the rotor side resistance to change the generator impeller speed, the range of speed adjustment is 2~10%, which is four times that of the fixed speed generator but still less than 10%. Therefore it is classified as a limited variable speed wind turbine with properties between the fixed speed wind turbine & variable speed wind turbine. Rotor side resistance change is done via an external resistor and the switching of power electronics. It can effectively reduce the impact from gust and help the turbine to maintain a stable power output under high wind speed, thereby


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increasing its performance. Like a fixed speed wind turbine, it still needs an external soft starter and capacitor bank.

Type C—Uses a doubly-fed induction generator (DFIG) to change speed: this structure also uses a winding rotor induction generator. The stator side is connected in parallel to the electricity grid, although the rotor side is not connected to an external variable resistor. Part of the power (25~30% of the rated generator power) is used instead via a frequency converter. Because it does not use a dissipative resistor, the efficiency is greatly improved and is permitted to operate at higher or lower than the synchronous speed. When the generator is below the synchronous speed, the rotor side frequency converter will supply real power into the rotor; when the generator is above synchronous speed, the rotor side frequency converter will export real power from rotor. The generator can therefore achieve a rotational speed deviation of ±30% and be considered as a real variable speed wind turbine. Because the capacity of the frequency converter is only within 30% of the rated power of the generator, there is minimum additional cost. Because it is possible to input/output reactive power from the rotor, an external capacitor bank and soft starter are also not needed.

Type D—Use of full scale frequency converter to change speed. A full scale frequency converter is used between the generator and the electricity grid. The disadvantage is the additional losses of the full scale frequency converter, while its advantages include: (1) wider speed range. It could be 0~100% of the synchronous speed; (2) the generator is not totally connected to the electricity grid, i.e. it is 100% decoupled from the main grid. For this reason the impact of grid side failure is minimal; (3) the choice of generator is more varied and not limited by the frequency of the grid. Theoretically it can use any type of generator without consideration of grid frequency, as long as the cost and reliability is justified.

According to wind turbine sales statistics gathered by Hansen & Hansen from 1995 to 2005 for over 30 wind turbine companies, Type C structure’s market share has been on the rise since it was first introduced by German company Tacke in 1996 for their then new TW/1.5 MW wind turbine. It has become the most popular wind turbine system structure since 2001. Type A’s market share dropped from 70% in 1995 to less than 20% in 2005. Type B almost disappeared from the market with the arrival of type C. Type D’s (mostly by


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increasing its performance. Like a fixed speed wind turbine, it still needs an external soft starter and capacitor bank.

Type C—Uses a doubly-fed induction generator (DFIG) to change speed: this structure also uses a winding rotor induction generator. The stator side is connected in parallel to the electricity grid, although the rotor side is not connected to an external variable resistor. Part of the power (25~30% of the rated generator power) is used instead via a frequency converter. Because it does not use a dissipative resistor, the efficiency is greatly improved and is permitted to operate at higher or lower than the synchronous speed. When the generator is below the synchronous speed, the rotor side frequency converter will supply real power into the rotor; when the generator is above synchronous speed, the rotor side frequency converter will export real power from rotor. The generator can therefore achieve a rotational speed deviation of ±30% and be considered as a real variable speed wind turbine. Because the capacity of the frequency converter is only within 30% of the rated power of the generator, there is minimum additional cost. Because it is possible to input/output reactive power from the rotor, an external capacitor bank and soft starter are also not needed.

Type D—Use of full scale frequency converter to change speed. A full scale frequency converter is used between the generator and the electricity grid. The disadvantage is the additional losses of the full scale frequency converter, while its advantages include: (1) wider speed range. It could be 0~100% of the synchronous speed; (2) the generator is not totally connected to the electricity grid, i.e. it is 100% decoupled from the main grid. For this reason the impact of grid side failure is minimal; (3) the choice of generator is more varied and not limited by the frequency of the grid. Theoretically it can use any type of generator without consideration of grid frequency, as long as the cost and reliability is justified.

According to wind turbine sales statistics gathered by Hansen & Hansen from 1995 to 2005 for over 30 wind turbine companies, Type C structure’s market share has been on the rise since it was first introduced by German company Tacke in 1996 for their then new TW/1.5 MW wind turbine. It has become the most popular wind turbine system structure since 2001. Type A’s market share dropped from 70% in 1995 to less than 20% in 2005. Type B almost disappeared from the market with the arrival of type C. Type D’s (mostly by

Enercon) market share remains stable. As wind power grows in scale, its intermittency and impact on the grid becomes more

obvious. Back in the 1980s & 1990s, the fixed speed wind turbine was the mainstream because wind power was connected to mid/low voltage grid directly at that time. The main consideration was to keep the voltage within an acceptable range. It was a regional power quality issue. Recent wind farms are in the range of hundreds of MegaWatts with direct parallel connection to the grid. How to control and maintain power system stability becomes the new focus. Because international grids are interconnected (especially in Europe), power quality has gone from a regional issue to global issue as wind power application grew. Under such circumstances, Transmission System Operators (TSO) have devised a unique grid code to govern the connection of wind turbines to the electricity grid. One of the key points is that the wind turbine must have fault ride-through capability. In the event of a grid fault, the wind farm must stay connected to help the grid voltage recover. It is not allowed to trip out which may lead to grid breakdown or blackout.

Of the above wind turbine structures, Type A and Type B do not have fault ride-through capability. They will trip out as soon as a fault occurs on the grid. Type C & Type D are protected by a frequency converter so they can stay connected to the grid in the event of grid fault. Of the four types, Type D has the best fault ride-through capability. However, the full scale frequency converter used on Type D is costly while Type C’s frequency converter capacity is within 30% of the rated power and low in cost. The cost / performance ratio of D is higher than C, hence type C is the most popular of all the designs.

What is foreseeable is that future wind farm developments will continue to grow in scale. Compatibility with the power system is the primary consideration for structural design of the wind turbine. Based on current situation, using power electronics techniques to reduce mechanical stress, improve wind energy extraction, and reduce noise are best served by power electronics type structures (types C and D); the controllability in particular seems to have contributed to their high market share. They are also expected to be the mainstream design in the future. Judging from new product development from various manufacturers, full scale frequency converters matched with permanent magnet synchronous generators seems to be the mainstream for now. However, in the end the market share is still determined by price and reliability.


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ConclusionsMarket trends show that the global wind power market was focused in Europe before

2005. As the US and China phased in favorable policies, local markets grew. Right now, the global wind power territory has gone from Europe being the sole driving force to the EU, US & Asia playing equal parts. Under the pressure of carbon reduction and the driving force of new industry development, wind power application is ‘a must’ for government policy.

Early in 2009, both Germany & Britain gave improved buy-back tariffs to offshore wind power; the goal was to encourage companies to take a proactive attitude when it comes to offshore wind farm development. China, Korea, and Japan are also focusing on offshore wind power for 2010 and beyond. Under the encouragement of government policy, offshore wind power development is expected to grow quickly between 2010 & 2020; offshore wind power will become mainstream within the wind power industry after 2020.

The unfolding of the financial crisis in the second part of 2008 caused the European and US markets to shrink. Western wind power companies also slowed down their expansion. In contrast, the Chinese government’s support for the industry has helped the growth and increased further investment. Big companies have plenty of financial backing, lower raw material costs and easy access to critical components; therefore, the industry has grown against the global trend. Through direct investment in overseas wind farms, M&A of overseas (utility) operators, and partnerships with agents, Chinese companies are actively preparing for product export.

Taiwan has been actively engaged in the promotion of wind power industry development since 2006. Domestic companies are able to cover the entire supply chain from raw materials and components through system manufacturing to wind farm development (including engineering consultancy, project contracting, and wind farm development, operation and maintenance). The peripheral support network, such as research and industry alliances, is well formed. The "Taiwan wind power system development alliance", jointly formed by TECO and other major players, is expecting to deliver the first domestically produced 2 MW wind turbine by Q1 of 2010. In terms of small wind turbines, there are around ten companies actively involved with competitive technology and quality. However, due to the small market size for small turbines, it is hard for manufacturers to achieve economy of scale and reduce cost.

Wind power is an integrated industry with wide lateral connectivity. It covers materials, electrical motors, machinery, electronics and metals, and also involves


425

ConclusionsMarket trends show that the global wind power market was focused in Europe before

2005. As the US and China phased in favorable policies, local markets grew. Right now, the global wind power territory has gone from Europe being the sole driving force to the EU, US & Asia playing equal parts. Under the pressure of carbon reduction and the driving force of new industry development, wind power application is ‘a must’ for government policy.

Early in 2009, both Germany & Britain gave improved buy-back tariffs to offshore wind power; the goal was to encourage companies to take a proactive attitude when it comes to offshore wind farm development. China, Korea, and Japan are also focusing on offshore wind power for 2010 and beyond. Under the encouragement of government policy, offshore wind power development is expected to grow quickly between 2010 & 2020; offshore wind power will become mainstream within the wind power industry after 2020.

The unfolding of the financial crisis in the second part of 2008 caused the European and US markets to shrink. Western wind power companies also slowed down their expansion. In contrast, the Chinese government’s support for the industry has helped the growth and increased further investment. Big companies have plenty of financial backing, lower raw material costs and easy access to critical components; therefore, the industry has grown against the global trend. Through direct investment in overseas wind farms, M&A of overseas (utility) operators, and partnerships with agents, Chinese companies are actively preparing for product export.

Taiwan has been actively engaged in the promotion of wind power industry development since 2006. Domestic companies are able to cover the entire supply chain from raw materials and components through system manufacturing to wind farm development (including engineering consultancy, project contracting, and wind farm development, operation and maintenance). The peripheral support network, such as research and industry alliances, is well formed. The "Taiwan wind power system development alliance", jointly formed by TECO and other major players, is expecting to deliver the first domestically produced 2 MW wind turbine by Q1 of 2010. In terms of small wind turbines, there are around ten companies actively involved with competitive technology and quality. However, due to the small market size for small turbines, it is hard for manufacturers to achieve economy of scale and reduce cost.

Wind power is an integrated industry with wide lateral connectivity. It covers materials, electrical motors, machinery, electronics and metals, and also involves

construction work, maintenance, port operation and the development of other service sectors. The potential business opportunity from domestic offshore wind power development is in excess of NTD 100 billion. The development of the wind power industry not only helps relevant local industries to transform into growth oriented high-tech industries, but can also help local industry to move from small power product and component OEM to system design, high power product design, and manufacturing with higher added value and higher technical entry barriers.

Year 2005 2006 2007 2008 2009

NTD/USD 32.17 32.53 32.84 31.52 33.05 Note: Exchange rate of USD to NTD

2010 Taiwan Industrial Outlook 《Macroeconomic Overview》Major Developmental Issues of Taiwan’s Manufacturing Sector

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Documents

Chapter 3 Wind Power Industrys3.amazonaws.com/zanran_storage/ Taiwan Industrial Outlook 《Emerging Industry》Wind Power Industry 409 Chapter 3 Wind Power Industry ITIS Program, IEK/ITRI