WindEurope 2017: squeezed margins for manufacturers could restrict innovation

Continuing our coverage of WindEurope 2017,

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Richard Heap
November 30, 2017
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WindEurope 2017: squeezed margins for manufacturers could restrict innovation

Wind innovators could end up as victims of their own success.

Turbine innovations by manufacturers have helped wind farm developers to drive down the projected costs of schemes to the record lows we have seen onshore and offshore this year. However, these lower prices mean manufacturers must deliver turbines more cheaply, which hits profit margins. In turn, this could end up reducing the amount they can reinvent in future innovations. This topic was central to the ‘Technology Across the Wind Value Chain’ session at the WindEurope conference in Amsterdam on Tuesday afternoon.

WindEurope-logo-sm.gif

Marc de Jong, chief executive at blade specialist LM Wind Power, said LM invests €100m per year on technological innovation, adding that further innovation on blades could help cut a further 30% of the cost of wind energy.

He went on to say that companies in the wind sector needed to collaborate more closely on turbine innovations to achieve savings that would benefit the whole industry, as happens in solar. This could help developers meet what he described as the “crazy low prices” that some companies are bidding – and winning with – in competitive tenders.

In de Jong’s view, part of this should involve sharing project and turbine performance data: “If everyone wants to keep the proprietary data [to themselves]… then, essentially, we end up dead in the water,” he argued. He said that industry-wide specifications for some parts and industry-level testing, where firms collaborate on designs, could support innovation in an environment where firms find it difficult to fund their innovations individually.

Alfonso Faubel, Chief Revenue Officer of Energy and President of Europe at Sentient Science, said that price pressure was not a new phenomenon – “There were price pressures forever in the past, not only now” – and that developing digital turbines could help project owners to make major savings. But, he said, it is “useless” for firms to gather data if they do nothing with it.

And Sven Utermohlen, chief operating officer at E.On Climate & Renewables, said that wind faced a serious challenge in developing the technology needed to keep making savings at a time when margins are squeezed: “That makes innovation more difficult,” he said. “What you invest has to be funded out of your operating margins. If those margins get thinner and thinner, we have to be careful that we don’t dry out our innovation power as an industry.”

Utermohlen added that he was sceptical about the prospects of some of the low-cost auction-winning projects actually being built: we expect some to fall by the wayside. That said, costs are falling and manufacturers will have to find ways to fund turbine innovation in a market where margins are smaller and money is harder to come by.

Finding the funds to keep innovating will require some innovation of its own.

Wind innovators could end up as victims of their own success.

Turbine innovations by manufacturers have helped wind farm developers to drive down the projected costs of schemes to the record lows we have seen onshore and offshore this year. However, these lower prices mean manufacturers must deliver turbines more cheaply, which hits profit margins. In turn, this could end up reducing the amount they can reinvent in future innovations. This topic was central to the ‘Technology Across the Wind Value Chain’ session at the WindEurope conference in Amsterdam on Tuesday afternoon.

WindEurope-logo-sm.gif

Marc de Jong, chief executive at blade specialist LM Wind Power, said LM invests €100m per year on technological innovation, adding that further innovation on blades could help cut a further 30% of the cost of wind energy.

He went on to say that companies in the wind sector needed to collaborate more closely on turbine innovations to achieve savings that would benefit the whole industry, as happens in solar. This could help developers meet what he described as the “crazy low prices” that some companies are bidding – and winning with – in competitive tenders.

In de Jong’s view, part of this should involve sharing project and turbine performance data: “If everyone wants to keep the proprietary data [to themselves]… then, essentially, we end up dead in the water,” he argued. He said that industry-wide specifications for some parts and industry-level testing, where firms collaborate on designs, could support innovation in an environment where firms find it difficult to fund their innovations individually.

Alfonso Faubel, Chief Revenue Officer of Energy and President of Europe at Sentient Science, said that price pressure was not a new phenomenon – “There were price pressures forever in the past, not only now” – and that developing digital turbines could help project owners to make major savings. But, he said, it is “useless” for firms to gather data if they do nothing with it.

And Sven Utermohlen, chief operating officer at E.On Climate & Renewables, said that wind faced a serious challenge in developing the technology needed to keep making savings at a time when margins are squeezed: “That makes innovation more difficult,” he said. “What you invest has to be funded out of your operating margins. If those margins get thinner and thinner, we have to be careful that we don’t dry out our innovation power as an industry.”

Utermohlen added that he was sceptical about the prospects of some of the low-cost auction-winning projects actually being built: we expect some to fall by the wayside. That said, costs are falling and manufacturers will have to find ways to fund turbine innovation in a market where margins are smaller and money is harder to come by.

Finding the funds to keep innovating will require some innovation of its own.

Wind innovators could end up as victims of their own success.

Turbine innovations by manufacturers have helped wind farm developers to drive down the projected costs of schemes to the record lows we have seen onshore and offshore this year. However, these lower prices mean manufacturers must deliver turbines more cheaply, which hits profit margins. In turn, this could end up reducing the amount they can reinvent in future innovations. This topic was central to the ‘Technology Across the Wind Value Chain’ session at the WindEurope conference in Amsterdam on Tuesday afternoon.

WindEurope-logo-sm.gif

Marc de Jong, chief executive at blade specialist LM Wind Power, said LM invests €100m per year on technological innovation, adding that further innovation on blades could help cut a further 30% of the cost of wind energy.

He went on to say that companies in the wind sector needed to collaborate more closely on turbine innovations to achieve savings that would benefit the whole industry, as happens in solar. This could help developers meet what he described as the “crazy low prices” that some companies are bidding – and winning with – in competitive tenders.

In de Jong’s view, part of this should involve sharing project and turbine performance data: “If everyone wants to keep the proprietary data [to themselves]… then, essentially, we end up dead in the water,” he argued. He said that industry-wide specifications for some parts and industry-level testing, where firms collaborate on designs, could support innovation in an environment where firms find it difficult to fund their innovations individually.

Alfonso Faubel, Chief Revenue Officer of Energy and President of Europe at Sentient Science, said that price pressure was not a new phenomenon – “There were price pressures forever in the past, not only now” – and that developing digital turbines could help project owners to make major savings. But, he said, it is “useless” for firms to gather data if they do nothing with it.

And Sven Utermohlen, chief operating officer at E.On Climate & Renewables, said that wind faced a serious challenge in developing the technology needed to keep making savings at a time when margins are squeezed: “That makes innovation more difficult,” he said. “What you invest has to be funded out of your operating margins. If those margins get thinner and thinner, we have to be careful that we don’t dry out our innovation power as an industry.”

Utermohlen added that he was sceptical about the prospects of some of the low-cost auction-winning projects actually being built: we expect some to fall by the wayside. That said, costs are falling and manufacturers will have to find ways to fund turbine innovation in a market where margins are smaller and money is harder to come by.

Finding the funds to keep innovating will require some innovation of its own.

Wind innovators could end up as victims of their own success.

Turbine innovations by manufacturers have helped wind farm developers to drive down the projected costs of schemes to the record lows we have seen onshore and offshore this year. However, these lower prices mean manufacturers must deliver turbines more cheaply, which hits profit margins. In turn, this could end up reducing the amount they can reinvent in future innovations. This topic was central to the ‘Technology Across the Wind Value Chain’ session at the WindEurope conference in Amsterdam on Tuesday afternoon.

WindEurope-logo-sm.gif

Marc de Jong, chief executive at blade specialist LM Wind Power, said LM invests €100m per year on technological innovation, adding that further innovation on blades could help cut a further 30% of the cost of wind energy.

He went on to say that companies in the wind sector needed to collaborate more closely on turbine innovations to achieve savings that would benefit the whole industry, as happens in solar. This could help developers meet what he described as the “crazy low prices” that some companies are bidding – and winning with – in competitive tenders.

In de Jong’s view, part of this should involve sharing project and turbine performance data: “If everyone wants to keep the proprietary data [to themselves]… then, essentially, we end up dead in the water,” he argued. He said that industry-wide specifications for some parts and industry-level testing, where firms collaborate on designs, could support innovation in an environment where firms find it difficult to fund their innovations individually.

Alfonso Faubel, Chief Revenue Officer of Energy and President of Europe at Sentient Science, said that price pressure was not a new phenomenon – “There were price pressures forever in the past, not only now” – and that developing digital turbines could help project owners to make major savings. But, he said, it is “useless” for firms to gather data if they do nothing with it.

And Sven Utermohlen, chief operating officer at E.On Climate & Renewables, said that wind faced a serious challenge in developing the technology needed to keep making savings at a time when margins are squeezed: “That makes innovation more difficult,” he said. “What you invest has to be funded out of your operating margins. If those margins get thinner and thinner, we have to be careful that we don’t dry out our innovation power as an industry.”

Utermohlen added that he was sceptical about the prospects of some of the low-cost auction-winning projects actually being built: we expect some to fall by the wayside. That said, costs are falling and manufacturers will have to find ways to fund turbine innovation in a market where margins are smaller and money is harder to come by.

Finding the funds to keep innovating will require some innovation of its own.

Wind innovators could end up as victims of their own success.

Turbine innovations by manufacturers have helped wind farm developers to drive down the projected costs of schemes to the record lows we have seen onshore and offshore this year. However, these lower prices mean manufacturers must deliver turbines more cheaply, which hits profit margins. In turn, this could end up reducing the amount they can reinvent in future innovations. This topic was central to the ‘Technology Across the Wind Value Chain’ session at the WindEurope conference in Amsterdam on Tuesday afternoon.

WindEurope-logo-sm.gif

Marc de Jong, chief executive at blade specialist LM Wind Power, said LM invests €100m per year on technological innovation, adding that further innovation on blades could help cut a further 30% of the cost of wind energy.

He went on to say that companies in the wind sector needed to collaborate more closely on turbine innovations to achieve savings that would benefit the whole industry, as happens in solar. This could help developers meet what he described as the “crazy low prices” that some companies are bidding – and winning with – in competitive tenders.

In de Jong’s view, part of this should involve sharing project and turbine performance data: “If everyone wants to keep the proprietary data [to themselves]… then, essentially, we end up dead in the water,” he argued. He said that industry-wide specifications for some parts and industry-level testing, where firms collaborate on designs, could support innovation in an environment where firms find it difficult to fund their innovations individually.

Alfonso Faubel, Chief Revenue Officer of Energy and President of Europe at Sentient Science, said that price pressure was not a new phenomenon – “There were price pressures forever in the past, not only now” – and that developing digital turbines could help project owners to make major savings. But, he said, it is “useless” for firms to gather data if they do nothing with it.

And Sven Utermohlen, chief operating officer at E.On Climate & Renewables, said that wind faced a serious challenge in developing the technology needed to keep making savings at a time when margins are squeezed: “That makes innovation more difficult,” he said. “What you invest has to be funded out of your operating margins. If those margins get thinner and thinner, we have to be careful that we don’t dry out our innovation power as an industry.”

Utermohlen added that he was sceptical about the prospects of some of the low-cost auction-winning projects actually being built: we expect some to fall by the wayside. That said, costs are falling and manufacturers will have to find ways to fund turbine innovation in a market where margins are smaller and money is harder to come by.

Finding the funds to keep innovating will require some innovation of its own.

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Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.