Wind Energy OEMs Buffeted by Winds of Change

As worldwide demand for wind-powered energy continues to grow, so too does the pressure on OEMs in the sector to lower overall cost of operations while simultaneously ensuring technology innovation, product reliability and speed to market. We examined the various market drivers in a previous post, and the good news is that OEMs are meeting these challenges. For example, a recent U.S. Department of Energy report states "wind energy pricing remains attractive due to technology advancements and cost reductions.” However, there is one big caveat: on-shore wind auctions are becoming the primary replacement for feed-in tariffs to subsidize projects. Bloomberg New Energy Finance (BNEF) predicts that will impact all companies across the value chain. OEMs need to transform their supply chains to manage shifting market forces and anticipate how digitalization will affect operations and maintenance (O&M) costs.

The subtitle of BENF’s 1Q 2018 Wind Market Outlook report summarizes the increasing pressure on OEMs perfectly: “More Auctions and Lower Prices.” It warns these auctions, “...raise questions for developers who need to take bets on future technology costs and the ability of the supply chain to deliver quality products in light of falling prices.”

Improving Supply Chain Flexibility

OEM supply chains are designed to serve traditional end markets, a model that has become cumbersome and expensive. Components are sourced from one region of the world, shipped to another country to have the integrated electricals assembled, then to yet another region for nacelle integration before it can embark on the last leg of this global journey to the end market for final installation. This increases costs and slows response times considerably.

Serving the still-emerging wind energy market demands greater flexibility in the supply chain to successfully address end market demand. Celestica provides OEMs with the capability to both source components and assemble integrated electricals in one of Celestica’s in-region facilities. Transitioning non-core assembly production to advantaged geography enables the OEM to leverage broader scale across multiple markets, reduce inventory and drive working capital benefits, as well as reduce fixed assets.

As a result, OEMs can ramp up quickly without having to devote a large amount of up-front capital and workforce investment, and leverage Celestica’s deep operational experience and investments in globally integrated quality management and IT solutions. The results of creating this accelerated supply chain transformation model include faster market access, lower logistics costs and improved flexibility necessary to meet end wind market demand and maintain a market leadership position.

Leverage New Digitalization Developments

Using an accelerated supply chain transformation model makes the supply chain much more resilient to disruption. This enables OEMs to offload non-competitive manufacturing operations and inventory, and focus their energies and capital on accelerating innovation by taking advantage of new technologies and processes to further reduce costs.

For example, as a turbine ages it becomes more susceptible to failure, and requires more frequent maintenance or replacing parts. Leveraging predictive analytics software can identify and remedy a potential maintenance issue before it even occurs. According to Accenture, less than 20 percent of maintenance activity is done on a predictive basis. Raising that percentage is just one example of how the digitalization trend is creating services for wind power that can reduce O&M costs and, by extension, an OEM’s outlays for repairs and other aftermarket services.

The OEMs that succeed will be the ones that leverage strategic partnerships to accelerate innovation and gain a competitive edge. Celestica is dedicated to helping our customers deliver innovative, cost-effective solutions that power a more sustainable future.

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