The US wind industry may be on the brink of launching into the offshore wind sector, prompting the supply chain businesses to consider joining the fray. The US government clearly had the same thought, commissioning a study into the competitive potential for a nascent US offshore wind sector.
Taking a snapshot of the 2013 supplier in relation to the market, the report, carried out by wind-industry supply-chain advisory group GLWN, found that unlike suppliers in many other countries, US manufacturers are located in the middle of the country, primarily supporting the current land-based wind farms.
The report compares the US market and potential with the current offshore supply chain in both China and Germany. It found that the German supplier base has been based in coastal regions from the outset, supporting onshore and, increasingly, local and European offshore projects, with proximity to main ports crucial for export. Most Chinese suppliers, too, are located near waterways to support land-based, offshore and turbine/components export.
For the US to serve and support the emerging offshore wind market, it must therefore develop a new coastal manufacturing base. Given that most of the current projects under development are concentrated on the east coast, this region is poised to become the centre of such new industrial activities, the report concludes.
Comparing global regions
The study involved visiting 22 different manufacturing facilities, providing "a limited snapshot", according to Patrick Fullenkamp, director of technical services at GLWN. It looked at four main components: towers; blades; permanent magnet direct-drive generators; and four-legged steel jacket foundations. The first three account for 50-55% of wind-turbine capital expenditure (capex), says Fullenkamp, with the fourth, the foundation, representing about 15% of offshore-wind project capex.
The cost differences of these components across the three regions showed surprisingly little difference.
The US has imposed steep import duties on Chinese towers. However, even without this anti-dumping measure, the cumulative cost differences between a tower made in China and exported to the US, and a locally produced tower is minor. Germany proved the most expensive in this respect.
For jacket foundations the study again revealed Germany to have the highest overall cost level, followed by the US and China as the cheapest, but with only minor individual cost differences. Noticeably, China faces rather high marine-transport logistics related costs, whereas the burden rate — indirect costs associated with employees above payroll costs - prove highest in Germany and the US.
Raw materials
Surprisingly, China produced the highest cost for blades, followed by Germany, with the US proving the cheapest, largely because of the cost of materials. This is based on the raw materials for the composite structures of blades, encompassing fairly standard polyester or epoxy-based resins and glass fibre. This cost comparison may change with increased use of carbon fibre, which is expensive and requires a high degree of processing skill, and is therefore produced by only by a selected number of turbine and blade suppliers.
China finally comes out on top for permanent-magnet (PM) direct-drive generators in terms of overall cost, with Germany second, and the US showing the highest cumulative costs. China's main comparative advantages are down to favourable materials cost linked to lower magnet procurement costs - as the country is the main source for the rare-earth elements used for these — cheaper labour and lower costs for general administration and sales.
Mediumand, especially, high-speed PM generators, which use far less of this expensive material, were not included in the study. Double-fed induction generators (DFIG), induction and electrically excited synchronous generators do not use any permanent magnets.
Based on materials, quantity, direct labour and cost, the study showed China as being the most competitive for supply of towers, generators, and foundations, but without logistics factored in. For process technology and lowest total process man-hours, the US came out as most effective for production of towers, blades and generators, and Germany on foundations.
Scorecard
An integral part of the project was the development of a US manufacturing scorecard based on 280 US manufacturers already or about to be capable of making specific wind-turbine components. The scorecard, above, shows the relative competitiveness and US industry status for components for 3MW and 5MW land-based and offshore turbines, in terms of what can already be manufactured today and other areas, where some or major capital investments are necessary. However, with the global offshore market moving towards 6-8MW power ratings, catching up could prove an even bigger overall challenge in some areas for US industry.
Study conclusions
Fullenkamp stresses that the results must be seen as preliminary, given the scope of the projects studied. "It is possible that German companies were over-conservative with their cost figures, while others might have provided more optimistic data," he says. Additional valuable information, such as factory flow processes, various fault rates and overall quality of the product could to be included. Despite these limitations, however, this report indicates potential for a US supply chain for its nascent offshore sector.
"Germany has an excellent model for the US to follow," he says. "The German offshore industry build-up started in 2000 and its industrial base has progressed impressively ever since. Based on hard figures we could obtain, Germany's offshore sector had a turnover of EUR5.9 billion in 2011, of which manufacturing accounted for 61% of total value added and corresponding jobs growth. "This outcome leads to only one possible conclusion: US, go for manufacturing."
COST COMPARISON METHODOLOGY USED TO EVALUATE SUPPLIERS
To achieve a true comparison of global supplier costs, GLWN developed detailed manufacturing drawings and standardised component specifications based on the 5MW NREL (National Renewable Energy Laboratory) standardised turbine model, which is based on specifications of the 5MW Repower (now Senvion) unit: a high-speed geared turbine with non-integrated drivetrain; doubly fed induction generator; and a rotor diameter of 126 metres.
GLWN carried out onsite reviews to validate costs and establish all process steps from the very beginning to the end products for the 22 suppliers. This information was processed with a detailed cost breakdown analysis using advanced value stream mapping (VSM), a tool commonly applied in the automotive industry. VSM can show detailed information from a customer order to the delivery in pre-defined process steps.
Parameters
The parameters for each step, including materials flow, cycle time, quantity per cycle, direct labour and cumulative costs, are documented. For each component value added and non-value added time can be documented throughout the process. Use of VSM enables identification of areas where waste occurs, and opportunities for improvement for domestic suppliers by looking across all global suppliers.
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