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Value Chain Trends

Wind’s spectacular growth as a vehicle for new generation capacity investment has attracted a broad range of players from across the industry value chain.  From local, site-focused engineering firms to global, vertically-integrated utilities, all have formed part of wind’s European growth story.  Since Europe’s surge in 2005 to an annual market of over 6.5 GW of new capacity, the industry’s value chain has become increasingly competitive as a multitude of firms seek the most profitable balance between vertical integration and specialisation.  The overall scaling up of the sector has meant that large-scale utilities have started to build sizeable project pipelines with long-term investment plans that indicate their commitment to adding wind to their generation portfolio, while at the same time a market remains for independent players able to contribute development skills, capital and asset management experience.

Europe’s wind energy value chain is seeing dynamic shifts as asset ownership is redistributed, growth is sought in maturing markets and players seek to maximise scale on an increasingly pan-European stage.  While utilities build up GW-size portfolios, through their own strategy initiatives or government prompting, IPPs seek to compete for asset ownership in booming Western European markets while development activity continues to shift towards new regions in the east.  The proliferation of players looking to develop, own or operate wind farms has pushed competition to a new level, underlining the key elements of local market knowledge, technical expertise and financial capacity as crucial to positioning on the value chain.

Utilities Moving into Prominent Role as Driving Force for Industry Scaling Up

Most of Europe’s utilities have now taken position on the wind energy value chain as they comply with national renewables targets, while some have also taken the initiative of seeking international expansion with this newer generation technology.  To maximise profitability, utilities have steadily migrated from risk-averse turnkey project acquisition, to greater vertical integration with in-house teams for development and operations and maintenance (O&M).  Strategies devised by these players for meeting their objectives have largely depended on their experience in the sector as well as on their desire to expand geographically.

Utilities adopting a ‘green’ strategy are among the few European wind players that combine in-house experience and sufficient balance sheet to ramp up capacity on a pan-European level, whilst risking project development in less mature markets to sustain growth in the portfolio.  These utilities have generally originated from countries with more pro-active renewables policies, including Spain and Denmark.  

Another set of utilities have taken on a more gradual approach to adding wind into their generation portfolios.  These players, from Portugal, Italy and Germany, have moved into neighbouring markets and looked to build wind alongside thermal plants; they have made major acquisitions to support growth while following green utility strategies of building up internal teams for more vertical integration. 

A third set of utilities, mostly working with conventional energies, has remained more domestic-focused.  Whether due to lower resource conditions, or a lack of scale to pursue larger opportunities, these players tend to focus on complying with national targets.