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17 October 2019

GE bound for USA as offshore gathers speed

General Electric Renewables arm is eyeing up the US for its next wind turbine production facility, as US offshore wind orders start flooding in. But moving quickly will be key.

The American conglomerate has won 5GW worth of orders for its Haliade-X offshore turbines in the past month alone, with much of this adding to its share of the ever-growing 25GW pipeline set for US waters.

Wind turbine makers tend to set up factories where their work is, and build out a complex interlinked eco-system of parts, throughout the local community. Broadly the work goes where the business is. But GE has been out of sorts with this equation, keeping its Alstom acquired factories in Europe, and not making its largest wind turbines in its home market where it is strongest.

GE currently produces its offshore wind components in two European facilities, and there are plans for expansion to the Chinese province of Guangdong by 2021. Following the location of increasing demand, GE will aim to expand as fast as cost will allow, with the US as the next obvious front runner.

Forty percent of the American population live in coastal areas, and despite President Trump’s attempts to stop the demise of coal, resistance has been shown through consistent growth in renewables and offshore wind seems to be the next frontier. The levelized cost of energy of offshore wind will sit only marginally higher than its onshore counterpart when subsidies end next year. As proximity to consumers is reduced without Not in My Back Yard (Nimby) issues, lower transmission costs will soon see this fall further, as offshore wind continues to snowball. In the US onshore wind suffers from the huge physical displacement between where winds are strongest and where people live, leading to high costs of transmission.

The wind potential on the East Coast of America is double its current power demand, and with states such as Massachusetts committing to offshore wind as their route to decarbonization, the rapidly growing pipeline inevitably warrants a US-based turbine factory. GE looks to jump in first, ahead of main competitors Siemens Gamesa and Vestas, who currently sit far ahead in terms of installed offshore capacity and committed orders.

Interestingly Siemens Gamesa and Vestas both have manufacturing in the US for their smaller onshore turbines, but none are as yet announced for their larger offshore blades or nacelles.

We reached out to Siemens Gamesa and a spokesperson told us, “Siemens Gamesa is excited to play a role in the burgeoning US offshore wind industry and in order to provide competitive products on the required timeline, we expect to supply the earliest projects from our existing offshore wind manufacturing facilities. We will make near-term local investments for construction and O&M activities in partnership with our customers, Orsted, Eversource, and Dominion. Looking ahead, Siemens Gamesa anticipates that decisions on supply chain strategy for the U.S. market will be made within the next year.” So quite clearly GE will have to stay ahead of the US employment curve in order to keep winning the deals for Haliade-X.

The offshore boom will only be facilitated by local manufacture in the US. Prices will be driven down as developers worry less about Local Content Requirements. Costs will also be offset, as transatlantic shipping is eliminated. Together, these could see a notable reduction in the LCOE of offshore wind projects, giving GE an albeit short term advantage in the US market.

While this is seemingly a no-brainer for GE, slowly removing ties with its French workforce will be controversial. Having failed to create 97% of the 1000 jobs it had pledged to the French government, in return for acquiring Alstom SA’s energy business, the Boston-based company was fined €56 million. GE may wish to reduce its French work force if it starts US-based manufacture, but will want to avoid further repercussions in Europe, so expect its non-French facilities to suffer more.

With a new US workforce, challenges may also arise in preventing turbine collapse. Five GE turbines have collapsed in the Americas this year, and with reasons yet unexplained, it is uncertain how technology will fare as turbines grow in diameter. Project developers will need certainty if GE is to win bids across the US.