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26 April 2019

GE not exactly retrenching to US, but may be updating its portfolio

A couple of recent General Electric announcements suggest that it is emphasizing US deals and finding it tricky to build momentum elsewhere in its GE Renewable Energy division, and may look for a better balance between the US and the rest of the world. GE Renewable Energy is a $15bn business which has installed 400 GW of renewable energy and has 40,000 employees across 80 countries, so it has to think of itself as a multinational, but it enjoys better economics at home.

The first announcement relates to a long-standing French deal, which GE has been waiting on at Eolien Maritime France (EMF). It said that it will honor the first slice of the contract, but at the same time terminate its exclusive supplier status for another two offshore wind installations, which have now gone to Siemens Gamesa. All three deals were held up by red tape and contested authorizations and it seems GE has lost its patience and not some little money.

The deal was a hangover from GE acquiring Alstom and it was due originally to supply 240 turbines for $2.6bn. It did not help when the tariff for the deal fell from $225 to $169 per MWh, renegotiated last November, which must have been the final straw. Given that the deals were agreed back in 2012 and the market place has totally changed its economics in that time, it made sense for GE to think again about all of these projects.

But it did confirm its commitment to provide and service Haliade 150-6MW turbines to the first French EMF offshore wind farm. The US market for wind is not waking up especially with some 7.8 GW added last year, slightly more than 2017, but GE is known to have picked up more market share there and sees its solar activities in the US likely to grow rapidly.

Since it won these three offshore wind contracts GE has built a dedicated engineering office in Nantes and built a manufacturing plant in Saint-Nazaire, which has already made more than 80 turbines for other projects. GE says that it now wants to make a new evolved Haliade-X turbines which output 12MW – double the amount its previous generation offered, so it won’t have the capacity to make the older turbines at Saint-Nazaire.

EMF, which is owned by the French developer EDF and Canadian energy-infrastructure company Enbridge, is hoping to develop a total of almost 1.5 gigawatts of wind capacity across three locations: Fécamp, Courseulles-sur-Mer and Saint-Nazaire. EMF has already worked with GE-rival Siemens Gamesa on turbines for the 62 MW Teesside Wind Farm in the UK and they have more joint projects together elsewhere and has now signed terms to include these two deals.

One of the reasons for the GE retreat will be that it is known to be struggling to meet the price curve for Offshore Wind farms, which have fallen steeply. Offshore, as opposed to Floating Wind, requires access to specialist ships to build the turbines over the water, with the entire team working offshore throughout installation. Floating farms can be built in dry dock and towed to the point of deployment by far less specialist ships, which keeps the cost down. Increasingly Floating Wind is more like an off-the-shelf product that can be made anywhere in the world, although many deals continue to require local companies to prepare many of the components to support local labor markets.

Meanwhile another turn of events in solar has made it more attractive for GE to refocus its efforts back in its native USA. It has landed its first US solar deal for both solar plus batteries and has contracted with Helios Energy to provide the integration between two energy storage and solar systems. They will be installed in upstate New York at the end of 2019 and come online in 2020.

This is a global trend to provide grid-ready stable electricity, what the US calls dispatchable energy, and really this is the first such deal in the US. The provision of solar with battery storage sufficient to hold the energy for about 4 hours or more. This allows daytime solar energy to be used through the night. Many battery owners support both renewable energy and grid stability with hybrid battery systems.

The system will use a direct DC-coupled configuration with a single inverter and single point of interconnection shared by the solar array and the storage system, helping improve the overall energy output of the hybrid system while optimizing equipment and installation costs and increasing the overall system reliability.

As a new generation of solar panels comes online, and they are partnered with batteries, there is every reason for GE to see an upswing in its revenues from the US, and while it may continue its footprint in Europe, its emphasis could easily slip to the US where it is top dog.