High demand for wind turbines

According to a new analysis from Wood Mackenzie, global wind turbine orders hit a new record of 23.5 gigawatts in the first quarter of 2023. This represents a whopping 27 percent year-over-year increase, and shows that the energy transition is finally accelerating around the world.

As in previous quarters, activity is mainly driven by China, where new orders for 15.2 GW were received in the first quarter. "China continues to be the overwhelming driver of global activity,” said Luke Lewandowski, Wood Mackenzie Research Director. “We do not see that slowing down anytime soon."

But the market is also picking up in the United States. Joe Biden's Inflation Reduction Act, which is supposed to provide green growth, is getting off to a better start, and suppliers are feeling the effects. In terms of orders, this is leading to a more than doubling of the 0.8 GW from Q1 2022 to 1.8 GW this year, already surpassing the H1 2022 total. Latin America also saw a record growth of 1.7 GW.

Overall, global orders for turbine manufacturers reached an estimated value of $15.2 billion, up $3 billion year-over-year.

"What is encouraging is seeing certain areas outside of China start to build momentum. Latin America had a record Q1, thanks to activity in Argentina and Brazil, and the U.S. is seeing renewed confidence and order growth, partially in thanks to the Inflation Reduction Act,” Lewandowski said.

Worry lines, however, are still likely to be most prevalent among Western manufacturers (OEMs), who are having to cope with a 9 percent year-on-year drop in orders in the first quarter. After years of global pioneering work, Western manufacturers have been increasingly squeezed by Chinese manufacturers for several years. The top 10 manufacturers include an increasing number of Chinese OEMs, which are making life difficult for long-established companies such as Vestas, GE and Siemens Gamesa, even though the Chinese operate almost exclusively in their home market.

Vestas lost its top spot among OEMs last year (Image: Vestas).

According to BNEF e.g., the Chinese Goldwind company was able to displace Vestas from first place in the ranking of global wind turbine suppliers last year. The company delivered 12.7 GW of projects in 2022 - almost 90% of which were destined for the domestic market.

There is currently no end in sight to this trend, with Wood Mackenzie stressing that there is a fundamental difference in strategy between Chinese and Western manufacturers: While in China the focus is primarily on growth to meet local government requirements, Western OEMs are focused on profitability.

"Western OEMs have remained very selective and disciplined in their activity, with the goal of improving their profitability," said Lewandowski. "Pricing has remained relatively level in markets like the U.S., where strategies such as measured technology development and price indexing have been employed by Western OEMs to expedite a return to profitability. This has also helped turbine pricing stabilize this quarter."

Offshore wind turbines, by the way, played only a minor role in the first quarter, with offshore wind orders down 12 percent year-over-year. Overall, offshore wind thus accounted for only 13 percent of all orders in Q1.