Wind turbine contract prices continue to decline

(06/08/2010)

According to the third issue of the Wind Turbine Price Index (WTPI), published by Bloomberg New Energy Finance, wind turbine contract prices signed in 2010 for delivery in H2 2010 and H1 2011 continue to point to a significant decline compared to 2008 prices. This reduction amounts to some 15%.

Bloomberg New Energy Finance analysis shows that turbine prices peaked at EUR 1.22m/MW for contracts signed in 2008 for delivery in H1 2009. Nevertheless, current over-supply in the global market - mainly due to financing issues for wind projects – has led to a sharp fall in pricing for contracts signed in 2010 for delivery in H2 2010 and H1 2011, with average prices coming at EUR 1.04m/MW. The Index shows no signs of a price recovery in the near future.

The Wind Turbine Price Index (WTPI), published twice a year, is based on confidential data provided by 22 turbine buyers – amongst them utilities/power players, independent power producers and project developers, as well as financial investors. The sample includes nearly 110 individual contracts totaling 5.6GW of contracted capacity – or 25% of the annual wind market – the most authoritative reference for turbine pricing in the industry. The sample also includes contracts in 24 different markets, with 14 manufacturers represented in the analysis.

Key findings include:

• Global turbine contracts signed in 2010 for delivery in H2 2010 and H1 2011 average EUR 1.04m/MW, down by 15% from peak values of EUR 1.22m/MW. This is close to the figure reported in the last WTPI, in December 2009. Contracts currently under negotiation for delivery in H2 2011 show identical pricing at EUR 1.04m/MW, with no signs of a price recovery in the near future. Prices quoted in this report include the turbines plus transport to site (marine and overland) excluding VAT and all other construction costs.

• Markets with exposure to electricity prices display the largest decrease - especially in the US where power purchase agreement prices have softened and those agreements are hard to secure. Average pricing in the Americas for contracts negotiated in 2010 for delivery in 2010 and 2011 falls in the range $1.36m/MW-$1.48m/MW. Pricing in Eastern European markets also showed a significant decrease, with average pricing slightly above EUR 1.00m/MW for deliveries in 2010, down 24% from peak values of EUR 1.32m/MW.

• Several contracts for Tier 1 (leading) manufacturers with over-capacity in 2009-10 and large inventories showed values significantly below average - in some cases well below the EUR 1.00m/MW benchmark.

• Full service operation and maintenance prices displayed a slight decrease, averaging EUR 29,000-35,000/MW per year for the first five years of operation, down from EUR 34,000-42,000/MW. More importantly, an increasing number of contracts are being agreed for 15 years of O&M, as manufacturers attempt to capture these revenues and make more competitive offerings.

• Procurement officers for some of the main turbine buyers expect a further decrease in pricing in 2010 and 2011, of 4% and 1% respectively. They only expect price increases from 2013, a significantly more conservative attitude than in the previous report.

William Young, manager of the Wind Insight Service at Bloomberg New Energy Finance, said: “Expectations for turbine prices have never been so low, and the current market oversupply will continue for quite a while longer. That may not be great for wind turbine manufacturers, but the good news for the sector is that it will improve the competitiveness of wind with gas, coal and nuclear as a means of generating electricity.”

The Bloomberg New Energy Finance Wind Turbine Price Index executive summary is available to Wind Insight Service subscribers

Related categories:  Wind power