GE warns of turbulence ahead for turbine production

US engineering giant General Electric (GE) yesterday warned that rising steel prices and turmoil on the financial markets will have a negative impact on its fast expanding wind turbine business.

Speaking at an event in Germany to publicise its latest turbine, GE Energy's global sales leader for wind energy, Mete Maltepe, said that the rising cost of steel would drive up the price of turbines.

"There is a lot of steel in our turbines, so the cost of steel going up makes turbines more expensive," he said. "It is a major issue for the industry,"

The price of steel has risen by about 30 per cent this year, driven largely by increased demand for raw materials from developing countries such as China. In 2007, the Chinese economy accounted for 37 per cent of global steel consumption, according to a report from financial services group Atradius.

But despite the negative impact that steel pricing could have on its turbine business, GE's Maltepe added that at least the wind industry was not greatly affected by the rising cost of other commodities such as fuel. "We have a world where all commodities are going up including fuel," he said. "Wind at least has free fuel and we don't get affected twice."

Maltepe made the comments at GE's centre for renewables in Salzbergen, Germany, close to the Dutch border, where GE unveiled its latest turbine, the GE Energy 2.5xl, which it claims has been developed specifically for the European market.

The 2.5MWxl is larger than its predecessors, the 2.5, and the 1.5, with a rotor diameter of 100 metres, which the company claims means that European customers can generate more power from one turbine.

"The 2.5xl is the next workhorse product specifically designed for the environment in Europe. There is less land available so you want to make most efficient use of it – so it's a bigger turbine," said Maltepe.

Despite the turmoil in the credit markets, GE claims that is has already secured about 1,000MW worth of orders and commitments for the 2.5xl including supplying a 600MW project in Romania operated by Czech power company CEZ which is touted as Europe's largest wind farm.

But while still predicting healthy sales for its newest turbine, Mete admitted that that the financial turmoil and the current state of the credit markets would impact GE's renewable business in the short term.

"Our view of what is going on the in the markets is that short term there is turmoil – in the short term projects will be delayed," he said. "But the fundamentals are that people need energy and governments support renewable projects. Wind energy projects are quality projects and when credit is tight money usually goes to quality projects. We think in a few months when credit markets are back to a normal state, wind projects will benefit so we are not worried at all."

GE claims it has invested more than $100m in developing the 2.5xl and developing the Salzbergen facility which it acquired as part of its purchase of Enron Wind Corp in 2002. GE bought the unit in a $325m bankruptcy sale following Enron's spectacular implosion.

The Salzbergen facility is capable of producing about 1,600 turbines a year, using its "moving line" production system. The wind turbines travel along a moving track through the factory with work divided between numbered work stations responsible for specific stages of the build.