GE bullish over wind forecast

Given that Germany has the highest installed wind capacity in the world at about 23,000MW, it is not surprising to learn that US engineering giant GE Power's main renewables facility is sited in the country.

Located in Salzbergen, close to the border with the Netherlands, and capable of producing 1,600 wind turbines a year, the facility is GE's so-called centre of excellence for wind energy. While GE is obviously proud of the facility and the investment it has put into it, the site has a rather dubious heritage, having been acquired in a bankruptcy sale following the spectacular collapse of power industry pariah Enron in 2002. However, according to GE Power's vice president of renewables, Victor Abate, the company has made significant improvements to the Salzbergen factory and the wider wind business it acquired.

"If you travelled back 10 years and went to California, the first thing you would notice is that two out of three wind turbines were not running," he says. "Reliability was a big challenge and we felt we could bring technologies from our other businesses and improve that over time."

Mete Maltepe, GE Energy's global wind sales leader, concurs that the main 1.5MW turbine product that the company inherited from Enron suffered from significant reliability issues. "Reliability was not going so well – about 85 per cent – and capacity factors, the measure of efficiency of the turbine, was about 39 per cent," he admits.

Six years later, GE claims to have made enormous progress, improving all aspects of the 1.5 model it bought from Enron. The rotor size has been increased from 77m to 82.5m, while reliability has been increased to 97 per cent and above, and capacity has been improved by about nine per cent.

GE claims to have its 1.5MW turbines in 19 countries, with more than 125m operating hours and over 75,000GW hours of electricity generated. "We took the design we acquired and applied GE technology to places such as the legs and gear boxes and improved the design, the efficiency and the reliability and significantly improved the diagnostic capabilities," explains Maltepe. "By the end of this year we will have about 10,000 of these units running around the world and more than 2,000 in Europe."

But despite this increase in production capacity, the company will still have to work the Salzbergen facility hard if it is to make a serious dent in the reported $12bn (£6.8bn) worth of back orders it is currently trying to fill across its wind turbine business. In a call with analysts in April this year, GE reportedly confirmed that its unmet orders were twice that of a year ago, with total sales up 40 per cent compared with the first quarter of 2007.

Production issues aside, there is obviously strong demand for turbines, something that GE is not prepared to miss. To build on strong sales of its 1.5MW turbine, the company also launched a larger 2.5MW turbine last year – the latest version of which is called the 2.5xl – which it is aiming firmly at the European market. Compared with GE's US home, space is at more of premium in Europe so fewer larger turbines capable of producing more energy in a smaller area are the order of the day. "The 2.5xl is specifically designed for the environment in Europe where there is less land available so you want to make most efficient use of it so the turbine is bigger," explains Maltepe.

In preparation for production of the 2.5xl machine, GE claims it has sunk about €100m into the facility and expanded the site by 28,000 metres.

The Salzbergen site has a modern "moving line" production system where the turbines are assembled on a constantly moving platform which carries the turbine from one numbered workstation to another.

It also features a special training facility that includes a 2.5xl test turbine which uses a generator to drive its shaft rather than wind power – a more flexible approach for testing according to the company, which also means the roof of the building does not have to be removed to make way for the 100m blades.

A 10m-high mock-up of part of a turbine tower is also used to teach rescue methods in case maintenance staff are injured accessing the 50m-plus turbines. "We trained about 1,100 students in 2007 right here in this facility and now through three quarters of this year, we have already surpassed that mark," says Dan Lance, GE Energy global training leader.

Compared with the 1.5, the 2.5xl has a 100m rotor and is more efficient at lower wind speeds because of its permanent magnet generator – a device that drives up power output from low rpms, as well as improving the integration with the grid. "Every day we look at developing how our turbines can actually improve the grid rather than cause problems on the grid," says Maltepe.

Integration with the grid is an important issue for any renewable energy source, such as wind, that is intermittent in nature. "We are definitely a leader in this industry at working with the grid companies to understand the requirements they might have. If you have more and more renewable energy on the grid – variable energy – there are more issues to deal with and we are working to provide reactive power. So I think you will see from GE a new feature every year to help support the grid," says Maltepe.

GE claims it has already received more than 1,000MW's worth of orders for the 2.5xl product, which equates to enough wind-generated electricity to meet the demands of more than one million German households. According to the European Wind Energy Association, Europe's installed wind capacity has increased almost six-fold since 2000, and despite some issues meeting existing orders, the company is confident that demand will continue to increase.

"Today the world's energy that comes from renewables is in the low single digits," says Abate. "But when you look at the world's electrical infrastructure there are 3,500GWs of generating capacity. If the world wants to meet this with wind it works out at 40,000 wind turbines, or if you want to go with solar it is 500 million solar panels."

With more than 70 countries installing wind power, the sector is by no means a niche operation for GE and the company projects massive growth in the near future. "This year, our wind business will be more than $6bn," predicts Abate. "We were doing maybe 500 turbines back in 2005 but this year we will break 3,000."

Most of GE's efforts are focused on onshore turbines at present – all production at Salzbergen is for land-bound devices – as the company currently sees offshore as a more difficult and potentially higher-investment business. However, Abate hints that the company's offshore strategy could evolve. "We have units running offshore and if GE wants to be aggressive in the offshore business, we can," he says. "Currently, with our land-based products we are fully committed through 2010, so when you look at supply and demand that is where our capacity is going. The big question for offshore in the long term is cost competitiveness and the tariffs needed to make it go are quite large."

As well as the issues associated with building the manufacturing capacity to meet demand for turbines, there are other deep-seated issues which could also affect the business in the short to medium term. Steel prices have been rising steadily over recent years due in part to the rising requirement for raw materials to fuel the expansion of developing countries such as China. "There is a lot of steel in our turbines so the cost of steel going up makes turbines more expensive," admits Maltepe. "It is a major issue for the industry."

The wind industry is also sure to be hit by the current credit crisis and financial turmoil as most renewable projects, while cost effective over the long term, have high initial setup costs that typically require access to credit.

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

GE is obviously confident about the potential market for renewables and its ability to meet that demand using facilities such as Salzbergen. And given the fact that that the company appears to be struggling to meet demand at present, any temporary slow-down in turbine orders might not be the worst thing that could happen, in the short term at least.