UK wind turbine prices might increase post-COVID-19, says GlobalData

The ongoing disruption caused by the COVID-19 outbreak could prove to be a source of concern for potential investors. Furthermore, round-four offshore wind power auctions have been postponed indefinitely, providing bidders time to consider the impacts of the pandemic in their proposals, says GlobalData, a leading data and analytics company.

Somik Das, Senior Power Analyst at GlobalData, comments: “Despite being a thriving industry, the UK suffers from a lack of domestic turbine manufacturers. Several continental Europe Tier 1 wind suppliers have built manufacturing plants to serve the country’s demand. Domestic businesses are primarily involved during farm development – construction, operation and maintenance, and in the supply chain of materials as tier 2 and tier 3 suppliers.

“Despite the manufacturing sector being exempt from the lockdown, stringent quarantine measures are likely to create a material supply bottleneck. Production rates are not expected to be high, hence to meet the expected rates, the manufacturing costs would go up. During the first quarter of 2020, the UK’s average turbine price is estimated to rise to $854/kW, from $816/kW, and is expected to peak further in Q2 to reach $891.6/kW as suppliers across the value chain are likely to be impacted by capital crunch, a shortage of personnel and transit issues.”

Prominent manufacturers such as Vestas, Siemens-Gamesa and Nordex have stalled facilities in Italy and Spain, which are two of the most affected countries in the EU. However, a vast majority of Europe’s wind manufacturing plants continue to operate, with Siemens and Vestas continuing operations in the UK. The biggest impacts on the supply chain are the restrictions imposed on the movement of goods and workers.

Das continues: “The pandemic has led to closed borders and fluctuating forex rates. This has impacted the flow of goods. Logistics and balance of plant support from UK businesses have declined, stalling projects. The current challenges are likely to be resolved once the lockdown measures are lifted by the government. However, the time lost in curbing COVID-19 transmission and regaining harmonization between supply and demand will most probably result in a period of high turbine prices, until the end of 2020.”