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IBISWorld Updates WInd Manufacturing Report

Manufacturing Group | March 6, 2012

Favorable incentives will drive industry revenue growth, providing tax credits and incentives for the industry's customer to put together wind power projects.

The Wind Turbine Manufacturing industry slightly decreased during the past five years. Revenue is anticipated to decline at an average annual rate of 0.2% to $6.3 billion in the five years to 2012. The credit crunch following the recession led to a sharp decline in sales during 2010, as customers ordered fewer turbines and factories were under capacity. Favorable incentives will still drive industry revenue growth over the period, providing tax credits and incentives for the industry's customer to put together wind power projects.

Wind Turbine Manufacturing industry revenue has hit a headwind. Over the five years to 2012, the industry is expected to decline at an average of 0.2% annually to $6.3 billion. According to IBISWorld industry analyst Justin Molavi "a sharp drop in business investment and a dearth of available financing during the recession hampered industry revenue. Additionally, the advanced energy manufacturing tax credit expired in 2010, making it more expensive to open turbine manufacturing facilities, which weighed on industry revenue during the period following 2010. Nevertheless, other favorable government incentives (other than the manufacturing tax credit) have supported the industry over the period as its customers' increasingly put together wind power projects." As a result, revenue is estimated to grow by 2.5% from 2011 to 2012.

Favorable government incentives have helped limit the industry's revenue decline. In response to the recession, the US government passed the American Recovery and Reinvestment Act (ARRA), establishing various incentives for renewable energy. Industry players increasingly set up shop in response to these incentives, adding to the industry's strength. Furthermore, state renewable portfolio standards (RPS), which mandate renewable energy generation goals, have created strong markets for renewable energy producers, resulting in greater demand for wind turbines. Despite the help that these incentives have provided, one incentive, the production tax credit (PTC), is set to expire at the end of 2012. If not extended, the industry may experience a fall in demand for turbines.

The difficulties of 2010 and 2011, which were caused primarily by recessionary aftershocks, will be a thing of the past over the next five years. Molavi says that "despite the possible expiration of the PTC, demand for wind turbines will likely continue, on the back of other favorable incentives and strong interest in sustainable energy. Increased interest in offshore wind will also drive demand for turbines higher, as offshore wind farms continues to entice wind power developers. However, the uncertainty in regard to the costs of wind power will hamper the industry's growth prospects as other renewable energy technologies and conventional energy generation sources compete for the power developer's attention."

IBISWorld forecasts that in 2012, the four largest players in the Wind Turbine Manufacturing industry will collectively account for 45.9% of industry revenue, with the largest player, General Electric, comprising 38.6% of industry revenue. Market share has increased moderately as GE has acquired small manufacturers to bolster its footprint in the industry. This trend is set to continue as GE continues to increase its stake in the wind industry.

Click here for more information on IBISWorld's Wind Turbine Manufacturing

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