Wind energy has completed a dramatic evolution in its relatively short history. It has come from being described as “alternative” to “renewable” to “the new conventional”. Grid penetration has also progressed enormously. Across the whole of 2017 Denmark produced more than 43% of its electricity from wind, the UK 17% and even the USA with its huge grid and competitive environment produced more than 6%. And the firms engaged across the wind energy value chain have also evolved from being pioneers staffed by dreamers – I should know, I was one of them – to now including multi-billion dollar manufacturing companies, most of the big energy utilities and a good proportion of the oil and gas majors.
This means that the strategic questions being asked by businesses have evolved too. Early on the questions were around does wind energy really work or how reliable is it. Later they became what part should existing businesses play in this new industry and how to grow it to become a significant part of the electricity mix. Nowadays the driver of most questions is less idealistic and rather more down to earth. For example “how can we drive higher profitability from our installed assets”, or “how can we reduce costs to compete in a zero-subsidy, technology neutral auction”?
A simple strategic answer is often relative market share. Consider Ørsted’s offshore development activity:
- the more sites they develop, the better they understand costs and revenues
- the more auctions they win, the bigger their construction and operational portfolios
- the more they reduce costs through economies of scale, the more they can invest in new development than competitors
… and so the virtuous cycle continues, in theory. Real life is more complicated though! Should you think about relative market share at a local or global level? How do you trade off critical mass versus avoiding the risk of having all of your eggs into one basket, which could mean including a mix of countries, turbine suppliers or emerging technologies in your portfolio?
So what strategy questions should you be asking about your business and the part of the wind energy value chain you operate in? What other answers might there be when you don’t start out as the biggest player or aren’t just seeking to be the biggest? Whilst our strategic analysis methods and tools have their roots in conventional “big consulting” practice, the devil is often in the detail, and deep industry insight and data are key.
BVGA Associates is focused on the wind energy industry. For more than ten years we have been helping clients of all sizes operating in all parts of the value chain to answer their toughest business, technology and economic questions. If you’d like to know how we can help you answer your most difficult strategic questions, get in touch.