case study

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20, November 2010

KETAN R GANDHI

RCG Group: Wind farming dreams
Freedom from dark nights to every home through powering green energy gives us feeling of pride and sense of making a sustainable world – Rameshchandra Gandhi, Chairman of RCG group of companies.

Wind Farming Dreams
Ever since RCG group’s inception in 1972 at Rajkot, it has always looked at things differently. RCG group started out in Rajkot in Gujarat state with a modest beginning as small scale casting and machining firm to produce diesel engine parts. Today, the firm has diversified in several areas. This is the story of a young man who simply refused to grow old.
So much that in such short span, he built one of India’s biggest and most respected group of industries: Rameshchandra
Chhabildas Gandhi Group (RCG Group). Today, RCG group has made its presence successfully felt in almost every spectrum. High-Tech Agriculture equipments, engineering, pulp & paper, milk / dairy products, Real Estates &
Infrastructure, Education, and FMCGs. With over 3500 employees and innumerable presence through offices, outlets, associates, firm is very near to everyone.
Right from its formative years, the RCG group has been spearheading growth and success; courtesy Mr.
Rameshchandra Gandhi’s vision and dynamic leadership. Born on 19th of May, 1943, Rameshchandra Gandhi completed his education - Diploma in Mechanical Engineering from Vallabhvidyanagar. He started off young and in the year 1972, KECO came into existence which was later merged with RCG group.
The story of a successful business lies in entrepreneurial spirit, intellect and management of relationships. Mr.
Rameshchandra Gandhi has many such stories to share. And what he earned, he gave it right back to the societydonations to a large numbers of social causes and organizations. Educational institutions, Hospitals, Blood banks,
School for the mentally challenged the list goes on and on. Thanks to his generosity and entrepreneurial skills, he has been honored and recognized by industry leaders and peers alike.
He always looked at constraints and took firm steps to convert them in to opportunities. After diversifying in to several areas and achieved fairly good success and approaching age of early sixties now he wanted to contribute in sustainable society and help overcome power crisis in the country. For last 10 years he has been studying opportunities in power sector in India. After successful IPO of wind energy firm Suzlon and various policy initiatives of government he decided to analyze potential in wind sector for local and global market and propose to board for diversification plan in wind energy sector.
He analyzed his 3 years of efforts of data collection, gathering market intelligence from various sources from with-in and outside India and have done extensive work on understanding market opportunities, challenges vis-à-vis group’s strength and weaknesses thinking and finalizing his recommendation to board of directors for group’s strategy on diversification in wind sector. He was looking outside window of headquarter looking over Aji river at Rajkot and drinking strong milk tea on 28-Feb-2009 before board meeting.
RCG Group has demonstrated very good revenue growth year or year. Refer exhibit 26 for consolidated annual results of the group. Though their major revenue (more than 60%) has been from real estate and infrastructure business, remaining 40% revenue is from all other businesses.

----------------------------------------------------------------------------------------------------------------------------------------------Prof. Ketan R Gandhi developed this case study. KgGuruji Academy cases are developed only for class discussion.
Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copy write © 2010 President of KgGuruji Academy. To order copies or request permission to reproduce material call [phone] or mail to [e-mail] write KgGuruji, G1-702, Jasminium, Magarpatta City,
Hadapsar, Pune-411028, India. This publication must not be digitized, photocopied, or otherwise reproduced, posted, or transmitted in any form, with out the permission of Head-KgGuruji Academy.

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Power Scenario
Electricity Demand - Global Electricity Demand
The International Energy Agency, or IEA, in its World Energy Outlook 2004, estimates that the world electricity demand will double between 2002 and 2030. Globally, the power sector is required to add an estimated 4,800 GW of capacity to meet the projected increase in electricity demand and to replace ageing infrastructure. The IEA has estimated that this would require an investment of US$ 10 trillion and more than US$ 5 trillion of that amount will be required by developing countries alone. The IEA also expects that the predominant use of fossil fuels, such as coal, oil and natural gas, for energy production will continue in the future. Nuclear power’s contribution is expected to decline and the use of renewable energy sources, such as hydroelectricity, wind power, biomass and solar, is expected to increase. The IEA also estimates that wind power share in total electricity generation will grow from 0.2% in 2002 to
3.0% in 2030 and will be the second-largest renewable source of electricity after hydroelectricity.
Electricity Demand - An Indian Electricity Demand
Historically, the power industry in India has been characterized by energy shortages. According to the Central
Electricity Authority, India, in fiscal 2005, demand for electricity exceeded supply (Exhibit – 4) by an estimated 7.3%
(7.1% in fiscal 2004) in terms of total requirements and 11.7% (11.2% in fiscal 2004) in terms of peak demand requirements. Although power generation capacity has increased substantially in recent years, it has not kept pace with the growth in demand or the growth of the economy generally. (Exhibit 2 Per capita consumption of electricity) One of the main reasons for lowest electricity consumption levels in the world is due to unreliable supply and inadequate distribution networks.
The Government of India, or GoI in its mission “Power for all by 2012”, estimated that Indian installed generation capacity should be 200,000 MW by the end of its Eleventh Five Year Plan in 2012 compared to 115,545 MW as of
March 31, 2005. Refer exhibit 1 for break-up of total installed capacity as on 31 Mar 2005 in India
The GoI adopts a system of successive Five Year Plans that set out targets for economic development in various sectors, including the power sector. Each successive Five Year Plan has increased power generation capacity addition targets. The Ninth Plan targeted a capacity addition of 40,245 MW. MoP estimates indicate that only around 19,251
MW or 47.8% of the planned capacity was added during the Ninth Plan. The Tenth plan (FY 2002 – 2007) has targeted a capacity addition of 41,110 MW through Thermal, Hydro and Nuclear power plants. This includes 14,557 MW that has been planned in the first three years of the Tenth Five Year Plan against which the actual installations have been
9,692 MW at the end of the third year.
With increasing urbanization, industrial growth and per capita consumption, the gap between the actual demand and supply is likely to increase. Some latent demand for electricity may also surface in the event of wider distribution and increased reliability in power supply. In this scenario, the GoI expects that alternative sources of energy, such as wind energy and biomass, are likely to play an increasingly important role in bridging the demand supply gap.

Generation Technologies
Power generation technologies have been evolving during last 100 years. Exhibit 7 presents an overview of different generation technologies and their life cycle stage. Wind energy has been in the growth phase of life cycle curve that indicates that it has promising future growth. It will take few years time to mature and few decades time to obsolete.
Growth phase also indicates the sector has many opportunities in technology development, business & profit.
Established wind turbine companies and new competitors all will have an opportunity to do business in the sector.

Global Wind Energy Demand
The global wind energy industry is worth US$ 11.3 billion as of end 2004, according to BTM Consult ApS. (BTM
Consult ApS is an independent consulting firm focusing on renewable energy sources and was formed in 1986 with its registered office in Denmark. In 1996, BTM Consult ApS began producing an annual survey of the wind energy market. BTM Consult ApS states that the sources of its market data include relevant professional energy sector journals and estimates by consultants, employees of wind turbine manufacturing companies and governmental institutions.)
Technological advances have resulted in larger and better quality WTGs with higher generation efficiencies at lower costs. Rameshchandra believes that heightened environmental awareness has also resulted in increased demand for
“green power” in developed countries. With over 8,000 MW of installations in 2004, the cumulative global installations

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of WTGs were 47,912 MW by the end of 2004. Cumulative installations have grown at a CAGR of 26.9% in the last 4 years. Exhibit 3 illustrates growth in global wind power installed capacity for the period 2001 to 2004.
Geographic demand for Wind Power Globally
Exhibit 5 illustrates the geographic growth in installed capacity in the four years ending December 31, 2004 and the cumulative installed MW capacity by country and region for the top ten markets:
Europe accounted for 72.8% of the new installations in 2004 while 6.3% of the new capacity was installed in the
Americas. Asia, including OECD Pacific almost doubled its installations to 1,648 MW thereby contributing to over
20% of the installations. The Spanish market was the largest market in the world in 2004, with 2,064 MW of installations. India, with 875 MW installed in 2004, was the largest market in Asia and the third largest market in the world in terms of annual installations in 2004.
Europe with 34,725 MW, accounts for over 72.5% of the cumulative installations as on December 31, 2004. Germany alone accounts for 34.7% of the global installations with cumulative installations of 16,649 MW at the end of 2004.
According to the EWEA, in the period 1995-2000, wind power accounted for 23.4% of the net increase in generating capacity from all fuel sources across the EU. The EWEA further estimates wind to account for 50% of the net increase during 2001-2010.
According to BTM Consult ApS, wind power as a percentage of global electricity supply reached 0.57% by the end of
2004. In Denmark, wind power contributed approximately 20% to the country 's electricity supply, while Germany and
Spain derive approximately 6% and 5% of their electricity requirements from wind. The German government has a long term target of producing 25% of the country’s electricity from wind energy by 2025. According to the EWEA, the north German state of Schleswig-Holstein has 1,800 MW of installed wind capacity, enough to meet 30% of region’s total electricity demand, while in Navarra, in Spain, 50% of the consumption is met by wind power.
Based on the March 2005 report of BTM Consult ApS, the ten largest markets accounted for 84.5% of the new installations in 2004. According to the data compiled by BTM Consult ApS, Canada, Spain, Italy, France, Portugal,
United Kingdom, India and China experienced strong growth in annual WTG installations in 2004. In addition, the number of countries with wind power installations grew to over 60 countries as of the end of 2004. Large multinationals such as General Electric and Siemens have entered the wind power market through the acquisition of existing wind turbine manufacturers.

Indian Wind Energy Demand
The wind power program in India was initiated in 1983-84. From the program’s inception, the GoI has promoted a market-oriented strategy which has led to commercial development of technology. The broad based national program includes wind resource assessment activities, research and development support, implementation of demonstration projects to create awareness, opening up of new sites, involvement of utilities and industry, growth of infrastructure capability and capacity for manufacture, installation, operation and maintenance of WTG’s and policy support.
India is perhaps the only country in the world to have an exclusive Ministry for Non-Conventional Energy (Now
MNRE) Source. The key functions of MNRE include:
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policy making and planning; program formulation and implementation research and development; technology development and commercialization; promotion of demonstration and pilot projects; and implementation of fiscal and financial incentives

MNRE through Center for wind energy technology (C-WET) also carries out wind resource assessment studies, pursuant to which it has revised its estimate for gross wind power potential in India from 20,000 MW to 45,000 MW, assuming land availability at 1% in potential areas for wind power generation. MNRE has also been working with the various state governments as a result of which states with wind power potential have introduced policies pertaining to power purchases, wheeling and banking to provide a framework for investment in wind power.
Regulatory enactments in India further support the absorption of renewable energy in the energy mix:
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The Electricity Act of 2003 requires all state-level energy regulatory commissions to ensure that electricity distributors procure a specified minimum percentage of power generation from renewable energy sources

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Maharashtra Energy Regulatory Commission has stipulated 750 MW of new wind power capacity for sale to utilities by March 2007
Karnataka Energy Regulatory Commission has stipulated a minimum of 5% and maximum of 10% of electricity from renewable.
Madhya Pradesh Energy Commission has stipulated 0.5% of electricity from wind power by 2007
The state government of Maharashtra has imposed a Rs. 0.04 per unit green power cess on commercial and industrial users in order to promote non conventional energy projects

MNRE and various state governments’ initiatives to provide a supportive and stable policy framework for investment in wind power have contributed to the growth of the Indian wind power industry over the last four years. The annual increase in newly installed MW capacity and the cumulative installed MW capacity for the past four years as mentioned in Exhibit – 6.
Seven states in India (Tamil Nadu, Karnataka, Andhra Pradesh, Rajasthan, Maharashtra, Gujarat and Madhya Pradesh) account for over 99% of wind power installations in India. As of March 31 2005, Tamil Nadu had the highest share and accounted for 56.7% of the cumulative capacity. Maharashtra had the second largest installations and accounted for
12.7% of the cumulative capacity. With 875 MW of installations in 2004, India recorded one of the highest year-onyear growth rates in installed capacity. India contributed 10.7% of the total new MW additions globally, in 2004 and as of end-2004 accounted for 6.3% of cumulative MW capacity installed globally.

Key Growth Drivers
The market for wind power has become significant due to the following factors:
Increasing Electricity Demand:
In World Energy Outlook 2004, IEA estimates the global electricity consumption to double between 2002 and 2030, with demand for electricity likely to increase at a much faster pace in developing countries like India and China. The
IEA also estimates the share of wind power’s share of total electricity generation to grow from 0.2% in 2002 to 3.0% in
2030 and that it will be the second-largest renewable source of electricity after hydroelectricity.
Increasing cost competitiveness:
The continuous focus on improving the cost efficiency of WTGs has resulted in wind power becoming increasingly cost competitive compared to traditional sources of energy. The American Wind Energy Association, or AWEA, in its report dated December 22, 2000 estimated that the cost per kWh of wind generated electricity has fallen from US$ 0.38 in the early 1980s to anywhere from US$ 0.03 to US$ 0.06, at excellent wind sites. Some of the factors that have contributed and are expected to continue to contribute to reduced costs are increasing focus on larger projects, technological advancements resulting in WTGs with higher capacity, economies of scale resulting from increase in the size of WTG manufacturers and the ability to obtain financing for wind power projects.
Environmental awareness and Government Initiatives:
Generating electricity from fossil energy sources releases carbon dioxide, which many claim leads to the "greenhouse effect". As such, many countries, such as India, the United Kingdom, the United States of America and Germany, have provided fiscal incentives and schemes to encourage the growth of renewable. These incentives and schemes range from preferential tariffs or tax credits for renewable energy projects to taxing those who contribute to emission of carbon dioxide. In order to combat the greenhouse effect at a global level, the Kyoto Climate Summit was held in 1997 to further implement the commitments agreed upon at the Rio Earth Summit in Rio de Janeiro, Brazil. According to the
Kyoto Protocol, which has recently become effective, the participating countries have agreed to a long-term reduction of their carbon-dioxide emissions by an average of 5.2% compared to the level of emissions for 1990, by 2012. The greenhouse gas reduction targets have cascaded down to a regional and national level. These in turn have been translated into targets for increasing the proportion of renewable energy. Wind is a preferred source given its modular nature and ability to generate power at competitive cost and therefore many countries / associations have set targets with respect to wind power installations. Some of these include in Exhibit 19.
Also, countries such as Australia, certain states in India and 18 states in the United States, have introduced the
Renewable Portfolio Standard, or RPS, which mandates that renewable energy sources contribute a specified minimum percentage of total electricity supply. In Australia, the existing Mandatory Renewable Target requires that renewable energy make up a further 2% of total power generated by 2010. Further, the system of carbon trading has also been initiated in countries in European Union and countries such as Japan. Carbon trading refers to a system wherein emitters of carbon dioxide and other harmful gases are required to purchase green certificates from clean energy
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producers including renewable energy producers. Trading in green certificates may also provide an additional stream of revenue for wind power projects.
Re-powering:
Re-powering involves the replacement of old WTGs with new and more cost efficient WTG. It is expected to become one of the growth drivers in relation to the future market for wind power, particularly for countries in Europe that have a large number of ageing WTG installations with relatively low capacity and outmoded technology. BTM Consult ApS, in its World Market Update 2004 estimates global potential for re-powering between 2,500 MW to 8,700 MW in the period 2005-2014.
Offshore Market:
The offshore WTG market presents a new opportunity for wind power, especially in Europe. Several offshore projects have commenced operations, with Denmark accounting for a majority of them. Total offshore installations stood at 589
MW at the end of 2004. With the introduction of larger WTGs targeted at the offshore market, significant developments are expected in the offshore market in the future.

Global Wind Energy Market Potential
Wind power installations are heavily concentrated in Europe, United States, India, Japan and China, which accounted for about 90% of global wind power installations, as of 2004. Europe continues to account for over 70% of the total installed wind power. In this connection, BTM Consult ApS has conducted a study to estimate the potential of wind power. According to BTM Consult ApS, the cumulative installed capacity for wind power is expected to grow from
47,912 MW in 2004 to 117,412 MW by 2009, representing a CAGR of 19.6% and 2,35,000 MW by 2014, representing a CAGR of 17.2%. Annual installations are expected to grow from 8,154 MW in 2004 to 17,605 MW in 2009 and
29,000 MW in 2014. BTM Consult ApS estimates that the penetration of wind power in worldwide generation of electricity will increase from 0.57% in 2004 to 2.37% in 2014. BTM Consult ApS estimates that Europe’s share in cumulative installations will decline to 63.7% by 2009, with the share of the Americas (including the United States) expected to increase from 15.4% in 2004 to 19.3% in 2009. OECD-Pacific countries such as Australia, New Zealand,
Japan and South Korea are estimated to increase their share of the cumulative installed capacity from 3.4% in 2004 to
5.1% in 2009. South Asia and East Asia are expected to have significant growth rates in the next five years, particularly due to countries like India and China. Its share of the cumulative installations is expected to increase from 7.9% in
2004 to 10% in 2009.

Indian Wind Energy Market Potential
According to BTM Consult ApS, India is making steady progress in the development of wind power and in 2004 it was the third largest country in the world with annual installations of 875 MW, which exceeded the forecast of 500 MW, issued by BTM Consult ApS. As of December 31, 2004, Denmark had cumulative installed capacity of 3083 MW and
India had cumulative installed capacity of 3000 MW, BTM Consult ApS expects India to overtake Denmark in terms of cumulative capacity in 2005. The following table sets forth the changes in the BTM Consult ApS estimates for annual installations in India from its 2002 report, 2003 report and its 2004 report. Refer Exhibit-21 for BTM’s forecast for
Indian wind power market released in 2004.
BTM Consult ApS has estimated that cumulative installed MW capacity for wind power in India will grow from 3,000
MW in 2004 to 8,300 MW in 2009, representing a CAGR of 22.6%. The annual installed capacity is expected to grow from 875 MW in 2004 to 1,200 MW in 2008.
The GoI, through MNRE, continues to encourage state governments to implement national policy guidelines set or wind power projects. Presently MNRE estimates India’s gross wind power capacity to be 45,000 MW (assuming that
1% of land available for wind power generation in potential areas is utilized). MNRE estimates the technical potential at approximately 13,000 MW (assuming 20% grid penetration), which is expected to increase with augmentation of grid capacity. Several new initiatives are being undertaken by the MNRE to reassess India’s gross wind power potential. Introduction to wind energy
Wind Energy

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A wind turbine generator, or WTG (also referred as Wind Energy Converters WEC), obtains its power input by converting the force of the wind into a torque (turning force) acting on the rotor blades. The amount of energy, which the wind transfers to the rotor blade depends on the density of the air, the rotor area and wind speed. The diagram
(Reference exhibit 12 illustrates how the kinetic energy from wind is converted to electricity
The power generated by the WTG, usually at a voltage of 440 volt / 690 volts, is converted by a transformer to a
“medium” voltage of 11 kV to 33kV – depending on the grid operator – and supplied into the grid. When several
WTGs are operated together on a wind farm, the operator must ensure that turning on or stopping the WTGs does not cause electrical surges to be fed into the utility’s power grid, which could cause damage when the electricity reaches end-users. Density of Air
The kinetic energy of a moving body is proportional to its mass (or weight). The kinetic energy in the wind thus depends on the density of the air, i.e. its mass per unit of volume. In other words, the “heavier” the air, the more energy is received by the turbine. Further, air is denser when it is cold than when it is warm. However, at higher altitudes, such as in mountainous regions, air pressure is lower and, as a result, the air is less dense.
Rotor Area
The rotor area determines how much energy a WTG is able to harvest from the wind. Since the rotor area increases with the square of the rotor diameter, a WTG of a given size will receive 4 times as much energy as a WTG half its size. Rotor diameter is often mentioned as major specification.
Wind Speed
Wind speed is extremely important as the amount of energy a wind turbine can convert to electricity. The energy content of the wind varies with the cube (the third power) of the average wind speed, i.e. if wind speed is twice as fast it contains eight times as much energy.
Wind Turbine Generators
A WTG comprises a tower (or mast), a nacelle, which contains the essential mechanical and electrical parts, and a rotor blade. However, the generation of electricity by a state-of-the-art WTG is a result of the specific interplay of various highly developed and synchronized components. The technical achievement in developing a WTG lies in harnessing the wind, the speed of which changes continually, and the power of which fluctuates depending on he air temperature, to generate a stable level of power regardless of wind conditions. The goal of the technical efforts and optimization, therefore, is to generate the highest possible constant level of power output from all types of wind conditions. To achieve this: (a) the height of the WTG 's hub must be optimized in order to balance the increased expenses associated with taller hubs with the higher wind speeds a taller hub can utilize; (b) the rotor blades must extract the maximum amount of energy from the wind and convert it into torque; (c) the drive train along with the gear and the generator must efficiently convert the captured energy to electricity with as little capacity lost as possible; (d) the power output of the WTG must be limitable to prevent damage to the turbine and adjustable to cope with the entire range of possible wind speeds; (e) the controlling electronics of variable-speed WTGs must control the interplay of all components and optimize the amount of energy captured from the wind; and (f) the WTG turbine and its individual components must have the strength to withstand the forces acting on it and to seek to achieve optimal operation for the longest possible time. In addition, for wind farms micro-sitting the location of each WTG is also a key factor, as too far a space between
WTGs will decrease the amount of wind intercepted while too close a spacing will lead to interference, resulting in downwind units being less productive.
The figure (Reference exhibit 11) illustrates the key components of a wind turbine:
The rotor blades
The rotor blades form the motor of the WTG, which uses the rotor blades to collect kinetic energy from the wind and to convert this energy into a rotation of the rotor. The area swept by the rotor blades, the aerodynamic profile of the rotor blades and the rotational speed of the rotor are the key factors determining the capacity of the WTG. In WTGs with stall-regulation, the rotor blades are fixed to the hub, whereas in WTGs with pitch-regulation, they are attached so that they can rotate along their longitudinal axis. Presently, WTGs are manufactured almost exclusively with three rotor blades. Energy conversion via the drive train and generator
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The rotor blades are attached to the hub, which in turn is connected to the rotor shaft. The rotor shaft transfers the revolutions of the rotor to a gear, which itself is linked to the generator of the WTG by way of a coupling. The unit comprising the rotor shaft, gear and generator is termed the drive train of the WTG. The generator at the end of the drive train converts the revolutions of the rotor blades into electrical power. The WTG’s gear serves to increase the rotational speed of the rotor to match the speed of the generator. Depending on the technical design, the generator can be operated either at a constant rotational speed (stall regulation) or at a variable speed.
Power regulation and limitation (stall and pitch regulation)
Depending on the technique employed to regulate and limit their capacity, WTGs are generally classified as
Stall-regulated or Pitch-regulated.
Stall regulation
In a WTG with stall regulation, power regulation is achieved by causing the air flow to stall by means of the aerodynamic profile of the blade when a certain wind speed is exceeded, preventing the WTG from capturing an increasing amount of energy. In order to increase the energy yield in lower power classes, it is possible to design the generator in such a way that it can operate two different nominal rotational speeds in order to generate power more efficiently at various wind speeds. Stall-regulated WTGs are braked through the front 1.5m to 3m of the relevant rotor blade which can be rotated around its longitudinal axis. This is achieved through a hydraulic mechanism, which can turn the blade tip “out of the wind”, acting as a type of aerodynamic brake similar to the landing flaps of an airplane.
The brakes in every WTG serve as emergency brakes and – similarly to the hand brake in a car – to immobilize and secure the mechanical components.
Pitch regulation
In a WTG with pitch regulation, power regulation is achieved by mounting the rotor blades on the hub so that they can be rotated around their longitudinal axis, in order to control their aerodynamic properties and thus their capacity to capture energy according to the wind conditions. When wind speeds (and thus the wind’s energy content) are low, the rotor blades can be turned “into the wind” so that their angle of attack is maximized and, when a strong air flow creates too much energy, they can be turned out of the wind. Pitch regulated WTGs are braked by allowing the rotor blades to flap like flags in the wind. In addition, the nominal rotation speed of the generator in WTGs with pitch regulation can be adjusted to the prevailing wind conditions. These WTGs are therefore also described as variable-speed WTGs. In these units, an inverter is installed between the generator and the power grid, which enables the generator to generate electricity at different frequencies.
The electronic controls in variable-speed wind turbines
In variable-speed WTGs with pitch regulation, the electronic controls are the “brain” of the WTG and adjust the angle of incidence of the rotor blades with the generator to keep them working smoothly together. The electronic controls measure the generator’s power output and, through the pitch regulation, adjust the angle of incidence of the rotor blades accordingly. If the generator’s power output appears to be dropping, the rotor blades are turned slightly more into the wind, but if the generator’s power output exceeds a predefined maximum limit, the electronic controls cause the pitch regulation system to turn the rotor blades out of the wind.
The use of pitch regulation and the related control options ensures that the wind turbine manufactures the maximum possible energy output from the wind in all wind conditions, taking into account not only variable wind speeds, but also the energy density of the wind. The colder the air, i.e. the denser the air surrounding the WTG, the higher the energy density. Consequently, cold wind blowing at the same speed as a warm wind carries more kinetic energy than warm wind. In order to obtain optimal energy output, the angle of incidence of the rotor blades can be adjusted as necessary.
The advantages inherent in this method for the optimization of output, in turbines with a capacity of approximately 1.5
MW or more or in regions with particularly difficult wind conditions, outweigh the substantial additional costs of-pitch regulated systems.

Future trends in wind turbine design, technologies
Since 1980s wind turbine technology has been evolving, in 1980s, 10 kW turbines were used. In mid 1990s turbine size has increased to 800 kW and in 2005, 5000-6300 kW turbines have been developed. It is expected that this trend will continue and higher capacity wind turbines will be developed in future. Average turbine sizes in different countries are also different and increasing (Refer exhibit 14). It is clearly evident that trend of average turbine size is increasing from
500 kW in 192 to 2000 kW in 2005. This will also help in installing turbines in offshore locations or near shore locations to have better return on investments. Also it will open-up new re-powering market for older turbines (less
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than 600 kW size installed in 1980s and 1990s) installed at high wind sites which can be replaced with higher capacity turbines at the same wind park. Re-powering is an very big market opportunity for wind turbine companies from 2011 onwards. Refer Exhibit 13 about evolution on turbine size.

Key challenges and risk factors in wind sector
Risks related to the wind power industry
Wind power industry has several risks. The occurrence of any of the following events could have a material adverse effect on business, results of operation, financial condition and can cause heavy impact.
The demand for wind power projects is primarily dependent on the demand for electricity.
The demand for electricity in India and in international markets such as the United States and China is closely linked to economic growth in these countries. As the economy grows, economic activities, such as industrial production and personal consumption, also tend to expand, which increases the demand for electricity. Conversely in economic downturns, activities such as industrial production and consumer demand decline or stagnate, causing demand for electricity to decrease. If either the Indian economy or the economies of major international markets, such as China and the United States, do not continue to grow at their current rate, or if there is an economic downturn, demand for electricity generally and demand for renewable energy sources such as wind power particularly are likely to decrease.
A sustained economic downturn would have a material adverse effect on RCG’s business, financial condition and results of operations.
The demand for wind power projects is dependent on the cost of wind-generated electricity compared to electricity generated from other sources of energy, as well as on the reliability of wind patterns.
The demand for wind power plants is dependent on the cost of wind-generated electricity compared to electricity generated from other sources of energy. The cost of electricity produced by wind power plants is dependent on the cost of establishment of the wind power plants themselves, financing costs, maintenance costs and wind conditions at the designated site. The cost and limited supplies of oil, coal and other fossil fuels are key factors in determining the effectiveness of wind power, as from an economic perspective, cheaper and large supplies of fossil fuels favor nonwind power generation, while more expensive and limited supplies of fossil fuels favor wind power generation.
In addition to energy produced from other renewable energy sources, the main competition to wind power is oil, coal, gas and nuclear-fuelled power generation. The cost-competitiveness of energy from renewable energy sources, particularly from wind power, has been enhanced by the current near record-high prices for crude oil and petroleum products. Also, continued investment in product techniques and technical advances in WTG design have led to a continuing reduction in the cost per kWh of power from wind energy. However, an increase in cost competitiveness or a leap in technology for other sources of power generation, the discovery of new and significant oil, gas and coal deposits or a decline in the global prices of oil, gas and coal and other petroleum products, which is currently tracking or near all-time highs, could result in lower demand for wind power plants, which would have a material adverse effect on our business, financial condition and results of operations.
Further, as the viability of wind power is dependent on the wind patterns, which are not constant and which vary over time, WTGs are generally not considered as viable base load sources of electricity. This means that while demand for wind power may increase, it is unlikely that wind power will be considered a large scale substitute for fossil-fuel generated power and for renewable energy from more reliable sources, such as hydropower. This may adversely affect the future growth prospects of the wind power industry in general and our growth prospects in particular.
A wind farm project requires higher upfront capital investment per kWh of energy produced as compared to fossil fuelbased power plants. The terms of financing that end customers can obtain for wind power projects has a significant influence on RCG’s business, financial condition and results of operations.
A wind power plant requires higher initial capital investment per kWh of energy produced from customers as compared to that required for a fossil fuel-based power plant. RCG’s customers are generally required to obtain financing approval and the financing terms obtained for investments in wind power therefore have a significant influence on the wind power industry 's opportunities to sell its products. Higher interest rate levels will cause the costs of investing in wind power to increase, thus making wind power a less attractive investment proposition. The creditworthiness of a wind power project proponent and the terms of any such financing also determine whether financing for a project can be obtained. In most cases, wind power plants are financed over terms that are shorter than what is available for conventional forms of energy. As a result, WTG customers assume a higher degree of risk regarding upward interest rate movements in the event a WTG project requires refinancing. Factors having an adverse impact on the financing
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terms for wind power plants therefore influence opportunities for selling products and could adversely affect business, financial condition and results of operations. The ability to obtain financing for a wind power project also depends on the willingness of banks and other financing institutions to provide loans to the wind power industry, including their willingness to participate in financing of large wind power projects. If lenders decide to reduce their exposure to the wind power industry or to one or more suppliers of WTGs, this could have a material adverse effect on business, financial condition and results of operations.
The decrease in or elimination of government initiatives and incentives relating to renewable energy sources, and in particular to wind energy, may have a material adverse effect on the demand for wind power.
In recent years, governments in many countries, including India, have enacted legislation or have established policies that support the expansion of renewable energy sources, such as wind power, and such support has been a significant contributing factor in the growth of the wind power industry. Support for investments in wind power is typically provided through fiscal incentive schemes or public grants to the owners of wind power systems, for example through preferential tariffs on power generated by WTGs or tax incentives promoting investments in wind power. In India, various state governments have also provided wind power generators with wheeling facilities and have also allowed wind power generators to bank power with the grid, due to wind being an intermittent source of power. In addition, in some countries governments also prescribe specified levels of electricity that utilities are required to obtain from renewable energy sources. Further, the international attention being paid to reducing carbon dioxide emissions and the possibility of trading carbon dioxide emission quotas taking place has led to extra duties being applied to those sources of energy, primarily fossil fuels, which cause carbon dioxide pollution. The imposition of these duties has indirectly supported the expansion of power generated from renewable energy and, in turn, the wind power industry in general. In the past, the decrease in or elimination of direct or indirect government support schemes in a country has had a negative impact on the market for wind power in that country. There can be no assurance that any such government support will continue at the same level or at all. If direct and indirect government support for wind power was terminated or reduced, this would make producing electricity from wind power less competitive. RCG’s ability to sell WTGs and to offer wind power-related services could therefore decline sharply, which would adversely affect financial condition and results of operations.
The construction and operation of wind power projects has faced opposition from local communities and other parties.
The construction and operation of wind power plants in a number of countries has faced opposition from the local communities where these plants are located and from special interest groups. WTGs cause noise and are considered by some to be aesthetically unappealing. Certain environmental organizations have expressed opposition to wind turbines on the allegation that wind farms cause the killing of birds and have other adverse effects on flora and fauna. For instance in India, some communities have claimed that the local climate has been adversely affected by the operation of
WTGs. Legislation is in place in many countries, which regulate the accepted distance between wind power plants and urban areas to guard especially against the effects of noise. It is possible that such legislation could be amended to place further restrictions on distance, or to limit the size or weight of WTGs in a given area, to prohibit the installation of WTGs at certain sites, or to impose other restrictions, such as noise requirements. A significant increase in the extent of such legislation or other restrictions could cause significant constraints on the growth of the wind power industry as a whole. This would have a material adverse effect on RCG’s future business, financial condition and results of operations. The construction and operation of wind power projects is subject to regulation, including environmental controls, and changes in these regulations could have a material adverse effect on RCG’s business, financial condition and results of operations. Many countries, including India, have introduced legislation governing the manufacture, erection, operation and decommissioning of WTGs, including compliance with procedures relating to the acquisition of land to be used for wind power plants, compliance with relevant planning regulations and approvals for the commencement of a wind power project, including clearances from environmental regulators. Further, the extraction activities on land used for wind farms and the refining and consumption of raw materials used in the manufacture of WTGs, the impact of noise pollution from manufacturing facilities and noise from the transport to and from production sites are subject to regulation. In the event legislation and regulation relating to the foregoing activities are made more stringent, such as increasing the requirements for obtaining approvals or meeting government standards, this could result in changes to the infrastructure necessary for wind power projects and the technical requirements for WTGs and the methods used to manufacture them, increasing the costs related to changing production methods in order to meet government standards and increasing penalties for non-compliance. These could have a material adverse effect on RCG’s future business, financial condition and results of operations.

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Wind turbine manufacturer may be unable to keep pace with rapidly evolving technology in the design and production of WTGs.
The global market for WTGs involves rapidly evolving technology. WTGs are progressively becoming larger and their operational performance has improved, and customers are demanding more cost efficient WTGs. To maintain a successful business in field, firm will have to quickly and consistently design and develop new and improved WTGs that keep pace with technological developments and changing customer standards and meet the constantly growing demands of customers in terms of WTG performance. Company’s ability to design, develop, manufacture and market financially viable and cost-efficient WTGs on an ongoing basis is particularly important. RCG’s future inability to adequately respond to the technological changes in industry in a timely manner would have a material adverse effect in business, financial condition and results of operations.
Wind turbine Manufacturers operate in a highly competitive industry, which could limit an ability to grow.
The market for WTGs is intensely competitive. Important factors affecting competition in industry include performance of WTGs, reliability, product quality, technology, price, and the scope and quality of services, including O&M services, and training offered to customers. It is important to allocate and expended considerable resources on product design, development and manufacture, however, few competitors have longer industry experience and greater financial, technical, personnel, marketing and other resources. Some competitors may also be able to react faster to trends and changes in customer demand. Competitors may be willing and able to spend more resources to develop products and sales and may be able to provide products faster or at a lower price. If competitors consolidate through joint ventures or cooperative agreements with each other, or even otherwise, RCG may have difficulty competing with them. Growing competition may result in a decline in RCG’s future market share or may force to reduce the prices of RCG’s future products and services, which may reduce RCG’s future revenues and margins, any of which could have a material adverse effect on RCG’s future business, financial condition and results of operations. Nital was discussing with
Rameshchandra that we cannot be reasonably certain that we will be able to compete successfully against such competitors, or that we will not lose potential customers to such competitors. Additionally, RCG’s future ability to compete also depends in part on factors outside RCG’s future control, such as the price at which RCG’s future competitors offer comparable products and services.

External risk factors for wind turbine manufacturers
Multinational operations subject to risks that could adversely affect business.
For new wind turbine manufacturer there are two choices, to be a local player with limited manufacturing capacity and conservative expansion plan or to be aggressive player, fast expansion plan and have presence in several countries where future wind market potential looks high.
In the first option, external risk factors will be limited. However, in case of second option, a firm will require direct presence in several countries, including China, Spain, and Germany, the United States, South American countries and
Australia and require expanding the amount of revenues that are derived from international markets. Future revenue growth will depends upon the successful continued expansion of sales, marketing, support and service teams in various countries around the world where potential customers are located. This expansion will require establishing new offices, hiring new personnel and managing offices in widely disparate locations with different economies, legal systems, languages and cultures and will require significant management attention and financial resources. Due to the global nature of operations, firm might be affected by various factors inherent in international business activities, including:
• coordinating and managing global operations;
• Political instability and related uncertainties;
• Different economic and business conditions;
• Difficulties in staffing and managing foreign operations, including fully understanding local business and regulatory requirements; • Difficulties are sourcing sufficient quantities of raw materials and components for our WTGs to supply customers in international markets;
• Immigration and labor laws of various countries may prevent us from deploying or retaining an adequate number of employees in foreign countries;
• Foreign currency exchange rate fluctuations;
• Restrictions on repatriation of earnings;
• Tariffs and other restrictions on trade and differing import and export licensing and other legal requirements;
• Multiple and possibly overlapping tax structures;
• Limited protection for intellectual property rights in some countries;
• Exposure to varying legal standards;
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• Unexpected regulatory, economic or political changes; and
• travel restrictions.
Any of these risks could have a material adverse effect on business, financial condition and results of operations.
Political instability or changes in the Government could adversely affect economic conditions in India generally and business in particular.
The Indian Government has traditionally exercised and continues to exercise a significant influence over many aspects of the economy. Wind energy business may be affected by interest rates fluctuations, changes in government policy, taxation, social and civil unrest and other political, economic or other developments in or affecting India. Since 1991, successive Indian Governments have pursued policies of economic liberalization and financial sector reforms. The
Government dissolved parliament in February 2004 and following the general elections held during April and May
2004, a new coalition Government, the United Progressive Alliance, led by the Indian National Congress party was formed. The new cabinet was sworn in on May 22, 2004. The new Government has announced its general intention to continue India 's current economic and financial sector liberalization and deregulation policies. However, there can be no assurance that such policies will be continued and a significant change in the Government 's policies in the future could affect business and economic conditions in India and could also adversely affect RCG’s financial condition and results of operations.
Terrorist attacks and other acts of violence or war involving India, the United States and other countries could adversely affect the financial markets, result in loss of customer confidence and adversely affect business.
Terrorist attacks, such as the ones that occurred in New York and Washington, D.C. on September 11, 2001 and New
Delhi on December 13, 2001, as well as the bomb blasts in Mumbai on August 25, 2003, in Bali, Indonesia and in
Madrid, Spain, as well as other acts of violence or war, may adversely affect Indian and worldwide financial markets.
These acts may also result in a loss of business confidence and have other consequences that could adversely affect our business, results of operations and financial condition. Travel restrictions as a result of such attacks may have an adverse impact on our ability to operate effectively. Increased volatility in the financial markets can have an adverse impact on the economies of India and other countries, including economic recession.
Some parts of India have experienced communal disturbances, terrorist attacks and riots during recent years. In addition, any deterioration in relations between India and Pakistan might result in investor concern about stability in the region. Further, since 2002 there have been military hostilities and continuing civil unrest and instability in Iraq and
Afghanistan. Events of this nature in the future, as well as social and civil unrest within other countries in Asia, could influence the Indian economy and could have a material adverse effect on the market.
Any loss of certain tax exemptions will increase our tax liability and decrease any profits we might have in the future.
The statutory corporate income tax rate in India is currently 30.0%. This tax rate is presently subject to a 10.0% surcharge and an education cess of 2.0%, resulting in an effective tax rate of 33.66%. One can’t assure that the tax rate or the surcharge will not be increased further in the future. Presently, wind turbine company benefit from the tax holidays given by the Government of India for the establishment of manufacturing facilities in backward areas (as notified by the Government). As a result of these incentives, which include a five-year full income tax holiday and fiveyear partial income tax holiday from Indian corporate income taxes for the operation of most of Indian facilities, operations have been subject to relatively low tax liabilities. Income tax exemptions will expire at various points of time in future.
Changes in global economy, recession, financial crisis
The global economy has witness ups and downs in last 30 years. It may change in future as well. Since wind energy requires high capital investment, any economy recession, financial crisis would adversely impact wind power forecast.
Key components sourcing
Sourcing of key components is a major challenge especially to new wind Turbine Company. In initial years of set-up and scale-up operations, RCG need to be customer centric, develop new product that meet market and customer requirements and become competitive. Bargaining power of established wind companies is always higher because of volumes and long relationship. Establish player might have invested in back ward integration projects as per their supply chain risk mitigation strategy (partly in-sourcing, partly out-sourcing). RCG can’t set-up backward integration projects from day 1 of their operations, as it require huge capital investment to set-up factories. RCG will have to fully depend on component suppliers in delivery schedule, no of components that can be supplied to RCG from supplier,
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price etc. Any increase of orders of key components to same suppliers from competitors, RCG’s production schedule might be affected, as component supplier always prefer to meet requirements of their key customers (competitors of
RCG) with whom, suppliers have long term relations and sourcing agreements.

Competition
The WTG market is characterized by strong concentration among a small group of manufacturers. In calendar 2004, approximately 96.1% of the global market for WTGs, measured by installed capacity, was accounted for by only ten manufacturers, including one Indian company Suzlon. (Source: BTM Consult ApS – March 2005). Some individual regional markets such as China, India and Australia are dominated by just two or three manufacturers. RCG’s primary competitors both in India and abroad would be Danish manufacturers, Vestas Wind Systems A/S and Bonus
Energy (which was acquired by Siemens), the U.S. manufacturer G.E. Wind (which acquired the WTG manufacturer
Enron Wind Corp.), Spanish manufacturer Gamesa Eó1ica, and the German companies Enercon GmbH, Nordex AG and REPower Systems AG. (source: BTM Consult ApS – March 2005), Indian manufacturers (Enercon India, RRB
Energy, Pioneer Wincon, Shriram EPC, Suzlon Energy, GE wind energy India, Elecon etc) and Chinese manufacturers
(Gold wind, Sinovel etc.)
Exhibit 16 indicates market share of top 10 competitors based on annual installed capacity during 2005 and accumulated installed capacity as of December 31, 2005.
In the Indian market, primary competitors include the Indian joint venture of Vestas Wind Systems AS and NEG
Micon A/S, as well as the Indian joint venture of Enercon GmbH. Exhibit 22 indicates share of the Indian WTG market and that of competitors based capacity installed during calendar 2004.
The types of wind turbines manufactured by local competitors in India and that possess valid type approvals and class certifications are listed in Exhibit 23.
New wind turbine developed by RCG Group will also require type approval and class certification from CWET to sale turbines in Indian market. For global market turbine need to be GL certified by obtaining certification from any international accredited approval agency.
Future competition is expected from local turbine manufacturers as well as world’s top 10 companies of outside India who wishes to establish their operation in India either through local partners or their subsidiaries. Few established
Indian corporate announced their plan to enter in to wind sector. If those companies are also able to launch their wind turbines in local/global market RCG will have to compete with them as well. Probable new wind turbine players are
Reliance ADAG group, Inox Group, Sanjay Ghodawat Group, Lanco Infratech, Sterling Infotech Group, Khemkas, and
Bhart Forge etc.)

Suppliers of key components and supply chain strategy of wind turbine companies
On the supply side, the current situation has focused attention on the supply chain which lies behind the large turbine manufacturers. A long list of components goes into the production of a wind turbine (see exhibit 11), not all of which are as readily available as others. “There are particular bottlenecks in gearboxes and bearings,” “A crucial issue is that the size of turbines (average) has been increasing dramatically from less than 1 MW up to 2 MW and larger. This means, for instance, that the number of gearbox suppliers who can satisfy the demand reliably is reduced considerably.
The same applies to blades and bearings and towers. Increasing turbine size has a lot of implications in the supply chain.” A final factor is the price and availability of raw materials. This has both contributed to supply bottlenecks but also to the recent increase in the price of turbines. Examples of raw materials whose prices have increased substantially are steel (used in towers, gearboxes and rotors), copper (used in generators) and carbon (used in rotor blades). Global steel prices have risen by 15-20 %, boosted by demand from growing economies like China.
“The underlying issue is that nobody successfully foresaw that so many world markets would expand all at the same time,” says Thorsten Herdan of VDMA, the German engineering business federation, whose members account for 4050 % of the global wind supply market. “So you had the United States, which was reasonably well expected, but you also had good markets in the UK, France, Italy and Portugal, as well as China and India.

General trend is to purchase components such as gearboxes, generators, towers, bearings and castings from several different manufacturers for small & medium size Turbine Company. However large size top 10 wind turbine companies pursue a strategy of procuring these components from manufacturers who have established themselves as suppliers of components that are compatible with WTGs and meet their technical and quality standards, either on a purchase order basis or through negotiated supply agreements as well as their own
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production units as backward integration strategy to control sourcing cost, to control supply chain and to minimize risk. In order to minimize the risk regarding availability of key components and of competition, one need to entered into exclusive supply agreements with suppliers, pursuant to which such suppliers have to undertake to maintain a minimum level of inventory to meet wind Turbine Company’s demand. In turn, wind turbine firm need to provide these suppliers with advances on orders, which range from 5.0% and 25.0% of the value of orders placed, depending on the supplier and the components involved. For an Indian wind turbine company, on a standalone basis, the cost of imported raw materials as a percentage of cost of raw materials works out to be approximately 50% to 65% depending on number of components import, remaining components can be sourced locally.
Exhibit 17 and 18 indicates present and future strategy of top 10 wind energy companies for their supply chains.
Following are major issues related to wind turbine supply chain;
•
•
•
•
•
•
•
•
•
•

Single source for many components
Time consuming and risky to qualify other suppliers who have no experience of wind sector supply
Lead time of key components like gear box, generator, tower etc. are very long (16 to 52 weeks)
Inventory in the entire supply chain impact the price
Matching of plan of key component production and wind turbine’s assembly
Raw material price fluctuation in long term agreed price contracts
Key component supplier severs need of many wind turbine manufacturers
Shortage of key components creating a situation of shortage of wind turbines
Order of key components based on forecast where forecast accuracy is generally lower than 70%, leading to bull whip effect in the chain
O & M spares also must be supported by OEMs from same production facilities on priority

As part of wind energy company strategy of increasing in sourcing through backward integration, competitors may from time to time evaluate the feasibility of entering into joint venture agreements with partners that have developed expertise in the manufacture of key WTG components / starting their own Greenfield projects. Exhibit
20 refer Spanish wind energy firm Gamesa’s in sourcing / out sourcing strategy.
“It’s not just the customers who have been concerned by the shortage of turbines, the turbine manufacturers have also been disappointed that they haven’t been able to get enough parts. And the component suppliers themselves are disappointed that they could have sold much more output last year if they had made an investment in machinery three years ago. The problem is that although it’s relatively straightforward for those turbine manufacturers who aren’t committed to total in-sourcing to increase their capacity, for component suppliers it requires a major investment in machinery, with up to two years lead-in time.”
Supply chain
Exhibit 15 illustrates supply chain of wind power industry. Of this chain, raw materials to manufacturing of wind turbine link are of particular interest for RCG group. Taking each of the main components of a turbine in turn it is possible to identify where bottlenecks are occurring and how these are likely to be resolved. Refer exhibit 24 that indicates cost break-up of wind turbine. This helps in deciding which are key components that wind turbine company should focus in reducing cost and there by increasing competitiveness.
• BLADES
A crucial component requiring sophisticated production techniques, global supply is dominated by independent blade maker LM Glasfiber, which has about 27 % of the market. All the major turbine manufacturers apart from GE Energy and REpower produce most of their own blades. No shortage of supply at present. To cope with demand a number of new blade factories were either opened or announced in 2006 by Gamesa, Vestas, Siemens and LM Glasfiber in China, the US, Denmark, Spain, India and Canada. BTM Consult says global production capacity should increase from 20 GW now to 25-30 GW by 2010. This should be enough to satisfy demand.
• GEARBOXES
Most turbine manufacturers have traditionally outsourced their gearboxes to a shortlist of six or seven independent companies. This situation changed somewhat with the acquisition in 2005 of gearbox supplier Winergy by Siemens
Wind and then in 2006, Hansen Transmissions by turbine maker Suzlon. Hansen has about 30 % of the global market for wind turbine gearboxes and Winergy about 40 %. Siemens specifically announced, however, that its acquisition was only part of a wider purchase of the parent company Flender and there would be no change in the relationship between
Winergy and other turbine manufacturers.
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With about 40 % of the market, Winergy is the largest producer of gearboxes for the wind industry. It supplies all the major turbine manufacturers. Winergy’s current products include combined planetary (low speed) and helical (high speed) gearboxes for wind turbines ranging from 600 kW up to 5 MW. The majority of its business is in the 1.5 to 2.5
MW range. Most of the components are sourced within the Flender group. What is the company’s explanation for the current shortage of supply? “There’s huge pressure on the whole supply chain,” says Chief Executive Stefan Tenbrock.
“With gearboxes it’s not as easy to increase capacity as it is with other components. You need a lot of equipment, from gear-cutting machines to heat treatment facilities.
That makes it a very capital intensive business. So increasing capacity involves a huge investment compared with, say, blade manufacture. And that takes time.” There’s also increased pressure on Winergy’s component and raw material suppliers, such as bearings and forged steel for the gearbox pinion and wheels, says Tenbrock. He doesn’t accept that repair work on existing gearboxes has been an important factor in slowing down the supply of new ones. Winergy’s response to the boom in demand has been to expand its production capacity in the US, China and India, as well as in
Germany. There’s also been investment right the way down the supply chain, says Tenbrock, including by its component suppliers, the castings foundries and in raw materials. “But it’s difficult for the whole supply chain to follow this very strong growth in the market, which we’ve seen now for two years running. Whether we can get to a position where we can always meet requests for gearboxes depends very much on the strength of future growth.”
Gearboxes are nonetheless the component for which most shortages of supply have occurred. Three reasons are given by BTM Consult for this: the limited number of production facilities tailored to the wind market, a shortage of large bearings and a bottleneck caused by unexpected repairs to operating gearboxes, including the replacement of bearings.
BTM adds that although a number of gearbox manufacturers which normally supply other heavy industries have considered entering the wind market, they have often shied away because of uncertainty about the return they would achieve. Keith Hays of EER says another important factor is that not enough of those gearbox manufacturers committed to the wind market have been able to ramp up their production lines quickly enough to cope with new multi-megawatt models. It can take several years to tool up and test for a new turbine size. According to a recent report on gearbox supply by MAKE Consulting, however, most of the manufacturers are already in the process of expanding their capacity, with new production lines opening in both Europe and Asia. This should lead to a resolution of current delays by 2008.
BTM says global production capacity should increase from 15 GW now to 21-32 GW in 2010 – enough to satisfy demand. • BEARINGS
There are particular shortages of large bearings used in gearboxes and the main shaft. BTM Consult says that the delivery time for large bearings can be 16-18 months where no framework (long term supply) agreement is in place.
One reason for the shortage is that the boom in the wind industry has coincided with a generally increased level of activity across all heavy industry. For bearing manufacturers wind represents only a small fraction of their business.
Two of the largest suppliers of bearings to the wind industry, the Swedish company SKF and the German FAG, have both reacted to this situation by expanding their production facilities. SKF expects a new factory in China to be fully operational during 2007. FAG is building a new factory in Romania and expanding its existing capacity in Germany and China.
• GENERATORS
Supplied to the wind industry by a number of large companies such as ABB and Siemens, and dedicated suppliers like
Indar (Gamesa). No signs of a shortage of supply.
• CAST IRON AND FORGED COMPONENTS
This includes the main frames used to support the rotor hub and nacelle, the hubs themselves and the main shaft which links the rotor to the gearbox. The market here has again been affected by the high level of activity in the heavy industry sector, with increased demand for both forged steel and cast iron. BTM says that the lead time for supply of steel parts for gearboxes can be up to 40 weeks.
• TOWERS
Strong forces act on the mast over the entire life of the WTG; the nacelle weighs approximately 67 to 110 ton
(depending on MW size and type of technology / components used), and its rotor including blades weigh approximately
20 to 40 tones. The tower has to withstand these forces and provide a secure foundation to the nacelle and the rotor without swaying due to changes in wind force, as this would result in the destruction of the WTG.

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Most turbine towers are made of rolled steel, although some manufacturers are turning increasingly to concrete as a cheaper alternative. Although manufacturing a wind turbine tower is an increasingly sophisticated process, the basic expertise is more widely available than for other components. It therefore often makes sense for suppliers to source towers locally to the eventual project. Nonetheless, the booming US market is reported to have soaked up the supply of towers from the four largest domestic manufacturers, requiring imports from already stretched European fabricators.
Overall, according to BTM Consult, towers are unlikely to create supply problems.
Given these bottlenecks what is the response of the main turbine manufacturers to the current shortage of supply in the market? Manufacture of towers is often done near wind projects.
Peter Kruse of Danish manufacturer Vestas says that the industry is doing what it can to improve the situation, but “it can’t be done overnight. It will take several years. But it’s one thing to source the investment and build the factories, another thing to find the people to run the industry effectively. There’s a lot of talk about the shortage of physical assets, but we need brain capacity as well.” During 2007 Vestas will open new blade production facilities in both the
US and Spain, an electronics plant in Denmark and increase its workforce to 14,000. German manufacturer Enercon says it is responding to the “enormous worldwide growth in demand for renewable energies” by increasing its manufacturing capacity through new production centers such as the one proposed at Viana do Castelo in Portugal.
Others will follow. Spanish manufacturer Gamesa is also expanding its production capacity with new plants in the US,
Spain and Portugal. The company says, however, that “if the market forecasts indicating a growing demand are fulfilled, we don’t expect it to be less than five years before suppliers can match market demand”. Among the gearbox producers, Luc De Proost of Hansen Transmissions confirms that his company is working at the maximum limit of its current production capacity. “But raw materials are difficult to get hold of at the moment and bearings are extremely difficult,” he says. More than two thirds of Hansen’s gearbox business now comes from the wind sector, and the company makes a point of ensuring control of all processes in house, making all its parts from supplied raw materials, right up to the finished gearbox. “That makes us special compared with other manufacturers,” says De Proost, “who tend to buy in finished components from sub-suppliers.” Hansen built a new factory at Lommel in Belgium over three years ago specifically dedicated to the wind business, believing at the time that it would be more than big enough to cope with demand. But the company is already in the process of expanding the plant, investing €140 million in 50% more factory space, new research and testing facilities and 300 more jobs. The extended production line should start operation in early 2008. Both Winergy, the largest gearbox supplier to the industry, and SKF, a leading supplier of bearings, say they are expanding their production capacity in the three key global markets of Europe, the US and Asia in order to catch up with demand (see boxes). “Almost all the suppliers took a decision in 2006 to increase their capacity,” says Thorsten Herdan of the German VDMA. “So they’ve put a lot of new investment into their production facilities, although it will still take some time for them to catch up.” Gearbox manufacturing hall. Suzlon has proposed to set-up an additional integrated WTG assembly and key component manufacturing facilities in China and India to increase total annual capacity to 4500 MW.
Vertical integration
To cope with the continuing uncertainty of supply, some turbine manufacturers have to make difficult strategic decisions about whether or not to produce more of their components in-house. Of the leading manufacturers, Enercon and Gamesa have historically produced all their main components within their own business structure. After the purchase of gearbox manufacturer Hansen, Indian company Suzlon is also vertically integrated. GE, on the other hand, has outsourced more, including its blades, considered by many to be the most vital component. Outsourcing raises issues not just of secure supply but of quality control and design confidentiality. Enercon says it has minimized the risk of shortages of components by increasing vertical integration and setting up long-term contracts with sub-suppliers.
Gamesa, on the other hand, recently signed a deal with blade-maker LM Glasfiber to produce 1,000 MW of blades in
Spain and the US whilst Vestas decided to outsource 1,500 MW of blades to LM in India. Both companies stress, however, that this is not indicative of a trend. Gamesa says that the shortage of components will not seriously modify its current selective “make or buy” strategy. Depending on the situation, it will decide whether it is necessary to resort to external agreements, as with LM. “Technology alliances and internal skills will also be established to ensure the reliability and availability of gearboxes and electrical components,” the company says. Vestas spokesman Peter Kruse says that “if someone can come up with a smart solution and beat us on our home turf, we obviously look at it. But although the growing market means we have sometimes had to go elsewhere, structurally our policy is still to keep the core components in-house.” Another important response to uncertainty of supply has been an increasing number of framework agreements – outline forward commitments by manufacturers to supply a set number of turbines to a particular wind farm developer over a series of delivery years. These have advantages from the both the buyers and sellers’ point of view. For the project developers they offer the security that they will definitely receive the turbines, for the turbine suppliers they enable much better coordinated planning of production schedules. The largest framework agreement in the wind industry so far has been for 2,700 MW of turbines to be delivered by Gamesa to power utility
Iberdrola between 2007 and 2009. The same types of longer term agreements are now being drawn up between turbine manufacturers and their suppliers, such as gearbox and bearing companies, in order to ensure that they can satisfy their
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final customers. Keith Hays of EER says that exactly when a more stable balance of supply and demand will be reached depends on issues such as the future US market, whether large offshore schemes take off in Europe and whether new quality manufacturing capacity is created in Asia. “But once that equilibrium is reached you’re going to see more competition, more forward contracts, more consolidation among turbine suppliers and possibly more consolidation in the supply chain.” EER also expects increasing component capacity and cost reduction measures to offset the “temporary upward pressure on turbine prices”.

Wind power potential in India
Government policies, incentives and future support
The original impetus to develop wind energy in India came in the early 1980s with the establishment of the ministry of
Non-conventional Energy Sources (MNES), now renamed the Ministry of New and Renewable Energy (MNRE). Its purpose is to encourage a diversification of fuel sources away from the growing demand for coal, oil and gas required to feed the country’s rapid economic growth. MNRE undertook an extensive study of the wind regime, establishing a countrywide network of wind speed measurement stations. These have made it possible to assess the national wind potential and identify suitable areas for harnessing wind power for commercial use. The total potential for wind power in India was first estimated by the Centre for Wind Energy Technology (CWET) at around 45,000 MW. Refer exhibit 8 that shows wind map of India released by CWET. This figure was also adopted by the MNRE as the official estimate of the wind power potential in the country. However, since 1990, a massive exercise of wind monitoring and wind resource assessment has been carried out by government agencies and private sector has identified many more resource areas. Currently, the Indian Wind Turbine Manufacturers Association (IWTMA) estimates the potential to be of the order of 65,000 MW. Following is the list of benefits offer to wind sector in India.
Direct taxes – 80% depreciation in the first year of installation of a project;
A ten year tax holiday;
No income tax to be paid on power sales to utilities;
Foreign direct investments are cleared very fast.
The Indian government is considering accelerating depreciation, and replacing the ten year tax holiday with tradable tax credits or other instruments. While this would be an issue for existing companies, new investors are less reliant on the tax holiday, since they often have little or no tax liability.
CDM projects
The possibility to register projects under the Kyoto Protocol’s Clean Development Mechanism (CDM) has provided a further incentive to wind energy development in India. As of 1 March 2008, 168 projects were registered with the
CDM Executive Board, accounting for 3,569 MW, second only to China.
The development of a domestic industry and foreign investment
India has a solid domestic manufacturing base, including global player Suzlon, who accounts for over half of the Indian market, and Vestas RRB (Now Pawan shakti / RRB Energy). In addition, international companies have set up / proposed to set-up / Expand production facilities in India, including Enercon, Vestas, Repower, Siemens and LM
Glasfiber.
Over the past few years, both the government and the wind power industry have succeeded in injecting greater stability into the Indian market. This has encouraged larger private and public sector enterprises to invest. It has also stimulated a stronger domestic manufacturing sector; some companies now source more than 80 % of the components for their turbines in India. Most recently, some Indian manufacturers, most notably Suzlon, have started to export their turbines.

Changes during 2006-2008
During 2006 to 2008 many changes have been observed in various forces which has shaped wind sector and gave lot of inputs for future strategy development at RCG Group. Exhibit 25 summarizes changes observed in global & local economy, wind turbine manufacturers, supply chain partners, society, political etc. Nital, VP of Strategy & Planning of
RCG group had compiled these market intelligence inputs for RCG group chairman to help in final proposal to board.
Major change is observed in new capacity addition in different markets. USA and Asia has recorded fastest growth
YoY 2004 to 2008 where as Europe’s new capacity addition was less compared to USA and Asia. Refer exhibit 10 about changes in total installed capacity % share among major regions.

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Global wind power forecast
As per 2007 report, GWEC is predicting the global wind market to grow by over 155% from its current size to reach
240 GW of total installed capacity by the year 2012. This would represent an addition of 146 GW in 5 years, equaling an investment of over 180bn EUR (277 bn US$, both in 2007 value). The electricity produced by wind energy will reach over 500 TWh in 2012 (up from 200 TWh in 2007), accounting for around 3% of global electricity production
(up from just over 1% in 2007). The main areas of growth during this period will be North America and Asia, and more specifically the US and China. This forecast exceeds previous estimates by GWEC, and the total installed capacity for
2010 has been corrected upwards to reach 171.9 GW (from 149.5 GW). These figures also lie above GWEC’s most ambitious scenario as outlined in the Global Wind Energy Outlook in 2006, which forecast a total global installed capacity of 221 GW in 2012, i.e. 19.3 GW below the current estimate. The reasons for this adjustment are twofold:
Firstly, both the US and the Chinese market have been growing and will continue to grow at a much faster rate than expected even a year ago. Secondly, the emergence of significant manufacturing capacity in China will have a more important impact on the growth of the global markets than originally thought. While tight production capacity is going to remain the main limiting factor of further market growth, machines ‘made in China’ will help take some of the strain out of the current supply situation. Exhibit 9 indicates forecast of global wind power installed capacity till 2020. Refer exhibit 27 for region wise forecast of new annual wind power plan in short term 2006-2012.

Key issues and Challenges for Wind Turbine Company in India
Availability of clear wind sites: Two major issues related to wind sites (1) Wind sites with high energy potential - Between 1984 till date good wind sites (high energy generation potential) has already been utilized in wind power projects with smaller size wind turbines e.g. 250 kw to 600 kw. Several new areas have been identified by CWET as well as wind energy companies which could have high potential, however wind measurement for 2 to 3 years for those new potential sites is under progress. In year 2010 only, it will be known how many more new wind sites with high energy potential would be available. Till that time wind energy companies will have to consider installation of wind turbines at sites which is comparatively less energy potential, which can impact return on investment for customers. (2) Land is clear in all respect (no statutory, local, social, political issue) – Many good wind sites fall under forest areas which require environmental impact assessment as well as statutory clearances, which takes longer time to clear and available for projects. Few wind sites with clearance from statutory bodies, un-clarity of land title, part land not for sale by owner, land disputes etc. also make it difficult for using those high energy potential wind sites.
Power evacuation network by state utilities: Wind power generation is distributed power generation concept.
All existing transmission & distribution lines have been designed in the past with centralized generation concept. Added to this, local utility companies have very limited budget for new transmission & distribution lines, sub-stations etc. to accommodate additional wind farms in existing power evacuation network. Public private partnership is emerging concept in setting up new infrastructure to be created by wind turbine companies to ensure their installed turbines are able to export energy in to electricity grid. It requires huge capital investment.
Capital for wind project: Wind turbines require capital investment. Project finance for wind projects for end customers has become one of the big challenge, as banks and financial institutions have concerns about viability of the projects and security of their funds back in projected time line.
Regulatory hurdles: Wind farms faces several regulatory and statutory hurdles, which must be followed-up by wind energy companies on behalf of customers.
Generation Based incentives and transferable production tax credit certificates to create larger base of investors: Several countries have moved from capital subsidy, depreciation benefits to production based credits to ensure that new wind power plants are in operation for longer time. Current policy is still depreciation driven.
Standardization of PPA across country, penalties for non-procurement required: There is no standardization of PPA across the country. PPAs are signed by state utility companies (electricity boards) and they are different from state to state. This is one of the major concerns for an investor who wishes to invest in wind power sector in many states. In High wind season (typically monsoon in all states and return monsoon in southern India) power evacuation network is not able to accept wind power from wind farm which operates at
100% plant load factor. Utility companies ask wind farms to reduce their power output to match energy

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demand that is denial of purchase of electricity. This impact revenue for wind turbine owner. There is no penalty for such non-procurement of green power.
Wind turbine suitable for low wind site condition, reduction in cost of wind turbine, power storage: Till now wind turbine companies have focused on technology development keeping higher energy potential wind sites.
More than 30000 MW of wind sites are yet to be tapped, which are low wind sites. To make projects viable at low wind sites turbine capital cost has to go down and energy generation at low average wind speed has to go up. This can only be possible is wind turbine companies focuses on development of wind turbine technologies to meet these objectives.
Competition from Indian and MNC companies in local market : More than 5 large corporate companies
(Essar group, Lanco Group, Bhart Forge, Inox Group, Sanjay Ghodawat group, Reliance Power ADAG group company) have announced their plans to venture in to wind sector as turbine manufacturer. More than
10 wind turbine companies (Suzlon, Enercon India, RRB Energy, Chiranjeevi, Elecon, Pioneer Wincon,
Shriram EPC, India windpower, Regen Powertech, Win Wind, BHEL, Jyoti Ltd etc) are already present in
Indian market and more than 5 MNC companies (Vestas, Gamesa, GE, Siemens) have declared Indian market as their next focus area.
Dependence on import of key components: More than 60% key components are still imported from other countries. Sustained long term availability of components and price fluctuations are major challenge for new wind turbine companies, as it will not be economically viable to invest in to integrated manufacturing complex until volume of business increases more than 1500 MW per year.
Rameshchandra and Nital are amazed at opportunities that wind sector offers, confident about RCG group’s strength of launching and management diversified business, really worried for threats and risks that wind sector/industry in general and India wind industry in particular, supply chain risks, fund and time requirement to set-up and scale up wind business and balance between resource allocation to existing business and new business, management expertise require to manage wind business, are struggling to finalize what to propose in the board meeting.
Key assignment questions:
1.
2.
3.

4.
5.
6.

What decision RCG group should take? Continue their diversification strategy to venture in to wind sector?
Should RCG group focus on Local market or global market or both?
What should be RCG group’s offerings for local market? Turbine technology, Size and supply chain whether to offer “concept to commissioning & management of customer’s assets for the lifetime” or to be only
“turbine supplier” and leave operation & maintenance to third party or to client?
What should RCG group’s supply chain strategy? Sourcing key components from key suppliers or to plan for backward integration for manufacturing of key components?
What market share RCG group should achieve with in 3 years of start-up in Indian market?
What should RCG group do for their core business which has been impacted due to recent economy changes?

References
•
•
•
•
•
•
•
•
•

Supply Chain Assessment, 2006-10 from BTM Consult, www.btm.dk;
World market update 2007 from BTM Consult;
Report Emerging Energy Research, www.emerging-energy.com;
Report from MAKE Consulting, www.make-consulting.com;
Global Wind Energy Council (GWEC) Global wind 2007 Report;
World wind energy report 2008 released from World Wind Energy Association;
List of Models and Manufacturers released by C-WET;
Directory of Indian wind power 2004
UN report on energy consumption, 2000

***

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Exhibit 1 Installed generation capacity - India’s power system (As of March 31, 2005)
Total installed capacity - 115,544.8 MW
Thermal power plants powered by coal, gas, naphtha or oil
Hydroelectric stations
Nuclear & Wind power

- 69.4%
- 26.1%
- 4.5%

Exhibit – 2 Per Capita Electricity consumption in 2000
India
China
Brazil
USA

-

355 kWh
827 kWh
1,878 kWh
12,331 kWh

Ref.: United Nations

Exhibit – 3 Global accumulated wind power installed capacity
Calendar Year
2000
Newly installed
4,495
capacity (MW)
Accumulated
18,449 installed capacity
(MW)(1)
Year of Year
32.40%
growth
CAGR (2000 – 2004) 26.90%

2001
6,824

2002
7,227

2003
8,344

2004
8,154

24,927

32,037

40,301

47,912

35.10%

28.50%

25.80%

18.90%

Source: BTM Consult ApS Report 2005 Note (1) Accumulated installed capacity at year end has been adjusted for decommissioned capacity Exhibit – 4 Gap in Demand and supply of electricity in India
----------------------------------------------------------------------------------------------------------------------Fiscal Year
Requirement
Availability
Surplus / (Deficit)
Million units million units million units
%
----------------------------------------------------------------------------------------------------------------------2000
480,430
450,594
( 29,836)
-6.2%
2001
507,216
467,400
( 39,816)
-7.8%
2002
522,537
483,350
( 39,187)
-7.5%
2003
545,983
497,890
( 48,093)
-8.8%
2004
559,264
519,398
( 39,866)
-7.1%
2005
591,373
548,115
( 43,258)
-7.3%
----------------------------------------------------------------------------------------------------------------------Source: Ministry of Power Annual Report 2003-04; CEA Executive Summary March 2005

Exhibit – 5 Top 10 markets for wind power installation
Total installed MW at end of 2004
________________________________________________________________________________________________
Cumulative
Cumulative
% of global
Country/Region
2001
2002
2003
2004
2002-2004 end of 2004 market share
________________________________________________________________________________________________
Germany
8,674
3,247
2,674
2,054
7,975
16,649
34.70%
Spain
3,329
1,493
1,377
2,064
4,934
8,263
17.20%
USA
4,245
429
1,687
389
2,505
6,750
14.10%
Denmark
2328
530
218
7
755
3,083
6.40%
India
1482
220
423
875
1,518
3,000
6.30%
The Netherlands 430
219
233
199
651
1,081
2.30%
Italy
682
106
116
357
579
1,261
2.60%
Japan
357
129
275
230
634
991
2.10%
UK
386
55
195
253
503
889
1.90%
China
406
67
98
198
363
769
1.60%
________________________________________________________________________________________________
Source: BTM Consult ApS Report 2005

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Exhibit – 6 New wind power capacity addition in India
___________________________________________________________________________________________
2001
2002
2003
2004
___________________________________________________________________________________________
Newly installed capacity (MW)
236
2 20
423
8 75
YoY Growth in new installations
40%
-7%
92%
107%
Cumulative installed capacity by year end (MW) 1,482
1 ,702 2,125
3 ,000
YoY Growth in cumulative capacity
17%
15%
25%
41%
___________________________________________________________________________________________
Source: BTM Consult ApS Report 2005
Accumulated installed capacity at year end has been adjusted for decommissioned capacity

Exhibit – 7 Generation technologies

Exhibit-8 Wind map of India

(Source: CWET)

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Exhibit – 9 World total wind power installed capacity in MW & Future forecast

Exhibit 10
Change of total installed wind power capacity share among different countries during 2004 - 2008

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Exhibit 11 Wind turbine overview

Exhibit 12 Basic operation of wind turbine

Exhibit 13 Evolution of turbine size

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Exhibit 14 Average turbine size in different countries

Exhibit 15 Supply Chain in the wind power industry

The Supply Chain in the Wind Power Industry:
2006 through 2010 - Onshore & Offshore Wind Farm Projects
Area of the Supply Assessment
Raw materials
Energy
Transportation
Etc.

Manufacturing of Key
Components
Selected
Key
Components:

Focus area of this Supply
Assessment

Blades
Gear Boxes
Generators
Forged and
Cast Iron Items
Towers
Large Bearings etc. Secondary
Components:
Subsystems
Hydraulic
Bearings
Bolts, Wires,
Electronics
etc.

© KgGuruji Academy 2010

(Onshore & Offshore)
Manufacturing of
Wind
Turbines
(The OEM’s)
Leading
Suppliers of
WTG’s (OEM’s):
VESTAS
GE Wind
SIEMENS/
BONUS
SUZLON
GAMESA Eolica
NORDEX
REpower

Development
Wind Res. Ass.
Project Design
Construction
Financing etc.

Operation
Service
Maintenance
Sales of Electr.

Offshore
Services:
Vessels
Cranes
Erection of
WTGs
Sub-marine
Cabling
Foundations
Type I, II, II

Assessment of
The Supply situation in a
2006-2010 Forecast
Context – with strong growth (15-20% p.a.):
Likely supply Constrains
Bottlenecks?
Delivery schedules?

BTM Consult ApS – June 2006

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Exhibit 16 Top 10 suppliers of wind turbines in 2005
Accu.
MW
2004
17,580
5,346
7,045
6,438
785
3,874
1,169
2,406
744
1,019
4,359
50,766

VESTAS (DK)
GE WIND (US)
ENERCON (GE)
GAMESA (ES)
SUZLON (Ind)
SIEMENS (DK)
REPOWER (GE)
NORDEX (GE)
ECOTÉCNIA (ES)
MITSUBISHI (JP)
Others
Total

Installed
MW
2005
3,186
2,025
1,505
1,474
700
629
353
298
239
233
567
11,207

Share
2005
%
27.9%
17.7%
13.2%
12.9%
6.1%
5.5%
3.1%
2.6%
2.1%
2.0%
5.0%
98%

Accu.
MW
2005
20,766
7,370
8,550
7,912
1,485
4,502
1,522
2,704
983
1,252
4,926
61,973

Share accu. %
35.0%
12.4%
14.4%
13.4%
2.5%
7.6%
2.6%
4.6%
1.7%
2.1%
8.3%
105%

Source: BTM Consult ApS - March 2006

Top-10 Suppliers in 2005
% of the total market 11,407 MW
ENERCON (GE)
13.2%
GAMESA (ES) 12.9%

GE WIND (US) 17.7%

SUZLON (Ind)
6.1%

SIEMENS (DK)
5.5%
REPOWER (GE) 3.1%
NORDEX (GE) 2.6%

VESTAS (DK) 27.9%
Others 5.0%
Source: BTM Consult ApS - March 2006

ECOTÉCNIA (ES)
MITSUBISHI (JP) 2.1%
2.0%

Exhibit 17
Supply Chain of leading turbine manufacturers

Buy all components In-house production of key turbine technology components

Manufacturer
Vestas

GE
Enercon
Gamesa

Suzlon
Siemens
Repower
Nordex
- Main position today
 - Old position
- Anticipated position in coming years
- Position today but in process of changing direction

© KgGuruji Academy 2010

In-house production 25
Academy
Exhibit 18 Wind turbine manufacturers and supplier of key components
Turbine maker
Vestas

Rotor blades
Vestas, LM

Gearboxes
Bosch Rexroth,
Hansen,
Winergy,
Moventas
Winergy, Bosch,
Rexroth,
Eickhoff,
Winergy, Hansen

Generators
Weier, Elin,
ABB,
LeroySomer

Towers
Vestas,
NEG,DMI

Controllers
Cotas (Vestas),
NEG
(Dancontrol)

GE Energy

LM, Tecsis

GE
Loher,

GE DMI,
Omnical, SIAG

GE

Gamesa

Gamesa, LM
Echesa (Gamesa)

Indar (Gamesa),

Cantarey

Gamesa
Ingelectric
(Gamesa)

Enercon

Enercon

Enercon

KGW, SAM

Enercon

Siemens, LM

Direct Drive (No
Gear box)
Winergy

Siemens Wind

ABB Roug,

KGW Siemens

Suzlon

Suzlon

Hansen, Winergy

Suzlon, Siemens

Suzlon

Repower

LM

Winergy, Renk,
Eickhoff

N/A

N/A

KK
Electronic
Suzlon, Mita
Teknik
Mita Teknik,
ReGuard

Nordex

Nordex

Winergy,
Eickhoff, Maag

Loher

Nordex, Omnical

Nordex, Mita
Teknik

Exhibit 19 Wind power installed capacity target set by various countries in 2004
________________________________________________________________________________
Country Current (MW)
Target (MW)
Time Frame
________________________________________________________________________________
UK
889
10000
2010
Portugal
585
3750
2010
France
386
10000
2010
Norway
158
1000
2010
Canada
444
10000
2010
Brazil
31
3000
2005
China
728
4000/20000
2010/2020
Japan
1000
3000
2010
Source: BWEA, EWEA, BTM
________________________________________________________________________________
Exhibit 20 Break-up of in % house production of key components of Spanish wind turbine firm Gamesa
-----------------------------------------------------------------------------------------------------------------------------------------------Blades
Controls
Gearboxes Generators
Power Electronics
Towers
-----------------------------------------------------------------------------------------------------------------------------------------------Design
100 % in house
100 % in house 50 % in house
50 % in house
60 % in house
100 % in house
Manufacturing
30 % in house

100 % in house

100 % in house 50 % in house

55 % in house

O&M
100 % in house

100 % in house

100 % in house 100 % in house 100 % in house

60 % in house

100 % in house

% of WTG Cost 20 %
5%
15 %
10 %
5%
20 %
-----------------------------------------------------------------------------------------------------------------------------------------------Source: Gamesa

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Exhibit – 21 India Wind power market forecast
---------------------------------------------------------------------------------------------------------------------2004
2005
2006
2007
2008
2009
(In MW) (In MW) (In MW) (In MW) (In MW) (In MW)
---------------------------------------------------------------------------------------------------------------------World Market Update – 2002
Forecast
400
500
500
600
n/a n/a World Market Update – 2003
Forecast
500
500
500
600
700 n/a World Market Update – 2004
Forecast
875*
900
1,000
1,000
1,200
1,200
----------------------------------------------------------------------------------------------------------------------Source: BTM Consult ApS World Market Updates 2002, 2003 and 2004. * Actual installations as reported in the BTM World Market
Update 2004.

Exhibit – 22 2004 Market share in India (Total MW installed 752 in 2004)
-------------------------------------------Company
Share %
-------------------------------------------GE Wind
1.2%
NEPC
7.8%
Vestas
32.0%
Suzlon
42.8%
Gamesa
0.8%
Enercon
15.4%
-------------------------------------------(Source: BTM Consult ApS – March 2005)

Exhibit – 23 List of Manufacturers and WTG models
------------------------------------------------------------------------------------------------------------------------------------Manufacturer
WTG Model
Capacity
------------------------------------------------------------------------------------------------------------------------------------Vestas RRB India Ltd.
V27, RD: 27m, HH: 31.5/50m
0.225 MW
V39-500 kW, RD: 47m, HH: 40/45/50m
0.50 MW
Pawan Shakti 600 kw, RD: 47m, HH: 65m
0.60 MW
Enercon (I) Ltd.

E30, RD: 30m, HH 50.6m
E40/6.44/E2, RD:44m, HH:46/56.85m
E48, RD:48m, HH: 50/56/57/65/75/76m
E53, RD: 53m HH: 73,75m

0.23 MW
0.60 MW
0.80 MW
0.80 MW

GE Wind Energy India

1.5s, RD: 70.5m, HH 64.7m/85m

1.50 MW

NEG Micon

NM48, RD: 48.2m, HH:45/50/55m
NM54/950, RD: 54.5m, HH:55/72.3m
NM82 / V82, RD: 82m, HH:70/78/80m

0.75 MW
0.95 MW
1.65 MW

Suzlon Energy Ltd

S64 / S66, RD: 64m/66m HH:57/65/75m
S60, RD: 60m, HH:58m
S33, RD: 33.4m HH: 60/70m
S88 V3A, RD: 88 HH: 80

1.25 MW
1 MW
0.35 MW
2.10 MW

BHEL (Nordex AG)

N 50, (N50s R46 LM23.3 IECIA) RD:50m,HH:46M

0.80 MW

Pioneer Wincon

P250/29, RD:29, HH:50

250 KW

Shriram EPC

SEPC 250T, RD: 28.5m, 41.2m

250 KW

Southern Wind farm
GWL225, RD: 29.8, HH:45m
225 KW
-----------------------------------------------------------------------------------------------------------------------------------(Source: Directory Indian Wind Power 2004 and CWET list of approved manufacturers)

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Exhibit - 24 Cost brake-up of wind turbine
Sr.
No.
1
2

3
4
5
6
7
8
9
10
11
12
13
14
15
16
17

Component
Tower (Range in height from 40 metres up to more than 100 m. usually manufactured in sections from rolled steel; a lattice structure or concrete are cheaper options.)
Rotor blades (Varying in length up to more than 60 meters, blades are manufactured in specially designed moulds from composite materials, usually a combination of glass fiber and epoxy resin. Options include polyester instead of epoxy and the addition of carbon fiber to add strength and stiffness.)
Rotor hub - Made from cast iron, the hub holds the blades in position as they turn.
Rotor bearings Some of the many different bearings in a turbine, these have to withstand the varying forces and loads generated by the wind.
Main shaft Transfers the rotational force of the rotor to the gearbox.
Main frame Made from steel, must be strong enough to support the entire turbine drive train, but not too heavy.
Gearbox Gears increase the low rotational speed of the rotor shaft in several stages to the high speed needed to drive the generator
Generator Converts mechanical energy into electrical energy. Both synchronous and asynchronous generators are used.
Yaw system Mechanism that rotates the nacelle to face the changing wind direction.
Pitch system Adjusts the angle of the blades to make best use of the prevailing wind.
Power converter Converts direct current from the generator into alternating current to be exported to the grid network.
Transformer Converts the electricity from the turbine to higher voltage required by the grid.
Brake system Disc brakes bring the turbine to a halt when required.
Nacelle housing Lightweight glass fiber box covers the turbine’s drive train.
Cables Link individual turbines in a wind farm to an electricity sub-station.
Screws Hold the main components in place, must be designed for extreme loads.
Other Miscellaneous components & items

%
26.3%
22.2%

1.37%
1.22%
1.91%
2.80%
12.91%
3.44%
1.25%
2.66%
5.01%
3.59%
1.32%
1.35%
0.96%
1.04%
10.67%

Source : REpower MM92 turbine with 45.3 meter length blades and a 100 meter tower. A typical wind turbine will contain up to 8,000 different components. This table shows the main parts and their contribution in percentage terms to the overall cost.

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Exhibit – 25 Changes during 2006-2008
Sr.
No.
1

Area

Changes

Impact

Global Wind Energy
Installation & Demand

* Installed capacity increased from 59000 to 121000 MW in 3 years
* Many countries (USA, China etc) and region (EU) have declared their new goals of 20% energy from renewable by
2020

2

Global Economy

3

Indian Economy

* Early 2008 almost all stock market crashed from their peak levels
* Mid 2008 onwards global recession started
* Bankruptcy of leading global banks / huge losses
* Though Indian economy remain little isolated from global recession, huge impact on main business of various sector companies

* Strong growth and CAGR indicated promising future
* Huge gap in overall demand v/s. availability in next 10 years * 1.21 Lakh MW to 15 Lakh
MW in 10 years globally
* Impact on confidence
* Availability of funds for wind projects

4

Wind turbine manufacturers

5

Entry of new wind turbine manufacturers 6

Offshore V/s. Onshore

7

Technology

8

Customers

9

Availability of wind sites

10

Government support and incentives 11

Climate change

12

Component suppliers and
Supply chain partners

13

Market distribution

14

Technology Development,
Design of wind turbine

15
16

Raw material prices
Foreign currency changes

© KgGuruji Academy 2010

* Top 10 companies had booked components for next few years through supply agreements
* Backward integration projects for key components
* Expansion of wind turbine manufacturing capacity in their home countries and abroad
* In India more than 7 new companies have released their plan to become wind turbine manufacturer either thorough acquiring technology or developing own technology
* Globally more than 50 new companies have started their wind turbine manufacturing operation in China, USA,
Europe, Korea and Brazil
* Many countries in Europe and states in USA have shifted their focus from on shore to off shore

* Technology development more towards higher capacity turbines 3 MW and above
* Utility companies and conventional power producers started purchasing more wind farms / turbines
* Scarcity of good wind sites on shore
* Moving towards production based incentive scheme from depreciation based benefits on capital investments
* Government’s focus shifting more towards solar energy developments * Government
* More awareness about climate change across the globe
* Expanded their manufacturing capacity of key components keeping future growth in mind
* More suppliers of key components started their wind energy division, develop / customized products suitable for wind sector
* Asia & USA showed huge growth in these years, domination of Europe has reduced
* Few design houses established their operation and started selling design of turbine
* American company AMSC-Windtec started selling license of their turbine technology
* Fluctuation in raw material prices
* Foreign currency vis a vis Indian rupee fluctuation of more than 30% Rupee becoming stronger and again becoming weaker

* Delayed / stopped their wind project plans to use available funds to sustain their core businesses * Supply is more than demand

* Competitiveness increased
* Market share of top 10 companies reduced

* Opportunity for offshore technology development
* Utility scale off shore wind farms * Demand for large utility scale wind farms
Lower return on investment on wind projects for customers
* Stagnant wind power local market * Good opportunities for IPPs who are serious players in power sector
* Interest towards wind energy increased * More supply than demand situation for key components
* Increased competitiveness, more option available for component sourcing
* More future growth in
China, USA, Brazil, UK and other countries
* Easy for new wind turbine company to acquire technology * Profit on turbines
* Huge impact on component and raw material contracts and revenues from export

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Exhibit – 26 RCG Group Financial Result
------------------------------------------------------------------------------------------------------------Particulars
FY 2007-08
FY 2006-07
Rs. In Lac
Rs. In Lac
-------------------------------------------------------------------------------------------------------------Net Sales & Other Income
32340.89
3229.42
Gross Profit
2232.33
2757.21
Depreciation
820.92
756.495
Profit Before Taxation
1411.41
2000.72
Less:
Provision for Taxation (Including Deferred Tax)
493.76
699.92
Profit after Tax
917.64
1300.79
Profit Brought Forward from Previous Year
621.24
429.46
Prior Period Adjustment
(27.73)
Balance Available for Appropriation
1538.88
1697.6
Appropriations are made as under:
- Debenture Redemption Reserve
234.37
73.75
- General Reserve
500
750
- Proposed Dividend
198.82
198.82
- Dividend Tax
33.79
33.79
Balance Carried Forward to Next Year
571.9
621.24
Source: Un-audited annual report of RCG Group

Exhibit 27 Annual Wind power development short term forecast

© KgGuruji Academy 2010

References: • Supply Chain Assessment, 2006-10 from BTM Consult, www.btm.dk; Directory of Indian wind power 2004 UN report on energy consumption, 2000 Exhibit 1 Installed generation capacity - India’s power system (As of March 31, 2005) Total installed capacity - 115,544.8 MW CAGR (2000 – 2004) 26.90% 2001