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8/8/2019 Evolution of Wind Energy Markets and Implications for Manufacturers & Suppliers_From_Pioneer_to_Mainstream_Feb 2010_32 Pages
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Evolution of wind energy markets and implications formanufacturers and suppliers
WindpowerChallenges2010.pptx
Hamburg, February 2010
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Contents Page
AContinuous growth and maturing of the wind energy market
expected
3
Wind turbine manufactures will need to get large and
20
2010 Roland Berger Strategy Consultants GmbH 2WindpowerChallenges2010.pptx
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A. Continuous growth and maturing of the market
expected
3WindpowerChallenges2010.pptx
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1 GLOBAL MARKET
Due to its technological maturity wind will continue to take amajor part of the growth market in the next decade
ExamplesWind Solar Marine ener 4,100 GW
2007
2008 2020 2008 2020 2008 2020Global capacity[GW]
242 GW
+60%
120 600 15 157 0.3 1.2
Long-term feasiblepotential worldwide[GW]
x~4
2,000-6,000 50,000-80,000 3,000-6,000
EUR 90-110 bn EUR 50-80 bn EUR 0.5-2.0 bnRevenue potentialin 2020
6,500 GW 970 GW
Current technologymaturity
Solar PV Solar thermal (CSP)
Current cost er MWh EUR 50-80 EUR EUR 190-270EUR
4WindpowerChallenges2010.pptx
100-270 145-200Renewables RenewablesGas
Large Hydro Coal Nuclear
Source: E.on; IEA; BTM; California Institute of Technology; World Energy Council, World Energy Assessment; NEF; RBSC
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1 GLOBAL MARKET
Governments are establishing ambitious investment andgrowth plans for wind energy all over the world
Worldwide actual and potential wind power capacity 2008-2020 [GW]
EU countries> Proposed target of 20% of renewable energy sources by 2020 wind
contributing to 11-14% of electrical energy with 180 GW, including 40North America 202
Europe
+126
> Total investments between 2011-2020 accounting for EUR 120 bn
USA> Proposed target of 20% wind power by 2030> Economic stimulus bill including USD bn ~67 for clean energy,
includin extension of roduction tax credits and offerin of invest-38
169Asia/Pacific
+148
76
PotentialInstalled
ment tax credits> Investment plans include initiatives for the transmission system which
constrains the wind energy growth today
CHINA> -
Potential2020
Installed2009 41
189
RoW
+14 120 GW of wind power capacity by 2020
> "10 GW Size Wind Base" program planning large scale deployment of10 GW of wind power in four key regions until 2020
INDIA> Government lans for wind ower ca acit of 40 GW b 2022
o en a2020
ns a e2009
16
2
5WindpowerChallenges2010.pptxSource: EER, EWEA, GWEC
> Offshore wind, currently untapped in India, has significant potential
India has 7,000 miles of coast line
Potential
2020
Installed
2009
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1 GLOBAL MARKET
In spite of the slowdown expected in 2010, mid term expecta-tions for wind energy are buoyant 12% growth p.a. until 2013
Worldwide yearly added capacity [GW]
> Economic stimulus packages stronglysupport renewable energies, especiallywindOther
59
52+12% p.a. 15%
> Strong growth in 2009 mainly due tocapacity going online and accounted forWTGs already delivered in 2007/2008
> 6%25%
USA25%14%
13%37
44
37
intake and deliveries during 2009
> Strong growth share in countries less
dependant on financial markets (China)
9%
29%
26%28
26%Asia26%
28%
23%
27%
23%
m ous governmen goa s orrenewable energy share in core markets(e.g. USA, Europe, China, India...)
> Cost penalties for fossil energies in32%
29%
36% Europe34%37%37%28%
6WindpowerChallenges2010.pptx
Europe (ETS)
> Offshore plans included2008 2012e 2013e2010e 2011e2009
Source: BTM; RBSC
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1 GLOBAL MARKET
Announced economic stimulus programs will further push windenergy
Announced governmental clean energy stimulus spending until 2013 [USD bn]
16322> USD 163 bn between 2009
28
47
an n c ean energy
70% of it in 2010-2011> By sector the stimulus target:
Efficiency 26%
66
enewa e n ustry Grid 20% R&D 20%
Other 15%
7WindpowerChallenges2010.pptxSource: NEF
EuropeChinaUSA TotalOther
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1 MARKET EUROPE
"20-20-20" targets bind EU countries to produce 20% of their powerwith renewables Wind best positioned to fill the supply gap
Impact of the EU ETS on utilities EU Climate and Energy Package, December 2008
> Utilities are responsible for around of CO2emissions of all branches of industry
Europe "20-20-20" targets 2020
2
as they have emissions allowances (certificates)> From 2013 on utilities will have to buy 100% of
their certificates1) in auctions and may trade-20% CO2 emissions of 1990 levels by 2020
them afterwards (EU ETS )
> By 2020 the total number of available certificateswill be reduced by 21%
20% renewables share of energy mix by 2020
-20% ener used -will have to be substituted wind is the mostmature renewable source to fill the supply gapand to reach the national quotas of renewable
of 2020 projected levels
8WindpowerChallenges2010.pptxSource: EU Council; RBSC
1) Utilities in East European countries are exempted and will get 70% of their required certificates for free after 2013 until 20202) Emissions Trading Scheme
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1 MARKET US
The current legislative environment in the US is clearly in favorof growth of renewable energy market
AMERICAN RECOVERY AND REINVESTMENT RENEWABLE PORTFOLIO STANDARD
Regulatory framework
> USD 20 bn tax incentives for clean energy
> USD 8 bn available as loans for renewable energy generationand transmission projects
> RPS commitments vary by state and range from 10-25% withtarget dates from 2010 to 2025
> USD 2 bn available for clean energy R&D
> Goal to unleash USD 100 bn in private sector co-investmentcapital
State renewable goal
Mandatory RPS
> RGGI states will distribute a set amount of
CO2 allowances through regional auctions,
> Production tax credit, PTC, was renewed for 3 years in
October 2008
Renewable energy
> Utilities will be forced to look at renewablesolutions as the CO2 allowances aredecreased 10 percent by 2018
, ,October 2008 for 8 years
> Allow PTC or ITC to be replaced with a grant from the USTreasury Department
9WindpowerChallenges2010.pptx
CARBON REDUCTION INITIATIVE PRODUCTION AND INVESTMENT CREDITS
Participating States
Source: Washington Post, RGGI, PEW, AWEA, RBSC
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1 MARKET CHINA
The Chinese wind energy market will also continue to growstrongly Significant support of domestic manufacturers
Estimation of China cumulative installed capacity 2008-2013 [GW]
> Ambitious 120 GW target promoted in the "Wind Base Program"planning large scale deployment in selected regions
> 22% p.a.
Chinese wind industrys development is mostly directed by thestate with 80% of the market concentrated in large state-ownedenterprises
> Stron romotion of domestic manufacturin In 2008 local
55
players accounted for 75% of China WTG market up from 30% in2004 Higher taxes for importing wind turbines and key components
Specific incentives (cash subsidies pro MW) for the
25
+
manufacturing of turbines for domestic brands (>51%Chinese)
70% localization must be achieved in order to participate insupply to state-owned wind farm operators
12
10WindpowerChallenges2010.pptxSource: GWEC, RBSC
> owever, oca manu ac ur ng ase s curren y su er ng rom
overcapacity (over 40%) and significant fragmentation
2013e20092008
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2 UTILITIES
Wind energy production has increasingly become a largeutilities game
2008 Europe Top 10 wind portfolio additions [MW]
> Utilities are increasingly taking over the wind industry andpositioning themselves as consolidators
685
715
> Aggressive portfolio extensions through building of newcapacity or acquisitions, e.g. S&S Energy acquisition of Airtricity (327 MW) RWE acquisition of Urvasco (148 MW)
575
670
pu c serv ces company acqu s on o a coc& Brown' wind energy assets in Spain (420 MW)
Magnum Capital (PE) acquisition of Babcock & Brown
wind energy assets in Portugal (515 MW and 156 MW
460
525
> Several large mergers are as well restructuring the market Vattenfall-Nuon RWE-Essent
185
225
11WindpowerChallenges2010.pptx
-
Source: EER; RBSC
180
Utility
IPP/Investor/Other
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2 UTILITIES
Six key factors are driving the utilities to further increase windin their portfolio, broadening their energy mix
>
OIL AND GAS RISK
> -
SHORT LEAD TIME OF WIND
increases the need for utilities to reduce theirexposure
> Wind broadens the energy mix cost-effectively Utilities' growth
in wind ener
each year
> Building a standard wind park takes only3-5 years, a much shorter lead time than thatof a conventional plant
market
> Problems for small and medium wind players
CRISIS "WINDOW OF OPPORTUNITY"
> General public increases awareness on
PROMOTE GREEN IMAGE
> Strong focus on
> Acquisition of locations, equipment and know-howat low prices relying on strong cash flow fromoperations
> Utilities need to promote a green image
opposed to the traditional "polluter" one
> Global supply ofwind turbines
> Own project
> Utilities are forced to auction 100% of requiredCO2 certificates after 2013
EU "20-20-20" TARGETS FOR 2020
> Support by political initiatives making windenergy production more attractive
POLITICAL INCENTIVESmanagement and
O&M organizations
12WindpowerChallenges2010.pptxSource: RBSC
> Operation with CO2-intensive energies
(e.g. coal) will become more expensive
e.g. ax ncen ves, ee - n ar s
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2 UTILITIES
There will be strong demands from the utilities towardssystematic industrialization of the wind value chain
Origination, development &procurement
e.g.Contractual risk allocation
e.g.Process integration
e.g.Monitoring
> Suppliers provide lowguarantee level
> Asymmetric contracts (e.g. 50%paid back if total WTG1) failure)
> Suppliers consider gridrequirements out of scope
> Some key offshore constructionsteps still not tested
> Random monitoring> Reactive maintenance> Heavy delays in data
transmission and intervention
WIND
TURBINE
> Suppliers provide full guarantee > Suppliers meet all grid > Full monitoring and controlGAS
vs. vs. vs.
e.g. pa ac o aturbine failure)
requ remen s> Proven construction/installation
technology
> reven ve ma n enance
14WindpowerChallenges2010.pptxSource: E.on
1) Wind Turbine Generator
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3 OEMs
The wind turbine manufacturers' market is still heterogeneous final structure has yet to emerge
Overview WTG OEMs clustersLARGE INDUSTRIALS PIONEERS REGIONALS
PLAYERS
2008 MWinstalled
? ?
Unison
Large and established industrialcor orations which have entered the
Original WTG technology developerswhich have not been ac uired b a
Regional players developing withinrowth markets
BACK-GROUND
MARKET-SHARE1) 30% 53% 17%
15WindpowerChallenges2010.pptx
WTG market mainly through
acquisition
large industrial
1) Installed capacity 2008 MW
Source: RBSC
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3 OEMs
Fragmentation of the OEM market has been observed in thepast years pioneers have been relative losers
Overview market shares 2005-08 [% MW delivered]
9%16%
6%
2%
Others
Sinovel
4%3%1%
Acciona
> Pioneers market share decreased from 64% to 49%in 3 years
64%
100% 100%
14%
8%6% 3%4% Goldwind
Nordex
Siemens
> arge n ustr a s as emens an ost re at ve y
low or no market share since 2005> Strong market competition with a fragmentation of
the overall the market
49%
18%11%
9%
Gamesa
Enercon Small players increased market share from 9 to16% between 2005-2008
Strong growth Chinese and American markets
28%18% Vestas
strengt en oca supp ers e.g. naSinovel/Goldwind and USA Clipper)
16WindpowerChallenges2010.pptxSource: BTM, EER, Companies, RBSC
20082005Pioneers Rest
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3 OEMs
Leveraging their strong home base Chinese manufacturers arepreparing to go global
Suppliers structure in ChinaWind turbine suppliers' market share in China
Market share of China annual installed turbine capacity
Development stage
Large capacity products
Companies
Gold Wind
2008 [MW %]
Others
8.4%Nordex
GE Wind Sinovel
Tier 2
w cense ec no ogy
Have prototype andpreliminary small
Sinovel
Dongfang electrics
Zhejiang WindeyXiangdianlocal
Mingyang 2.8%ShanghaiElectrics 2.9%
2.3%
2.3%Acciona
2.4%
Windey 3.7%
22.5%
Tier 3
GE Nordex
Tianwei baobianYuanjing EnergyChangzheng Electrics
Completed prototypedesign and plan to build
Forei n com anies with mature
Gamesa 8.1%18.1%
GamesaVestasSuzlon
design and process technologiesForeign
JVAcciona JV in NantongREpower, Honiton JV
Leverage foreign technology
Vestas
9.6%
Dongfang Electric
16.9% Gold Wind
17WindpowerChallenges2010.pptx
top 3 market share57.4%Local and JVs
Source: RBSC
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3 OEMs
The financial crisis and the emergence of new OEM players hasled to structural overcapacity shift to a buyers' market
Expected overcapacity evolution (%; 2009 2013)
60.000
70.000 4035%
> Short-term: Maximize sales deals in an
[MW]
40.000
50.000 22%
14%
24%
20%
30%
manufacturers overcapacity,ensuring '10 production and beingready for the re-launch
20.000
30.000
11%10%
-1%
a n a n marg ns an paymenconditions during current turbulenttimes (as far as possible; potential
buyer will ask for significant price
0
10.000
2010E 2011E 2012E 2013E
-10
2009E2008
reductions from 10 to 20%)
> Mid-term: Pre are the sales or anization for
18WindpowerChallenges2010.pptxSource: BTM; Macquarie; RBSC
OvercapacityAggregated capacityAggregated demand
a "buyers' market" environment
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CONCLUSION
Conclusion: The WTG market is changing from being a"pioneering" market into a mainstream industrial market
PIONEERING MARKET (UNTIL 2008)
MAINSTREAM MARKET (EXPECTED AS OF 2011)Main market growth in a few Western European markets(Germany, Spain, Denmark) US starting with delay
Growth broadening to all large and non fossil fuelexporting markets (Rest of EU, USA and China)
Technology development occurring in parallel to WTG Product development following standard industrialmanufacture with fast evolving model ranges bottlenecksin component development and supply capacity
practices and speeds supply chains more stable andlocal
s were ma n y purc ase y eve opers or nanc ainvestors who primed delivery capability over price
es are ncreas ng y ecom ng uyers, w o app ysimilar price/performance criteria as for conventionalgeneration equipment price squeeze is expected
WTG industry was dominated by pioneers like Vestas andGamesa
Large industrial players (Siemens, GE) and localplayers (Goldwind, Sinovel, etc.) are increasing theirmarket share at the expense of the early pioneers overcapacity will trigger consolidation
19WindpowerChallenges2010.pptx
"Get large and industrially lean or exit!"
Source: RBSC
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industrially lean Suppliers must follow suit
20WindpowerChallenges2010.pptx
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OEMs need to develop along four axis support from suppliersrequired on all of them
OEM development needs and key requirements to suppliers along the value chain
MARKET
TECHNOLOGY OPERATIONS
PRESENCE
OEMDEVELOP-
> Contribute to overall > Support OEM access> Support complex-
> Build up global
NEEDS
OEM-
reduction> Support further
flexibility andindustrialization of
markets and clients> Support OEMs going
for a a full-servicevalue ro osition
focusing on life cyclecosts
> Support faster time-to-market for new
> Contribute to theestablishment of localsupply chains on alobal scale
MENTS TOSUPPLIERS
operations along thevalue chain
> Achieve processexcellence, especially
WTGs> Contribute to
standardization andmodularization
21WindpowerChallenges2010.pptxSource: RBSC
for global, regional
and local logistics
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TECHNOLOGY1
Complex technological challenges ahead Close collaborationwith supplier base is required
OPPORTUNITIES FOR SUPPLIERS
Main technical challenges Towards improved reliability, life-cycle-costs and yield
> Position as a critical partneractively supporting OEMs
GENERATOR
> Lighter and more compacthousings (e.g. integration of drive
> Introduction of new materials(e.g. CFRP)
> Manufacturing constraints> Endurance to environmental
technical challenges on criticalcomponents
> Pursue risk sharing and
> Simplification and new design
solutions for drive trains (e.g.reduction of bearings and rollerparts)
> Integration of new generator
damage (e.g. weather,
lighting)
developments of proprietarytechnology
> Support reduction of
ec noog es e.g. supercon uc orgenerators)
GRID CONNECTION &TOWER AND
FOUNDATIONmanufacturing costs byestablishing industrializationrequirements early in thedevelopment
> Adaptation to grid requirements(e.g. stability, voltage fluctuations)
> Industrial customization andmodularization of wind turbines
> New foundations design,construction techniques andmaterials, specially forOffshore
22WindpowerChallenges2010.pptx
Source: RBSC
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GLOBAL PRESENCE2
Large industrial players are systematically expanding theirfootprint
Example Siemens global footprint
Boulder(Wind & Ft. Madison
Keele (UK, Delft (NL),Aachen (DE)(Mechanics, grid offshore) Underlying rationale
First:> Establish an industrially lean
USA
(planned fornacelles/hub)
(blades)
Orlando
Indialanned
China(planned fornacelle/hub/blades)
processes n t e ome ase
Then:> Transfer (duplicate) industrialset up to international locations
Engesvang(blades)
Igod
(hubs)
Aalborg
(blades prod. & R&D
Expectations towards suppliers
> Follow international moves ofOEMs
blade design)Taastrup(Aerodynamics, structuraldynamics, electrical systems)
Hamburg(Europe HQ)
Bremen
Su l chain Sales hubs
improve lean manufacturinglocally while benefiting from thevolumes generated by the OEM
24WindpowerChallenges2010.pptxSource: Siemens, RBSC
Other sales R&D
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LEAN OPERATIONS3
Strong pressure on reducing the cost of wind turbines willsubsist
Typical life cycle costs of a 2-MW onshore wind turbine [%]
24% 100%> Current over capacities in the market
are putting strong pressure on turbine"Wind turbines prices have dropped by 18% forcontracts signed in late 2008 and 2009" [NEF]
5%7%57%
7% 76%
> Wind turbine acquisition costs is themain lever for operators to reduceoverall wind energy costs
Turbine Grid Found- Other Total O&M Total
26WindpowerChallenges2010.pptxSource: NEF, EWEA, DEWI, Eon, RWE, RBSC
(ex works) connec-
tion
dation up-front
costs
capex
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LEAN OPERATIONS3
OEMs have engaged in systematic "lean operations"programmes and expect suppliers to contribute
Example Siemens "Lean as driver of transformation" IMPLICATIONS FOR SUPPLIERS
Bench-
KaikakuStepwise changes
> Double productivity> 90% red throughput
KaizenContinuous Improvement
> Double productivity> 50% red throughput
> Suppliers will be required to contributeto increase capacity flexibility and costperformance of OEMs
mark > 50% red injuries> 50% faster to market
OEM manufacturing activities will beextended to the overall value chain
> Launch of joint improvement projects
Pull
> Adaptation of supplier footprint to OEMneeds will be a key factor to a lean
overall industrial set-up
Value stream
27WindpowerChallenges2010.pptx
1-2 years 3 years
Source: Siemens, RBSC
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LEAN OPERATIONS3
Bottlenecks on lower-tier levels need to be pro-activelymanaged
CONTEXT CHALLENGE FOR SUPPLIERS
Context and challenges of bottlenecks on lower tier levels of the supply chain
Symptoms Causes
- -
> Dynamically growingindustry with CAGR > 20%
> Increasingly qualityproblems of components
> How pro-actively identify bottlenecks at Tier-2 level?
> Lack of predictability of
sales plan> Lack of commitment
> Lack of communication
> "Blame game" betweendifferent parties involved Bottle-necks inlower
tiers of
> How to mitigate them?
> How to avoid sandwich positioning (OEM directly controllingTier-2)?
regar ng requ remen sand volumes (reactiverather than pro-active)
the
supply
chain
Main challenge for OEM
Build a com rehensive su l chain ca acit model to
29WindpowerChallenges2010.pptx
upp y c a n ramp-up quan y an qua y n mes o
difficult prediction of own market shareidentify hidden bottlenecks early on
Source: RBSC
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MARKET4
Sales will become the key priority for OEMs Indirect supportwill be a key factor of success for suppliers
> Establishing industrial setup in target marketshelping to contribute the OEM with local
CLIENT
> Lobbying> Reputation of components reliability and
performance
(e.g. Utility, IPP)Direct sales
> Joint operational performance optimizatione.g.:
Cost reduction New products time to market
Service
Logistics
Indirect salessupport
30WindpowerChallenges2010.pptxSource: RBSC
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BACKUPMARKET4
New after sales value propositions and contractual offers needto be developed between OEMs and suppliers
Transition from selling to full service model
Operatormodel
Full-servicecontract
Value for the client SUPPLIERS
> Access and
Maintenance &repaircontract
Investmentand operationof machineryMaintenance,
capture new
businessopportunities
>Maintenance
contractInspection
services
contract
reparsubstitutionof wear parts,provision of spare
arts
Maintenance, repairand substitution of
wear arts
infrastructure costsby partnering withOEMs on joint
setu sContinuous statuscontrols
Periodicalstatus controls Typical major
OEMs today
31WindpowerChallenges2010.pptx
Services value chain
Source: RBSC
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CONCLUSION
Conclusion OEMs requirements to suppliers are changing asthe market goes mainstream on a global scale
PIONEERING MARKET (UNTIL 2008)
MAINSTREAM MARKET (EXPECTED AS OF 2011)
Supplier R&D and production footprint essentiallyEuropean based
Global footprint to serve OEMs international network oflocal production clusters
Technology development of critical WTG components Development of critical components for new and largerdriven together by specialized suppliers and the OEMs WTGs driven by the OEMs (incl. ownership of IP).
Low end and smaller turbines make use of industriallystandardized components
g pro t marg ns a ong t e manu actur ng va uechain fueled by the ever increasing demands and capacitybottlenecks
apac ty uctuat on an pressure on pro t marg nspush for flexibility, an efficient industrialization and costperformance from supplier to OEM
ragmentat on o t e mar et ue to t e cont nuousflow of new entrants Experienced suppliers for criticalcomponents in demand
ar et w conso ate as t matures upp er positioning with successful OEMs will be key not to beleft out of the big game
32WindpowerChallenges2010.pptx
"Actively support OEMs achieving a sustainable global growth or exit!"Source: RBSC