Wind farm costs have fallen significantly for companies big enough to finance their own projects as the economic crisis cripples competitors for turbines, an executive from RWE Innogy said on Wednesday.
A global surge in demand for wind turbines drove up development costs until last year's credit crunch slashed financing for many projects that had been competing for a limited supply of turbines.
Multi-billion dollar economic stimulus packages announced by the United States and China could revive demand again next year but the supply bottleneck has gone for now.
Every cloud has a silver lining ... Those who can actually weather this storm and those that are balance-sheet investors such as RWE are actually now seeing the positive effects, RWE Innogy Chief Operating Officer Kevin McCullough told the Reuters Energy Summit in London.
There are now, I wouldn't quite say a glut of turbines on the market looking for a good home, but I can say that, as a developer that will develop throughout this, it's very pleasing to see that we are getting vastly improved terms and conditions and in some cases hard price reductions.
McCullough said the renewable energy arm of German utility RWE had seen a 15-20 percent reduction in prices for onshore wind turbines as a result of the economic downturn, with suppliers that until last year could barely meet demand now competing to sell to the surviving developers.
SERIOUS PLAYER OFFSHORE
Offshore turbine prices have not fallen as markedly, with the market dominated by just two German suppliers Siemens and REpower.
But they are offering better warranties and extended maintenance periods which cut upkeep costs for the small group of companies, including RWE, planning or building offshore wind farms.
So while the initial commodity price isn't changing that much the conditions under which those are being offered are changing tremendously for offshore, he said.
Last year RWE Innogy, which already has over 1,000 turbines installed across Europe, signed a deal with an option to buy up to 250 turbines from REpower of 5 or 6 megawatts each, enough to meet about a fifth of RWE Innogy's total needs over the next few years.
We know that we are going to be a very serious player in the offshore arena. It's part of our strategy for growth. Therefore we needed to secure that access to a key commodity, McCullough said.
It is likely that we will have similar deals with very select technology providers but never to the point where we have more than a 50-60 percent coverage on turbines because we don't want to be locked into a market that is still maturing globally.
RWE is not planning to buy up projects that have been stalled by the lack of credit and will instead focus on developing over 12 gigawatts of potential wind power projects it has identified.
We will concentrate on making sure that we make those opportunities work, McCullough said.
If the right project comes along, distressed or otherwise ... then we would consider it, but at this moment in time we are not actively pursuing any major acquisition target.
(Additional reporting by Gerard Wynn; editing by Christopher Johnson)