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Vertical supply chain integration gathers pace in the offshore wind sector

Increased demand and investment has placed strain on a budding supply chain, driving vertical integration in the European offshore wind sector. In a nascent industry like wind vertical integration has its share of risks. But as a way to bypass supply chain bottlenecks, vertical integration has a clear upside at this stage of the sector’s development.

In May 2010 French energy giant Areva took full control of German wind turbine manufacturer Multibrid, forming a new subsidiary called Areva Wind. A few months later in October a long-term partnership agreement was sealed with Beluga Hochtief Offshore, a joint-venture between Hochtief Construction and Beluga Shipping, securing the use of a purpose-built jack-up vessel for offshore wind park installation. Other notable examples of vertical integration in 2010 included energy conglomerate Siemens buying a 49% stake in A2SEA, a supplier of installation vessels for offshore wind farms, for 115million euros and last December’s move by RWE Innogy to invest in purpose-built vessels for installation of turbines and foundations. United Technologies Company (UTC) also recently completed its £139.5million buyout of wind turbine maker Clipper Windpower.

There is a serious limitation in terms of specialised providers across the supply chain in offshore wind. Whether it’s cables, turbines, skilled workers, ports or logistics it is a nascent industry that is in the process of specialisation. There are bottlenecks that need to be overcome in just about every part of the supply chain.

Other sectors such as coal, gas or nuclear have an existing pool of suppliers who can provide services on a turnkey basis. In wind however, the utilities are discovering that they need to do a bit more on their own balance sheet.


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