Innovating/Creating Future in New Energy (Finland)

Innovating/Creating Future in New Energy (Finland)

They say that the best way to predict the future is to invent it. And for The Switch, this holds true. They’ve created every bit of their present success by working closely with their customers, shaping the industry by making permanent magnet generators the technology of choice in the wind power industry and then cutting the costs of the drive train components.

In celebrating their first five years

The Switch came to the market five years ago on a mission to bring better drive train technology to wind power generation that allows more energy per turbine. Their idea was to push the permanent magnet generator (PMG) as the technology of choice because it maximizes energy yields, especially at partial loads. The full-power converter (FPC) too offers the highest-level performance by assuring utility-grade power.

What has happened during these first five years in the market? Practically all of the top 10 turbine manufacturers have selected PMG for their turbines. And the drivers have remained the same: better quality power, more energy and more robust, compact design for PMGs.

Despite the clear technology transition, they’re living in a world now marked by constant turmoil. Although many things are moving forward, there is always some force pushing true success in the renewable energy industry down. This makes it impossible to predict volumes as before.

There is a cry for higher quality products with lower prices. The times are forcing turbine manufacturers to focus on their core competences and select value-adding partners who can carry responsibility for their products and services.

Those players aiming to survive and thrive in the renewable energy industry need to develop organizations that have the ability to work in an networked manner. Vertical integration worked fine when there were shortages of components and the industry was still emerging. But those times are gone. And the vertically integrated companies find themselves now facing challenges due to the volatile market conditions when it comes to technology, production and inflexible organizations. They’re feeling the pain of trying to do it all themselves.

The way forward for these turbine manufacturers requires a new way of working – even a new business model – that embraces cooperation and collaboration, which leads to greater effectiveness. The perfect business model during their unpredictable times is based on specialists that know how to network and add value for better end results.

Five reasons for optimism

In spite of the market uncertainty, they see reasons to believe in a bright future.

– Money is now available from private equity, which hasn’t been there before. This is due to the fact that the wind power industry is finally mature enough and ROI is becoming more attractive due to the short payback times of wind power installations.

– Positive signs are continuing for offshore, especially in certain regions or countries, like Germany, France, Denmark, the UK – and eventually China and the US.

– Public opinion is still favorable towards renewable energy. Most governments still have it on their agendas despite the global economic crisis.

– Real advancement in nuclear power has stalled, creating gaps between the nuclear output planned and the rising energy demands. The decisions in Germany are now being followed by other countries – and are putting renewable energy back on the map with greater interest.

– In good wind conditions, wind power is the cheapest way of all to produce energy. Not only is it the safest, most secure energy generation investment with the shortest payback time, it is also the fastest to build.

InnovatingCreating Future in New Energy (Finland) (2)
Figure 1: Clean versus fossil-based generating capacity investment, 2004 – 10 ($bn). Public opinion is still favorable towards renewable energy and positive signs are continuing for offshore. Despite the volatile economic situation, there is growing proof that New Energy competes effectively as a source of power generation. The installed capacity of clean energy from 2004 to 2010 has nearly matched that of fossil-based generating capacity, source: Bloomberg New Energy Finance, November 2011

 China’s steps ahead

China has finally placed quality ahead of quantity and wants to evaluate the performance of the turbines they are installing. Growth in the overall market has slowed, but the value of higher performance equipment has been realized. Some Chinese power producers are now specifying PMG and FPC in their requirements.

China’s internationalization may not have materialized as expected a few years ago. The image of poor Chinese quality also slowed the process. Nevertheless, the country’s turbine manufacturers and power producers have set their sights on internationalization. This will not be the takeover scenario of earlier feared by many, but rather a gradual and natural internationalization process, including localization of operations with new job creation.

Time is biggest threat to growth

Time is one of the biggest threats to a rosier growth outlook. For example, how long will it take the Chinese government to regain trust and move forward? How long will it take for turbine manufacturers to get their offshore turbines developed and installed at sea for qualification? How long will it take before turbine manufacturers realize that vertical integration is an outdated model that will actually choke their future?

The way manufacturers handle their time pressure will be critical to their success. Aligning with partners long term can alleviate some of this pressure and lead to even greater added-value innovations for the industry at large.

Opportunities for the industry in 2012

The Switch is optimistic about the opportunities in 2012. They have proven their place as a specialist in the market and as a forerunner. Today, they are the only independent supplier of key drive train components for wind turbines. This gives us the opportunity to work with everyone. For the wind power industry at large, the biggest opportunities in the upcoming year are in larger megawatt turbines in the space that The Switch rules from a technological standpoint.

Based on their experience in wind, they have been able to leverage their know-how to utility-class solar systems and variable speed genset (VSG) systems for distributed power generation in large commercial buildings, schools and hospitals. We also see that permanent magnet (PM) technology has good application opportunities in areas such as marine. The Switch high-speed motors are also gaining popularity and replacing the geared systems used in compressors and pumps.

Theyare confident about thinking once again like a winning start-up company – and are open to new partnerships and technologies that make products even better together. For instance, the horizontal supply chain collaboration between Moventas and The Switch led to the innovative FusionDrive™ wind turbine drive train concept.

Collaboration has been the hallmark of they Model Factory concept, too, where they can support customers and move into new production areas, for example, near-shore parks. This creates local jobs at locations that are logistically convenient to final wind farm sites.

They are in a position to take more control in their customers’ production facilities, ramping up and down in a flexible manner, and to enter regional production cooperation with them.

Strength to add value

At The Switch, they have created a strong company and strong platform for the future. Since the time they started up five years ago, they have embraced a start-up mentality. Now, as they move forward in these challenging market conditions, this passion-to-succeed mentality is even more important than ever as they head up to the top.

They see that the larger wind turbine players have needed to react to the technology transition. Technology is still the area where they can excel. They now need to change to a new world and introduce new wind turbines.

Their recommendation for the future is to outsource the risk to proven added-value partners, divide the responsibility among specialists in a networked team for value-added business collaboration, and innovate truly new-generation turbines for the future.


Offshore WIND staff, December 07, 2011; Image: theswitch