December 15, 2010
General News

With new turbine, Suzlon hopes to reap the low wind

By Varun Sood & G Seetharaman, Daily News & Analysis, www.dnaindia.com 15 December 2010

Suzlon Energy is banking on its new turbines, which can generate power at low wind speeds, to gain an early-mover advantage in the segment.

The company, India’s biggest and the world’s third-largest wind turbine maker, will bring out the prototype of its class-III turbine by February 2011, Robin Banerjee, group chief financial officer, told DNA on Tuesday.

The turbine, which no company manufactures yet, will be available in the market by August 2011.

“We have already got orders for the turbine,” Banerjee said. He refrained from divulging the size of the orders, but said they were from both emerging and developed economies.

Suzlon and its German unit, REpower Systems AG, have an order book totaling $5.4 billion.

Wind turbine manufacturers, including Suzlon, currently produce class-I and class-II turbines.

Class-I turbines are for sites with an average wind speed of more than 8.5 metres per second (m/sec). Class-II is for wind speeds of 7.5-8.5 m/sec, class-III for 4.5-7.5 m/sec and class-IV for less than 4.5 m/sec.

Class-IV turbines are not economically viable now, Banerjee said, pointing out that 99% of the wind farms globally come up in class-II areas.

Suzlon currently manufactures wind turbines having a blade diameter of 88 metres.

“The new class-III wind turbine has a blade diameter of 97 metres and requires a lot of manual work to make,” said Banerjee.
The new turbine is being developed at Suzlon’s technology centre in Baroda.

The company has four other centres, in Denmark, Belgium, Germany and the Netherlands. It plans to set up the next one in China, which would work with its manufacturing plant in Tianjin, catering to local demand.

Together, the five centres presently house over 800 scientists, most of whom have worked in aviation. They are headed by Duncan Koerbel, who holds the curiously-titled post of chief reliability officer. Koerbel and a few other senior R&D officers have spent much of their careers in the aviation sector.

Suzlon spends Rs400-500 crore, about 2% of its revenues, annually on research and development. Banerjee said even Suzlon’s competitors – GE Energy and Vestas Wind Systems – are working on class III turbines. “But I don’t know when they plan to launch it.”

Joanna Lewis, assistant professor of science, technology and international affairs at Georgetown University in Washington DC, and whose research has focused on wind energy, said Suzlon has been investing enough in R&D but whether this gives the desired results remains to be seen. She added that the success to any wind turbine company in future would come from the strategy it employs in the developing markets, including China.

“Chinese wind energy manufacturers have been backed by supportive government policies,” noted Lewis. That may be why foreign wind turbine manufacturers have found it difficult to tap the Chinese wind market.

Wind energy manufacturers see a business opportunity after countries at the recent UN climate conference in Cancun, Mexico reached an agreement to set up a $100 billion Green Fund to fight global warming.

Under the agreement, developed countries are expected to give $100 billion a year by 2020 to developing countries, which would be help in increasing clean energy or renewable energy production. Since wind energy corners 70% of the world’s renewable energy market, wind energy manufacturers, including Suzlon, see a huge business demand from developing countries like Brazil, South Africa and India.

Talking of its subsidiaries, Suzlon denied reports of offloading some of its 91% stake in REpower, saying its chairman Tulsi Tanti had always maintained that the German subsidiary was a “jewel” in its crown. The company, however, reiterated that it was open to selling its 26% holding in Belgian gearbox maker Hansen Transmissions International NV at an appropriate time.

Suzlon had bought a 60% stake in Hansen Transmissions in 2006 for about $565 million. In November 2009, Suzlon raised $370 million when it sold 35% in the company to institutional buyers.

Pune-based Suzlon has 10% of the world wind turbine market, and had revenues of Rs 20,620 crore in 2009-10, in which year it installed 1,460 mw energy, including 688 mw in India, 410 mw in the US and 182 mw in China. The company reported a loss of Rs 1,079 crore during the same period.

According to Banerjee, the cost of manufacturing wind turbines is “up to 20% cheaper in China and India” than in developed markets, owing to cheaper labour.

Suzlon has brought down its net debt-equity ratio from 1.97 as of June 30 to 1.48 by the end of September. This was largely because of a rights issue. Additionally, it managed to get a two-year moratorium on principal payments.