July 25, 2024

The wind power value chain

In short

The simplified wind power value chain described in this article illustrates the interdependence between the supply-side, comprising of the value chain stages “wind turbine generator (WTG) manufacturing” and “WTG system deployment”, and the demand-side “WTG system use”. With each manufactured and installed turnkey WTG system, the wind power supply side enables the future generation of clean electricity during its service life. WTG fleet owners and operators realize the enabled lifetime impact potential by producing clean electricity every year.

The simplified wind power value chain

In an earlier blog post, we described the importance of understanding a climate solution’s value chain and the role of a potential target company within it. This is particularly relevant for attributing the total enabled greenhouse gas (GHG) emission avoidance from climate solutions to specific players across the value chain. Let’s consider an example related to our recent acquisition of a specialized wind power service provider. The value chains for offshore and onshore wind power are fundamentally similar, although the value added by each activity differs, as highlighted in NREL’s “2022 Cost of Wind Energy Review”. Accordingly, the value chain for onshore and offshore wind power can be divided into three major stages: 

  1. WTG manufacturing
    The first stage of the wind power value chain ranges from the procurement of raw materials and sub-components to hardware design, manufacturing and delivery. In particular, key components such as blades, nacelles, and towers are procured or manufactured, engineered, and integrated, and finally marketed and distributed as a turnkey solution by large OEMs such as Vestas.  
  2. WTG system deployment  
    During this stage of the wind power value chain, project developers/infrastructure investors plan, finance, and contract the installation of a WTG system fleet. It comprises a variety of activities that correspond with the “balance of system capex”, such as project management and engineering, specialty logistics and installation, including ground-/electrical infrastructure and final assembly. “Soft costs” related to construction finance, contingency, insurance etc. are included in the financing costs of project developers/infrastructure investors.
  3. WTG system use 
    During the last stage of the simplified value chain, utilities either own and operate WTG fleets or procure wind power generated by other owners/operators to distribute clean electricity. Proper maintenance of a running WTG fleet represents a critical success factor to ensure its efficient functioning and full service-life utilization. This activity is performed by OEMs, specialized service providers, or asset owners themselves.  

So what?

All three stages of the WTG value chain are necessary to realize the lifetime GHG emission avoidance potential. The WTG manufacturing and deployment stages are essential to enable owners and operators, while maintenance, repairs and upgrades are needed to ensure continuous and efficient electricity generation. In practice, the enabled lifetime GHG emission avoidance of a newly installed WTG system can be estimated based on the carbon intensity of the electricity output generated during an average service life of around 20 years, compared to the (declining) carbon intensity of the competing electricity mix during the same period. At the same time, the GHG emission avoidance realized by owners and operators (and enabled by maintenance and repair service providers) can be estimated based on the electricity that has been generated during a given year compared with the average carbon intensity of electricity production for the same year. 

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