Turbulent Time in Wind Energy: Turning to Asset Solutions

Asset management best practices might vary across industries, but the benefits are well-known regardless of the sector. The problem, however, arises when whole markets fail to implement asset recovery, disposition, and valuation tactics. Not only does this impact the health of an industry, but a lack of valuation can cause investors to think twice, and poor asset management strategies often lead to financial difficulties in both the short and long term.

The wind energy industry currently finds itself in this exact predicament. According to the report “Global Wind Supply Chain Update 2015” from market research firm FTI Consulting, policy uncertainty and inconsistency in the United States, Europe, and China wind markets have pushed 120 firms out of the business. Competition in both quality and cost are causing suppliers to lower costs, and those that cannot contain inconsistencies in their supply chains may end up closing their doors if they are unable to innovate more quickly. A way to create new revenue streams within the business and implement cost savings is through smarter asset recovery.

The perfect storm
This year will be a turbulent time for the wind energy sector. In order to ensure a successful 2015, many firms in the industry will need to work with asset management partners to develop asset management best practices and acquire cloud-based software to make these processes a business-wide, global strategy.

Dark skies are clearing up, but that won

Dark skies are clearing up, but that won’t mean success for all wind energy firms.

For example, the industry could see a drastic shift in dominant regional markets. According to Clean Technica, wind power usage in China reached record highs in January 2015, as it accounted for 14 percent of electricity generation in Shanxi province. The region’s quick shift to wind energy from coal power came after Shanxi was identified as one of the most populated provinces in the country.

Meanwhile, Recharge cited a study produced by the Crown Estate that indicated the cost of offshore wind power on the coast of Britain dropped by almost 11 percent since 2011. This means that the industry is on track to meet the government’s previously stated goals of reducing the price of wind energy to £100/MWh – approximately $154/MWh.

Relying on the supply chain
Both of those wind energy reports indicate that 2015 will be difficult to manage for overseas organizations. On one hand, the Chinese wind power market exploded overnight, which puts demands on the supply chain. Manufacturers and suppliers will need focus on resource management to keep up with the growing sector, while energy firms continue to place an importance on equipment and machinery management.

Alternatively, the wind power market in Britain has been steadily improving, but the Cost Reduction Monitoring Framework study suggested that much more work is to be done to ensure success, according to Recharge. Specifically, the source pointed out that there are no guarantees that the supply chain will continue to invest in new technologies.

Growing overseas markets are causing the U.S. government to push alternative energy adoption stateside.

Growing overseas markets are causing the U.S. government to push alternative energy adoption stateside.

Some energy firms might find themselves with surplus during this time, while some suppliers discover they have overinvested in resources. The best option for both of those scenarios would be to work with an asset management partner to value and dispose of assets in a sustainable, compliant way that maximizes return on investment. Having an accurate account of all corporate assets, from equipment and machinery to resources and supplies, will also strengthen budget and procurement forecasting.

On U.S. soil
While it’s always smart to take a global approach to asset management, sometimes the reasons for implementing asset management best practices are easier to discover than some business leaders think. According to The Hill, wind energy only supplied 1.6 percent of the total U.S. energy in 2014. Despite this, the U.S. Department of Energy set a goal of hitting the 20 percent usage market by 2030.

This proposition will stir up investment into the wind power sector. The results are far out and relatively unknown, but it’s clear that asset management processes will be critical during the impending period of growth. Firms will need to value their assets to uncover hidden net worth, sell used equipment, and safely dispose of old machinery and have a best-in-class, repeatable process that can be implemented across the enterprise.

Visibility into assets will be a determining factor in the wind power market’s success in the coming decade. With support from governments around the world, investors will be looking to buy shares, while suppliers, manufacturers, and other organizations in the wind energy industry focus on improving their asset management strategies. Having a trusted partner will make a difference for wind energy companies as they plan for the future.