options for 100 were renewed and 50 more were added for the new year; all of the turbine manufacturers were booked. The firm orders for 2008 were now for 400 (250 original plus the 150 backorders), with 350 firm orders for 2009 and 500 firm orders for 2010, not counting production options. To make matters even worse, many customers were hedging the capacity of any turbine manufacturer that would accept their option deposits, especially this year with PTC expiration looming. But, all of the manufacturers faced the same world-wide limitations on bearings and gearboxes. WIM had orders for 2011 and 2012, “but what is the point?” – Jackson thought to himself.
Pricing and KWH Production: A Competitive Advantage?
The current price for turbines is about $1,800 per kWH, installed. Of that, WIM would get $1,000 per kWH (or $2.6 million per unit) for the main turbine. WIM’s technology, and perhaps its competitive advantage, included the largest domestically manufactured turbine at 2.6 MW, with a 104 m blade sweep. The three blades are 51 meters in length each and the hub is 2 meters in diameter. Larger turbines with larger blade sweep are more efficient in capturing the wind and increasing their production factor (PF). A production factor of .33 means that the turbine averages electricity production of 1/3 the nameplate generating capacity on an annual basis. In 2006, many projects in the U.S. were seeing an average PF of .38 or more with slightly smaller blade sweep than available from WIM. This is a WIM competitive advantage: their blade sweep is the largest in the industry for terrestrial turbines, meaning a higher PF for most sites.
You are a consulting firm, hired by the Board of Directors of The World In Motion Wind Turbine Company to advise Jackson Brown and his CEO, Olivia Newton-Johns. Exactly what advice do you have for Jackson and Olivia, and why? What steps should they take in the short- term versus the long-term and why? Please take into account the nature of the industry, i.e., an industry with explosive growth, but questionable stability.
In addition, feel free to consider and address any of the following issues you feel are critical to their future success. These areas might include, but are not limited to:
Supplier management issues, i.e., how to handle the existing suppliers / situation in the
short run, perhaps developing new suppliers for the long run?
How can a start-up company like WIM compete for major components?
What influence will other start-ups, like Clipper in the U.S.A. and Goldwind in China,
have on the competition for components and customers?
Are there transportation or location issues that need to be addressed?