Siemens drops gears in battling Vestas for offshore wind energy market

Siemens AG (SIE) is betting it can sell an unproven wind turbine that uses rare-earth metals from China to cement its lead over Vestas Wind Systems A/S in an offshore wind power market that’s forecast to be worth $50 billion by 2020.

Germany’s largest engineering company is developing a machine with fewer moving parts to be used at sea, saying the wind turbines design offers simpler maintenance and improved reliability. Denmark’s Vestas, the world’s biggest supplier for land-based wind farm plants, is sticking with its existing technology.

With winter gales exceeding 90 miles (145 kilometers) an hour and waves topping 15 feet at prime sites in the North Sea, the thousands of turbines planned must be rugged enough to avoid a maintenance disaster that could sour the offshore fortunes of either supplier. While Siemens’s “direct-drive” design eliminates gears that are a major cause of outages in current turbines, the novelty may be its main drawback, analysts said.

“We do not have experience so far with a direct-drive machine offshore,” Birger Madsen, director of industry research house BTM Consult ApS, said in a telephone interview from Ringkoebing, Denmark. “The technology is unknown and there is the potential risk that something will surprise you.”

The wind turbines, whose blades sweep an area bigger than a football field, are competing as the centerpiece of offshore renewable-energy spending that the U.K. Carbon Trust said may grow to 33 billion pounds ($53 billion) by 2020, about eight times its 2010 level. Britain is the world’s largest offshore market, with more than 1.3 gigawatts of the total installed base of about 3 gigawatts at the end of 2010.

Randers-based Vestas is offering a traditional wind turbine design that employs gearboxes to convert the slow rotation of blades into faster revolutions to drive an electrical generator. That approach may attract financing more easily, analysts in London at Commerzbank AG (CBK) and Barclays Capital said.

“It’s the devil you know rather than the devil you don’t know,” Ben Lynch at Commerzbank said in a telephone interview. “Banks are going to want to reduce the risk, and technology is one of those risks. At the moment they’ll favor the known technology, which is the Vestas route.”

Munich-based Siemens’s wind turbibine is gearless, with the blades linked to a generator’s rotor so they spin at the same pace. To generate power from a slower rotation, the device needs a larger diameter and more magnets made from rare-earth metals. Tests on a 6-megawatt prototype will start this year, said Torsten Wolf, a Siemens spokesman.

“All of our wind turbines undergo extensive testing before wind farm market release,” Wolf said. “We installed gearless test wind turbines in 2007 and operated them under real-life conditions.”