Opportunities in Terms of Viable Market for Micro Turbine Business in the United Kingdom - Case Study Example

Blowing In the Wind Table of Contents Introduction 3 Opportunities In terms of Viable Market for Micro Turbine Business in the United Kingdom 4 2.Unique Selling Proposition (USP) of the Micro Wind Turbine Business 8 3. Opportunities in Business Related To the Micro Wind Turbine Franchise Business in Yorkshire-An Explanation 10 4. Use of Analytical Tools to Explain Various Aspects of Micro Wind Turbines 12 PEST 12 SWOT 13 Porter’s Five Forces Analysis 14 Marketing Mix 15 Blue Ocean Strategy 15 Conclusion 17 References 18 Introduction Wind turbines tie together the power of wind and utilize it to generate electricity. Forty percent of all the wind energy in Europe blows over the United Kingdom, building it as an ideal nation for domestic turbines referred as small-wind or micro-wind turbines. A typical system of micro wind turbine in an uncovered site could simply produce greater power than the lights and electrical appliances used. Residential consumers of urban areas cannot use the traditional wind turbine technology because of a lack of reach. Researchers belonging to the Hong Kong University along with the Lucien Gambarota of Motorwave Limited have formulated a micro-wind turbine technology named Motorwind, which is quite small for the domestic use in both urban and rural areas. Micro wind turbines are actually different from the large scale turbines in terms of its physical formation. Owing to the great results derived currently the business and residential properties are increasingly moving towards the micro wind turbines (Energy Saving Trust, 2013). In this regard, the Clean Energy Cashback Scheme provides tax free incentive support for the generation of renewable energy for the household use (Renewable Energy Consumer Code, 2013). Whilst micro-systems turbines may not generate as much power as large scale turbines, what they lack in size they compensate for in terms of price. There are many individual technologies and products available to convert wind energy to electrical energy. Small scale turbines or micro turbines are one of them. Small scale or micro turbines are quite popular. The simplified permitting procedure and installation appeal to early adopters and household users, particularly with a lack of channel support for other larger options (Artmetcosolutions, 2010). This particular study is mainly based evaluating the revolution in the area of micro turbines. It broadly describes the opportunities of micro turbines in Yorkshire in the UK along with its major unique selling propositions. Certain personal explanations are shared in this regard on the subject for making this a viable business. Different kinds of tools such as PEST, SWOT, Porter Five Force, Marketing Mix and Blue Ocean Strategy are used in this study to analyse the market potential of micro turbines along with the prospective benefits of it. Micro Wind Turbines Source: (Chau, 2009) 1. Opportunities In terms of Viable Market for Micro Turbine Business in the United Kingdom The concept of wind turbines in the UK is not a new one. Previously, Strata Tower, a London based building attached a wind turbine with it. In the United Kingdom (UK), the requirement for energy continues to grow as people drive additional cars, use growing number of electronic devices and normally lead more energy-intensive lifestyles. This avid desire for energy is now starting to cause significant concerns, and the problem is essentially two-fold. Firstly, traditional energy sources such as oil and coal are deeply creating pollution in nature, releasing bulky quantities of CO2 into the atmosphere upon burning of coal, the most polluting of these limited energy sources. Secondly, in order to reduce the carbon emission, people of the UK are greatly turning to the use of natural gas. An assortment of renewable energy options is available in the UK, and there is a large potential resource. In the coming 20 years, it appears likely that wind technologies will play the most significant role in Europe (UK National Statistics, n.d.). Production of Primary Fuels, 1980-2011 Source: (UK National Statistics, n.d.) From the above figure relating to the production of primary fuels, it can be greatly observed that the production of the petroleum and natural gas has declined manifold. Thus, from this point of view, it can be assumed that there is a viable market waiting for the energy sources like wind turbine especially micro wind turbine because it is lighter than the large scale wind turbines and can be installed with ease. With the growing energy consumption, only the petroleum, coal and natural gas will not be able to meet the demand, in this regard wind energy can serve the purpose. The features of the micro wind turbines can be identified with the help of following few points: The technical potential for onshore wind in the United Kingdom is sketched at 57GW or 114TWh y-1 and an estimated offshore potential is about 48GW of installed capacity by the year of 2030. Although in comparison with certain other renewable energy sources the current level of deployment of offshore wind is small, the installed capacity is predicted to grow at around 800 megawatts (MW) per year. The Energy Saving Trust (EST) has estimated that small wind could supply up to 4% of the requisite UK electricity and diminish domestic carbon emissions by approximately 6% by the year 2050 (Driscoll, 2008). Percentage of Energy Generated By Turbine Class Source: (Willcock & Appleby, 2012) From the above chart, it can be viewed that a majority (i.e. 84%) of the installed units in the United Kingdom are Micro-Wind Turbines, accounting for almost 9 Mega Watt (MG) (i.e.34.7%) of energy generating capacity. Although the capacity of 1.5-10 kW turbines account for about14.1% of entire number of units, they make the greatest contribution towards generating a capacity of 10.1 MW. Turbines of the size ranging from 50 to 100 kW are often excluded from micro generation research as they are not actually deemed to be small-scale wind turbines. Although they merely comprise 0.2% of the whole number of units 0–100 kW, machines of this class supply 2.2 MW of the installed capacity (Willcock & Appleby, 2012). Sources of UK Electricity In 2005 Source: (Driscoll, 2008) In the year of 2005, only 5 percent of the electricity was generated from the sector of renewable energy such as wind, water and thermal. Therefore, there is an opportunity for the growth of the business related to the wind turbine to increase its market share. These are great growth opportunities for the micro wind turbine manufacturers. For example, FuturEnergy is a leading British wind turbine producer and engineering corporation specialising in the design, creation and distribution of micro wind turbines facilitating in the generation of renewable energy. It has sold more than 4000 domestic air turbines and it aims to enter in the global market as well (FuturEnergy Ltd, 2005). From the above discussion, it can lucidly be viewed that there is a viable market for micro wind turbine in the UK. 2. Unique Selling Proposition (USP) of the Micro Wind Turbine Business There are various USPs relating to the micro wind turbine business. Electricity generated by the coal or petroleum brings air pollution to the environment whereas micro wind turbine is entirely compact, moreover it does not pollute the air. Micro wind turbine, being an easy to install mechanism, tends to be either free standing or mounted directly to the side or top of the attached building. The major USP for the given product could be its never ending supplies generated through wind power which will always prevail. Generation of electricity through the wind is a long-term solution for the countries such as the UK. Though for the first time installation there is a requirement of certain investments but it will definitely reduce the expenditures behind electricity in the following years. It generates relatively high electricity from the low cost expenditure. The above unique selling propositions are quite strong in their position. It is a well known fact that the supply of coal and petroleum is limited and both of these energy resources will certain die down in future. However, the supply of the renewable energy sources is abundant. Thus, using these sources will help the nation in the long run. On the other hand, carbon emission can also be reduced by using such renewable resources. This will significantly facilitate to reduce the greenhouse gases along with enabling to minimise the scare of global warming. Owing to the reason that it imposes low carbon emission so government and environment specialist organisations also may take initiatives to promote the business at a greater level (Driscoll, 2008). The UK Energy System Source: (Driscoll, 2008) As one of the vital evidences, the above figure describes the UK energy system. Electricity is used in every corner of the UK, from home and business to transport. Being less polluted energy resources, Micro Wind Turbine will attract the consumers towards it. Therefore, it can be ascertained the USPs of micro wind turbine are quite strong (Driscoll, 2008). 3. Opportunities in Business Related To the Micro Wind Turbine Franchise Business in Yorkshire-An Explanation The opportunity of running a franchise of micro wind turbine in Yorkshire can be quite a beneficial business prospect in the long run. Though Yorkshire does not witness a significant extent of air of pollution owing to the burning of fossil fuels but the use of renewable wind energy can meet its demand for the electricity by a considerable extent. There is a great opportunity for the business related to the micro wind turbine as only 5 percent of the electricity of the UK comes from the renewable energy resources (Yorkshire Dales National Park Authority, 2011). Though the financial downturn has affected European countries by a significant extent but the demand for the electricity will never reduce. In this respect, there are other pertinent factors which need to be considered. Yorkshire is a part of United Kingdom, which is the windiest country in Europe. Customers of the proposed franchisee would require evaluating the efficiency of the micro wind turbine before purchasing such product. However, the actual performance of the wind turbine completely depends upon the condition of the customers’ site. In Yorkshire, it is observed that there are certain wind farms operating in a successful manner. Moreover, there is a medium sized wind turbine located in Yorkshire Dales National Park. Thus, these factors can be quite encouraging for a new franchise to leverage definite future benefits (Yorkshire Dales National Park Authority, 2011). Contextually, the equation to determine the power of wind is provided below: Power=0.5*collection area*the wind speed cubed. This reflects that the power of the turbine is dependent upon two factors such as the size of the turbine and strength of the wind. It can be said that the small turbines have disproportionately lesser collection areas and therefore generate noticeably less power. Thus, for the industrial purposes, demand for micro turbines might not be a large one but as far as household is concerned there can be a significant demand for the micro wind turbines especially in Yorkshire. Though it will not generate higher proportion of electricity but as per the claim made by the Energy Saving Trust, domestic wind turbines could supply 4% of all the UKs electricity requirements and cut carbon dioxide emissions by at least 6%. According to estimation, it is revealed that an average United Kingdom residence uses 125 kWh per day. However, a question arises whether micro turbines will be able to meet this kind of electricity requirement on a sustained basis. In Yorkshire, micro wind turbines can be expected to be used mostly for household purposes. This is because industrial plants require a greater quantity of electricity which simply cannot be generated by the micro wind turbines as it has smaller blades as compared to large scale wind turbines (Rowlatt, 2013). In order to ensure proper communication about the franchise offerings and ascertain that the main targeted population i.e. households get accustomed with the features, advertisements and promotions would be quite vital. This is because in accordance with a research it is found that building mounted wind turbines in urban as well as suburban areas are unlikely to execute well and where building mounted turbines did perform well, a great deal of better return would have been achieved by installing a mast-mounted wind turbine. The landscape character of Yorkshire supports the growth of the wind turbine industry (Rowlatt, 2013). 4. Use of Analytical Tools to Explain Various Aspects of Micro Wind Turbines PEST Political Factors The Yorkshire Dales National Park Authority is familiar with the prospective contribution of micro and small wind turbines. The energy they produce can be sufficiently important to residences and small businesses including farms, to permit a degree of compromise in terms of landscape preservation. On the other hand, Energy Saving Trust, a government supported body encourages every individual to maintain a low carbon lifestyle, the Yorkshire and Humber Microgeneration Partnership is the first option for renewable, microgeneration and low carbon technology in the Yorkshire and Humber region. It helps to reduce fuel bills and earn from the home (Yorkshire Dales National Park Authority, 2011; YHMP, 2013). Economical Factors In North and West Yorkshire alike numerous other regions of the United Kingdom, small-scale projects are being developed on indigenous sources of food and renewable energy. This factor illustrates the real potential for domestic economic alternatives that reduce the dependency on non-renewable resources along with cutting down carbon emissions. However, not surprisingly, they also highlight the huge challenges that are faced by some comprehensive and serious programmes based on the main beliefs of a zero-carbon and no-growth economy (Yorkshire Dales National Park Authority, 2011). Social Factors Society of the UK is high earning. Households of this country daily consume a lot of electricity. Thus, it will be highly encouraging for the residences of Yorkshire to implement the technique of electricity generation through micro wind turbines (Yorkshire Dales National Park Authority, 2011). Technological Factors With regard to technology, Yorkshire has a number of high tech companies of renewable resources such as Yorkshire Wind Power Ltd. (YWPL) and Hydrogen Mini Grid System (HMGS), which depicts an opportunities for sustained growth of micro wind turbine based industry (Yorkshire Dales National Park Authority, 2011).. SWOT Strengths The main strength of the micro wind turbines could be its easy to installation procedure. By utilizing this mechanism, people can reduce carbon emission along with ensuring a reduction in their fuel and electricity expenditures (Yorkshire Dales National Park Authority, 2011). Weaknesses Microwind turbines might not always enjoy a favourable location especially at households as compared to large scale devices due to them being mounted at a low altitude and in dense urban terrains. Poor positioning can cause problems with the neighbours. It cannot generate better power as compared to large wind turbines (Yorkshire Dales National Park Authority, 2011). Opportunities The government involvement needs to be there apart from the community researches for the optimum growth of the wind energy. Certain technological advancements can be done to ensure better electricity generation (Yorkshire Dales National Park Authority, 2011). Threats Dorset Against Rural Turbines (DART), a pressure group has been set up to try and influence planners keen on preventing the installation of the turbines in the county. A few of their arguments include claims that wind power is more costly than other sources of energy, the turbines are noisy and cause psychological harm, they kill birds and bats, and most significantly there are better alternatives. Thus, these factors can be a threat to the prospects of micro wind turbines (Department of Energy and Climate Change, 2009). Porter’s Five Forces Analysis Threat from the new entrants is determined to be considerably low in this sector as there is an involvement of large amount of technologies along with high cost research and developments. Buyers have low bargaining power as there are only a few companies which provide micro wind turbines. Its possible threat from the substitutes could be the other renewable energy sources but a crucial different in this regard is that other sources such as water and thermal cannot be utilised in the buildings of the households. The level of competition is quite low as there are quite a limited number of companies manufacturing quality micro wind turbines. Bargaining power of suppliers is low as the suppliers related with this industry are not differentiated with each other (Owuor, 2012). Marketing Mix The concept of micro wind turbines is very popular. As the size of the product is much smaller as compared to the other turbines so it can easily be installed on the top of the building. Despite the factor that this product generates less electricity as compared to the large turbines, it can be extremely beneficial for households. In terms of price, building mounted micro wind turbine costs around £2000 along with 5 percent extra Value Added Tax (VAT) for equipment and installation. With regard to place, the landscape characteristics of Yorkshire support the wind power development. Furthermore, apart from the private agencies, government organised initiatives also need to be taken for the promotion of micro wind turbines (Energy Saving Trust, 2013). Blue Ocean Strategy Blue Ocean Strategy is concerned with value innovation. In this regard, value needs to be created for both the consumers and companies of micro wind turbines. A clear focus should be there regarding innovation of ideas in product, service and delivery. Blue Ocean Strategy in relation to micro wind turbines suggests that a wind turbine company should generate new demands in an open market space or a "Blue Ocean", rather than fighting head-to-head with the other suppliers in the same existing industry (Kim & Mauborgne, 2006). Value Innovation The company operating in micro wind turbine business should focus on the low cost turbines with some sort of differentiated products to stay ahead of its competitors (Kim & Mauborgne, 2006). How to Create Uncontested Market Space by Reconstructing Market Boundaries Business operations need to be global. Any sort of market boundary creates barriers in the success of the business (Kim & Mauborgne, 2006). Focusing On the Big Picture The franchise needs to focus on the opportunities and the strengths of the existing market. Apart from this, focussing on the weaknesses will help the organisation to eradicate its drawbacks (Kim & Mauborgne, 2006). Reaching Beyond Existing Demand For producing more units of micro wind turbines, companies not only are required to meet the existing demands of the customers but they also are needed to meet the future estimated demands as well. It describes the potential marketplace of the organisations. Meeting the expected demands will definitely boost the goodwill of the company in the customers’ mind (Kim & Mauborgne, 2006). Getting the Strategic Sequence Right Strategic sequence in relation to wind turbine business needs to be structured properly. Without the proper sequence, process cannot be channelized appropriately (Kim & Mauborgne, 2006). Conclusion From the overall study, the viability of the micro wind turbines market in the UK context is ascertained. Certain external environmental analysis based factors have revealed that there are some technological limitations which need to be corrected for the successful implementation of micro wind turbines in the market of Yorkshire. In addition, cost of micro wind turbines is also affordable and favourable for the households of the country. It can be convincingly stated that there is a huge opportunity in the area of micro wind turbines in regions such as Yorkshire in the UK. However, the business execution process needs to be properly channelized. References Artmetcosolutions, 2010. Medium Scale Vertical Axis Wind Turbines (Vawt) As Primary Source for Household Energy. Abstract. [Online] Available at: http://www.artmetco.com/energy/pdf/VAWTWhitePaper.pdf [Accessed June 24, 2013]. Chau, W., 2009. Blowing in the Wind. HK Magazine. Driscoll, H. J. R., 2008. Micro-Hydro Power in Dorset: A Re-Assessment of Potential Installed Capacity. Earth & E-nvironment, Vol.3, pp .52-114. Department of Energy and Climate Change, 2009. UK Small-Scale Wind Survey. AEA. [Online] Available at: https://restats.decc.gov.uk/cms/assets/Uploads/Results_2010/UKSmallWindSurvey2008-Abstractv2.pdf [Accessed June 24, 2013]. Energy Saving Trust, 2013. Wind Turbines. Choosing a Renewable Technology. [Online] Available at: http://www.energysavingtrust.org.uk/Generating-energy/Choosing-a-renewable-technology/Wind-turbines [Accessed June 24, 2013]. FuturEnergy Ltd, 2005. Home. Airforce. [Online] Available at: http://www.futurenergy.co.uk/ [Accessed June 24, 2013]. Kim, W. C. & Mauborgne, R., 2006. Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Your Coach Digital. Owuor, V., 2012. Wind Energy. Executive Summary. [Online] Available at: http://shuraako.org/sites/shuraako.org/files/case-study-windenergy.pdf [Accessed June 25, 2013]. Renewable Energy Consumer Code, 2013. Feed-in Tariff Scheme. Contents. . [Online] Available at: http://www.recc.org.uk/pdf/feed-in-tariff-scheme-guidance-for-consumers.pdf [Accessed June 24, 2013]. Rowlatt, J., 2013. Why Micro Wind Turbines Dont Work. BBC. [Online] Available at: http://www.bbc.co.uk/blogs/ethicalman/2009/12/why_micro_wind_turbines_dont.html [Accessed June 25, 2013]. UK National Statistics, No Date. Publication Hub. Topic Guide to: Energy Production and Consumption. [Online] Available at: http://www.statistics.gov.uk/hub/business-energy/energy/energy-production-and-consumption [Accessed June 24, 2013]. Willcock, T. & Appleby, S., 2012. UK Small-Scale Wind Survey. Assets. [Online] Available at: https://restats.decc.gov.uk/cms/assets/Uploads/Results_2010/UKSmallWindSurvey2008-Abstractv2.pdf [Accessed June 25, 2013]. YHMP, 2013. Yorkshire and the Humber Microgeneration Partnership – YHMP. Home. [Online] Available at: http://www.yhmp.org/ [Accessed June 25, 2013]. Yorkshire Dales National Park Authority, 2011. Wind Turbines. Energy Production in the Yorkshire Dales National Park: A Guide for Developers and Householders, pp. 38-42. Read More