Wind turbine manufacturers are scrambling to find alternatives to a key element used in direct-drive permanent magnet generators (PMGs), thanks to skyrocketing prices and diminishing supplies of crucial rare earths.
China currently provides 94% of the world's rare earths, including neodymium and dysprosium, which are used in the magnets for direct-drive wind turbine motors. However, the Chinese government has put new restrictions on rare-earth mining that have resulted in lower supply levels, according to a report from research firm Roskill Information Services (RIS).
For instance, this year, the Chinese government issued new regulations requiring all companies that mine rare earths to show they have mandatory production plans, appropriate planning permission, environmental certification and safety licenses.
But it was last year's tightening of China's export quota that really impacted the rare-earth market. Between May 2010 and August 2011, Chinese internal prices for neodymium increased eightfold – a reflection of the shortage of rare earths for magnets within China, RIS notes.
China has also ramped up its export taxes on rare earths, causing a shortage in the rest of the world.
As a result, only 25% of the world's rare-earth supply will come from China by 2015, as demand for the neodymium and dysprosium necessary for the manufacture of magnets for wind turbines will climb at a pace of 7% to 9% per year through 2015, according to RIS' research.
This growth in demand could result in a supply deficit within that time frame, causing wind turbine manufacturers to rush to find alternatives to PMGs.
Searching for other options
Some companies that rely on PMGs for their wind turbines have already taken steps to avoid the problem.
In September, PMG manufacturer Boulder Wind Power engaged Molycorp – which claims to be the only U.S. supplier of rare earths, and the largest provider outside of China – to be its preferred supplier of rare earths and/or alloys for wind turbine generators.
In addition to avoiding the trade conflicts and price volatility associated with China by using a U.S.-based supplier, the company also uses permanent magnets that do not require dysprosium, a very scarce rare earth.
‘By effectively solving the dysprosium supply problem for the wind turbine industry, this technology removes a major hurdle to the expansion of permanent magnet generator wind turbines across global markets," says Mark A. Smith, Molycorp's president and CEO.
Direct-drive wind turbine manufacturer Goldwind has taken a similar approach.
‘As a result of early price increases, Goldwind began developing efficiencies and alternatives that reduce the amount of rare-earth materials required to manufacture our magnets, which, in turn, mitigates our exposure to future price fluctuations," Colin Mahoney, spokesperson for Goldwind USA, tells NAW. "This is a scenario that we have long considered."
Despite RIS' somewhat negative forecast, some say the worst is over. Because companies are looking to U.S. rare-earth suppliers, such as Molycorp, instead of to China – as well as coming up with alternatives that do not involve rare earths – there is some indication that prices may come down.
In fact, a recent New York Times article claims prices have dropped significantly since August.
Goldwind's Mahoney agrees with that assessment.
"While the price of rare-earth materials have fluctuated over the past several years, more recent trends have included a dramatic drop in the neodymium market,’ he says.
Still, it is uncertain how long these prices can be maintained, as demand for rare earths is expected to soar by 2015, the RIS report notes.