Geopolitics as much as price or quality will decide how successfully China’s turbine makers penetrate global wind markets, industry analysts told Recharge as big names such as Envision, Goldwind and Mingyang seek to accelerate their international expansion on- and offshore.
The ambition of Chinese OEMs was highlighted last week when China Three Gorges announced that it was commencing installation of a 16MW Goldwind offshore turbine off the southeastern province of Fujian, shortly after erecting a 13GW machine in the same waters.
The big four among Western turbine manufacturers – Siemens Gamesa, Vestas, GE and Nordex – are producing bigger machines too on land and sea, but none have yet deployed the size of machine seen off Fujian now.
Leap frog
CTG chairman Lei Mingshan said the 16MW turbine showed that China’s OEMs had made a historic leap from 'following' to 'leading' in the development of global offshore wind power hardware.
Overtaking western OEMs on turbine size is not just a matter of hubris, it is also a question of efficiency, quality and cost.
China’s own wind market is already the biggest in the world — the nation will install significantly more new wind power capacity than the rest of the word this year according to BloombergNEF — so opportunities for economy of scale abound.
China's 2021-25 plan aims to reach 599GW of wind power by 2025 but is on course to go much higher, according to research published last month by Global Energy Monitor.
GEM estimated that China's current operating capacity of wind energy is at 310GW, but detected 311GW of prospective onshore wind and 60.5GW of prospective offshore wind capacity, and most of this is expected online before 2025.
In the offshore sector, Mingyang, Envision and Goldwind have all announced larger models of up to 18MW, and say they may move beyond that soon.
Exceptional conditions in windy northern regions, means scaling-up is also occurring in an onshore sector where several Chinese OEMs have double-digit megawatt machines in production, such as Goldwind’s recently announced 12MW model.
“Massive turbines are often geared for specific areas of China, for example, in Inner Mongolia,” says Endri Lico, principal analyst at energy research consultancy Wood Mackenzie.
In spite of all this domestic growth, an abundance of Chinese OEM players means that this market is surprisingly fragmented, notes Lico.
“Last year, we found 16 different OEMs at work, and a decade ago, there were something like 25. To secure the necessary volumes, and to have your plant running properly you need to find other ways to expand,” he told Recharge.
The answer has been a newly aggressive push for overseas markets that has already seen more advances than Chinese players have previously managed in earlier attempts to gain share abroad.
Progress is more notable in the onshore sector, although Chinese OEMs Envision, Goldwind, Dongfang and Windey have also secured near-shore orders in Vietnam using customised onshore turbines.
Belt and road
Belt and road diplomacy, and the fallout of geopolitical upheavals have arguably opened new roads for China in markets such as Africa and the Middle East, where Beijing brokered a rapprochement between Saudi Arabia and Iran in March.
Envision is on a particular roll, with major deals announced in the last few months in Egypt, India and Saudi Arabia itself, where the group was picked to supply almost 1.7GW to the Neom hydrogen mega-plant.
There is also rivalry between the Chinese players, with one-time pacesetter Goldwind arguably overtaken by Envision in the push for foreign markets .
Chinese exports began to ramp up around 2008, with around 12GW of wind turbines since exported overall to 49 different markets, according to Shashi Barla, head of renewable energy research at Danish advisory Brinckmann.
Of this, Goldwind exported 5.6GW, representing 46%, followed by Envision with 2.9GW accounting for 24%, but this is changing.
“In 2022, Goldwind managed to win 3.5GW of exports orders, while Envision won 6.5GW of orders. Goldwind is under pressure to respond by increasing its own activities in the international markets,” Barla said.
Data from Wood Mackenzie suggests that Envision had increased its backlog of non-Chinese orders to 7.6GW, with Goldwind on 2.7GW. Mingyang for its part is especially active offshore, with turbines in the water off Italy and ambitions to enter the UK market.
In such an environment, Chinese companies are not just competing on availability and price — which Lico reckons can be as much as 20% lower — but also on technology and performance.
“From the perspective of quality, there is the perception that [Chinese OEMs] are not as good as the Western manufacturers, but in some aspects they are arguably even better,” said Lico.
China is basically ready to accelerate its technology roadmap.
“China is basically ready to accelerate their technology roadmap, and to develop bigger turbines, seeing the profit potential that they have.”
The overseas growth trend is most evident in the Middle East and Africa, where with very significant orders Chinese companies are becoming dominant.
"A decade ago the Western OEMs had about 65% of the business in these regions, with China on 35%. We are seeing a rapid reversal of that trend,” Lico said, adding that similar growth is occurring in Central and Southeast Asia, albeit with some reticence about over reliance on a potentially overbearing China.
Geopolitics in play
In Western markets, other factors come into play such as insurability, environmental restrictions and financing, but geopolitics is arguably the key factor at work.
Most analysts agree that the Russian invasion of Ukraine has elevated the influence that concerns about energy security plays in policy decisions in the west, with concepts such as friend-shoring, near-shoring and diversification of supply all gaining ground.
The Chinese push for growth is also occurring just as western competitors have been running into problems with quality issues, soaring costs and supply chain constraints, but governments are increasingly mindful of the risks of dependency.
"The Ukraine war shows us is that energy can be weaponised, as can any kind of economic power. Every country now wants to diversify and avoid dependence on a single country," says Lico.
So even though Western OEMs have flirted with their Chinese counterparts as suppliers, there has been limited Chinese penetration of European markets, especially offshore, where Siemens Gamesa, Vestas and GE dominate.
"There is a marked reluctance to concede market share to OEMs from a country that might be willing to use its own supply chain to exert diplomatic leverage in the future," Lico reflects, predicting that penetration of offshore markets in the US and Europe will remain very difficult for Chinese OEMs.
"The political thinking is that they don't want to shift the dependency that we had as Europe, from the Russian gas to the Chinese equipment," he says.
The position was articulated explicitly by Danish prime minister Mette Frederiksen one year ago when she rejected outright the presence of Chinese wind turbines in the North Sea.
This reticence is less evident onshore, where the market lends itself to more diversity and lower costs can boost energy security. Here, the constraints are of the land kind, leaving less scope for the massive machines used in northern China and making financing more challenging. Inroads are being made in Eastern Europe and the Balkans, however.
"I find it a bit difficult to imagine that by 2030 or 2032 or anytime soon we're going to see a 10MW onshore wind turbine in Europe," says Lico.
Lico reckons the importance that Chinese OEMs are giving to overseas markets means that they are willing to retreat from pricing advantages that domestic supply chains and manufacture offers if local content and existing supply chains is what it take to build market share in a key market, as seen with Envision's decision to build and then expand manufacturing capacity in India and Goldwind's desire to build a factory in Brazil.
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