The failure of the Western ‘big three’ turbine OEMs to secure any share of the world’s largest wind farm project shows the shift towards zero-subsidy renewables in China will make price an even tougher hurdle for the likes of Vestas, Siemens Gamesa Renewable Energy (SGRE) and GE, said a leading industry analyst.

The trio were left out in the cold after a tender by developer SPIC for its 6GW Ulanqab project in Inner Mongolia, despite a tendering structure that specifically invited global big-hitters to take part.

Instead the capacity went to local Chinese players that bid-in much lower turbine prices than the foreign groups – so low that some of them are “unlikely to achieve profitability”, Wood Mackenzie senior analyst Li Xiaoyang told Recharge.

Ulanqab – seen by the Chinese authorities as a key early test of the zero-subsidy regime – shows the scale of the difficulties ahead, Li said.

“Ulanqab project’s economic outlook is challenging,” as the zero-subsidy project must sell electricity at the same price as local coal-fired power plants.

With abundant coal resources, Inner Mongolia is among the regions with the lowest coal- power prices in China. Last year, the coal price was just over 0.29 yuan per kWh ($0.043/kWh), compared to 0.4 yuan/kWh under the previous wind power tariff in the region. The sheer drop in price will squeeze the already slim profitability margins on offer.

However, there are further factors beyond price, Li believes.

SPIC required OEMs to commit to 20-years maintenance and warranty at a fixed price, essentially adding future risks to the suppliers. The developer apparently had more confidence in Chinese state-owned turbine makers to fulfill the promises, the result suggests.

Three of the five winners were state-owned enterprises. Of the other two, Goldwind has a state-owned shareholder in China Three Gorges, while Ming Yang is known for gaining backing from the Guangdong government.

Alongside the Western OEMs, China’s second-largest wind installer last year, privately-held Envision, also failed to secure a share in the Ulanqab tender.

Moving forward, Li believes the foreign players still face a tough battle in the Chinese market.

Although leading in technology innovation, “foreign OEMs’ technology advantage has been reducing in the Chinese market as domestic players quickly catch up,” with their competitors more flexible and adaptable to the new demands of China developers.

The Chinese OEMs approached SPIC over the Ulanqab project as early as 2016, while SGRE—albeit the quickest among the international trio — only begun to make a move around early 2018.

Although SGRE, Vestas, GE are leading in the global market, in China they face a unique situation where “ten or twenty local players are competing head-to-head”, Li pointed out.

Wind

Ulanqab failure 'shows West's wind OEMs face tough task in China'