Is China stirring up the wind sector?
China’s wind power market is huge – and growing. According to the government in Beijing, by 2020 on and offshore turbines with a combined yearly output of 420 terawatt hours (TWh) will cover six percent of the country’s electricity needs. In 2016, the figure was four percent, with 23.37 GW of new installations (2015: 30.75) bringing total installed capacity to 168.73 GW at the end of the year.
In light of the market’s size, it is no surprise that four Chinese turbine manufacturers were among the top ten worldwide in 2016: Goldwind, Guodian, Ming Yang and Envision. Foreign firms have to settle for the crumbs: Vestas, Gamesa and GE boasted a combined share of just 5.2 percent of the Chinese market in the same year.
Nevertheless, China’s wind boom is likely to slow in future, according to the German development agency Germany Trade and Invest (GTAI), as poorly developed electricity grids put a damper on growth. Even so, GTAI believes there are opportunities for German companies. Demand for efficiency and sustainability is growing in China, with service and management packages playing an increasingly prominent role.
On the other hand, it is highly likely that Chinese manufacturers will become increasingly active beyond the country’s borders, with many experts reporting that these companies have completed a steep learning curve. For Nordex spokesman Ralf Peters, for instance, it is conceivable that Chinese turbines could soon be erected in Germany, as he explains in this interview.
new energy: For a long time, Chinese wind turbines were not considered mature technology, making them uninteresting for Europe despite their low prices. Is this changing?
Ralf Peters: This is indeed changing. Chinese manufacturers are unquestionably gaining a foothold in the traditional European market. And we’re no longer talking about cheap goods. That said, production costs are obviously lower in China than they are here, so they’re offering higher quality at reasonable prices. Chinese firms have also gained experience. Then there were the strategic bids made in Sweden and Spain, partly with the support of Chinese banks. But in a Turkish auction too, a Chinese manufacturer reached the final round of bidding alongside Siemens.
ne: Does the cost pressure resulting from auctions mean that we could soon see Chinese turbines in Germany?
Peters: I can certainly imagine some Chinese turbines being built in Germany after the next auction. And if it goes well for them, this will become more frequent. The choice used to be very clear-cut for operators, but now optimisation is the order of the day. On the other hand, it should be pointed out that development costs have risen in China too. Like I said, these are no longer cheap goods.
ne: Does this mean that competition will become more intense for all market players, Western and Asian alike?
Peters: Exactly. Prices are on a downward trend – this is normal in a market with oversupply. But there are significant differences between the different global regions, due to the framework conditions in place there.
ne: Does Nordex sell to China?
Peters: A few years ago we decided to suspend sales in China due to difficulties with market access. However, we are still servicing the turbines we built there in the past.
ne: How about sourcing components?
Peters: For us manufacturers, China is a supply market, no question. And the days when we would only buy steel or cast iron constructions from China are long gone – nowadays it’s components of increasing technological complexity too. Everyone sources their gearboxes from China, for example. Chinese firms have simply become much more competent. You only rarely hear of significant defects, and in machine building there will always be occasional blips here and there.
ne: There are rumours in the market that not all manufacturers are transparent about which of the components they use are made in China. There are concerns that this could lead to higher repair costs down the road…
Peters: I haven’t heard anything like that. I think that customers who are stumping up millions of euros will pay very close attention. Contract negotiations involve teams of experts who carefully check everything from quality and sustainability to safety.