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EU announces probe as Chinese ambitions grow

Chinese wind turbine makers are looking to make inroads outside China as they seek to increase their global stranglehold. In response, the EU has launched a probe into the use of Chinese turbines, echoing concerns from the US.

RICHARD HEAP

April 9, 2024

  • Four Chinese firms were in the top five by 2023 installations
  • The EU this week launched a probe into use of Chinese turbines
  • This echoes concerns from the US about unfair competition

 

The health of western turbine makers is now dependent on installation rates staying high in China.

Last month, Bloomberg New Energy Finance reported that China accounted for two thirds (77.1GW) of the 118GW wind capacity installed globally in 2023, which is more than ten times the 7.2GW commissioned in the second-placed US.

The same BNEF research showed that Chinese turbine makers were four of the five largest by completed capacity in 2023. Goldwind (14.6GW) and Envision (15.4GW) held the top two spots ahead of Vestas (13.4GW). Windey (10.4GW) and Mingyang (9GW) made up the rest of the top five. In total, 98% of the installations completed by Chinese turbine makers in 2023 were in China, with 2% (or 1.7GW) overseas.

This isn’t currently a huge problem for western wind turbine makers. It might make it tough to gain a foothold in some emerging markets, but it doesn’t become a major problem for firms in the west if high levels of turbine production in China are matched by high levels of installations.

However, the risk for western turbine makers is that installations will fall in China and those Chinese manufacturers will then have to compete harder overseas, which could essentially flood the market with cheaper machines.

There does not appear to be a rapid slowdown in wind farm installations in China in prospect, at least if the statements of President Xi Jinping are to be believed. He has said renewables and cleantech will remain priority sectors for the Chinese economy in the years ahead. But the country already dominates solar panel production, and has been looking to increase its stranglehold on the wind turbine market too.

In response, the European Union has today (9th April) announced a fightback that could lead to tougher measures to keep Chinese turbine makers out of Europe.

EU Commissioner Margrethe Vestager said at a speech at Princeton University in the US that the EU is investigating the subsidies received by Chinese turbine makers selling products into Europe, and whether it gives them an unfair advantage. It is looking at deals in Bulgaria, France, Greece, Romania and Spain.

“We can’t afford to see what happened on solar panels happening again on electric vehicles, wind or essential chips,” she said.

This could open the way for the EU to impose tariffs on Chinese turbine imports, in a move that would surely provoke a furious response from China.

Vestager’s concern was also expressed by US Treasury Secretary Janet Yellen last month. Yellen warned that high production of solar, wind and batteries in China could distort the global market, and harm American companies and workers.

She said: “In the past, in industries like steel and aluminum, Chinese government support led to substantial overinvestment and excess capacity that Chinese firms looked to export abroad at depressed prices… This maintained production and employment in China but forced industry in the rest of the world to contract.”

And other national governments have warned about the security implications of handing contacts for key energy infrastructure to Chinese companies. This was a factor in discussion about Norway’s Sørlige Nordsjø offshore wind tender in March, where Mingyang did not make the final list of five shortlisted bidders.

Whatever happens politically, this is a challenge that western turbine makers will have to keep grappling with in the years ahead.

 

Chinese expansion

One positive is that there does not appear to be a rapid slowdown in prospect in wind installations in China. The Global Wind Market Forecast report released by consultancy Brinckmann last week predicted that annual wind installations would average 160GW between 2022 and 2034, which is 2.5 times higher than the 62GW that was completed on average annually between 2012 and 2021. The research said the Asia-Pacific region, especially China, will remain central to global growth.

In addition, the International Energy Agency reported earlier this year that China is set to account for around 60% of renewables capacity installed globally by 2028. This would enable it to hit its 2030 renewables goals in 2024, or six years early.

And yet, despite these warnings, we see governments and companies in Europe keen to engage with Chinese manufacturers. In the absence of protectionist rules from EU or US politicians, Chinese firms will keep growing their influence.

For example, the chief executives of Total Energies and Mingyang reportedly met last month to discuss cooperation on renewables projects. This is to be expected as TotalEnergies chief executive Patrick Pouyanné warned in February that the energy transition would raise power prices for energy users, and so one way to keep these risks in check is to work with manufacturers that can supply cheaper technology.

In addition, the Scottish Offshore Wind Energy Council last week named a new turbine factory by Mingyang as a strategic priority as it seeks to spur investment in the offshore wind sector, particularly with the delivery of ScotWind projects.

But while SOWEC is now set to field familiar questions about the risks to national security, we can also see the appeal from a business perspective. As long as the factory creates jobs and investment in Scotland, is it really so different if the country hosts a factory from a Chinese firm rather than Vestas or Siemens Gamesa?

The challenge for the industry and politicians is that they are now grappling with the inevitable result of policies that have sought to drive down the cost of green power in recent years. This has made low-cost turbines look attractive – wherever they may come from. Price isn’t everything: there will are good reasons why developers will still want to stick with European- and US-made turbines, even if they are costlier.

But we expect the Chinese influence in wind to keep growing in line with its goals to dominate more industries. Responses from the EU and US will need to be equally robust, and will give plenty for us to pore over in the months ahead.