China built a record 75.9 GW of new wind capacity in 2023, and its domestic turbine-makers are now eyeing international expansion.
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Wind developers in emerging markets are increasingly viewing Chinese turbine-makers as attractive alternatives to the established Western manufacturers in a trend that could fundamentally reshape the competitive landscape.
After years of speculation about their expansion overseas, Chinese suppliers are now selling turbines far and wide in markets from Saudi Arabia and Egypt to Serbia and Brazil. In 2023, they racked up nearly 7 GW of firm orders outside of China, according to S&P Global Commodity Insights data, more than the three previous years combined.
The growth comes amid a fierce race to the bottom in the domestic Chinese market which, coupled with the rising price of Western turbines, has boosted the economics of export opportunities and the potential to undercut the competition.
Yet at the same time, the companies continue to face barriers to entry in the EU and US, where wind development is more mature and the Western original equipment manufacturers (OEMs) such as Vestas Wind Systems A/S, Siemens Energy AG, Nordex SE and GE Vernova Inc. have strong footholds and long track records.
Despite the few Chinese turbines operating in the EU to date, the European Commission has launched an inquiry into Chinese wind OEMs, arguing that Chinese state subsidies could distort competition in the bloc. Both Europe and the US also have policies aimed at reshoring their clean technology supply chains.
Still, China's cheaper turbines are increasingly being lapped up by heavyweight European developers, such as Engie SA, Electricité de France SA and Copenhagen Infrastructure Partners P/S, in emerging markets. For industry observers, this is merely the beginning.
'We could not compete'
At 854 MW, the Maestrale Ring project in Serbia will be one of Europe's largest onshore wind farms, and one of the biggest projects globally outside of China, to feature Chinese turbines.
For Tiziano Giovannetti, CEO of project developer Fintel Energia Group SpA, the decision in early 2023 to go with Chinese manufacturer Windey Energy Technology Group Co. Ltd. was made for financial reasons, coming off the back of the higher price of Western turbines.
"It was a forced choice," Giovannetti said in an interview. "We could not compete anymore."
For Fintel, Windey's turbines represented about one-third of the cost quoted for Western-made machines. The Italian power producer has previously worked with Vestas on projects in Serbia.
"The only possibility we have to survive ... is to cut [capital expenditure]," Giovannetti said, adding that Maestrale Ring will sell its power on the wholesale market, without any subsidy. "There is no other way."
While higher prices have improved the Western OEMs' balance sheets, the CEO said the move has also been counterintuitive, given it allows the big Chinese producers a way in. "They are coming in force," Giovannetti said.
Windey is one of a handful of Chinese OEMs to have secured international orders last year, with Envision Energy Co. Ltd. accounting for the largest share, led by the giant 1.7-GW Neom project in Saudi Arabia.
The Chinese players also have growing pipelines. Goldwind Science and Technology Co. Ltd., ranked by BloombergNEF as the world's leading turbine supplier in 2023, had an overseas order backlog of 4.68 GW at the end of 2023.
Envision declined an interview request while several other Chinese OEMs, including Goldwind and Windey, did not respond.
Rising competitive pressure
The expansion of Chinese OEMs overseas comes amid enormous wind growth in their domestic market.
China commissioned a record 75.9 GW of new wind capacity in 2023, according to the Global Wind Energy Council, and is now home to 43% of all wind installed globally.
The sheer scale of the Chinese market has led to an aggressive reduction in turbine prices by the domestic OEMs as well as a series of new product launches, each of which pushes the boundary on turbine capacity and rotor diameter.
By contrast, Western OEMs have taken an approach that prioritizes profitability over volume: withdrawing from certain markets, cutting product portfolios and protecting their margins.
"It's completely the right thing to do ... but it also means that the competitive pressure that comes from the Chinese players has increased massively," said Christian Busdiecker, managing partner at consultancy Greentech Partners.
Germany's Nordex is already coming up against new Chinese rivals in emerging markets, which according to Deutsche Bank analysts represent about 33% of the manufacturer's target regions.
"We are competing against [Chinese OEMs] in Brazil, in South Africa, in Serbia, in Romania, so it's a real threat," Nordex CEO José Luis Blanco told Commodity Insights in March.
EU takes aim at Chinese subsidies
For now, firm orders overseas by Chinese OEMs are still only a fraction of the total order intake globally, reflecting developers' unwillingness to be first-movers and do "experiments" with Chinese machines, according to Busdiecker.
But sentiment could change quickly.
"Once some projects have been built with Chinese turbines, either it's a disaster or it's running very well," Busdiecker said in an interview. "If it's running very well, then the pendulum might shift and shift fast."
Lawmakers are seemingly aware of that risk to their domestic supply chains, with the European Commission launching a new inquiry into Chinese wind OEMs in early April. The inquiry is conducted on an "ex officio" basis, meaning the commission acts on its own initiative, rather than responding to a complaint.
It is the latest effort under the EU's Foreign Subsidies Regulation to combat the impact of Chinese state subsidies on the bloc's competitiveness. The commission has a similar inquiry underway into electric vehicles.
"It's mostly about not repeating past mistakes," said Angeline Sanzay, policy adviser on EU-China climate diplomacy at think tank E3G, pointing to the EU's solar supply chain which was all but taken over by China in the 2010s.
"With solar it's quite clear that it's difficult for the EU to de-risk [from China]," Sanzay said in an interview. "With wind there is little risk for now."
The investigation could be a long process. As for the outcome, Sanzay said a trade ban on Chinese turbines would be "quite extreme," with import taxes perhaps more likely.
EU Competition Commissioner Margrethe Vestager has talked about having stronger criteria around environmental impact, labor rights and cybersecurity.
The China Chamber of Commerce to the EU said the investigations against Chinese companies have the potential to create "significantly unfair" market conditions in the bloc. It also accused European lawmakers of "deliberately ignoring" subsidies granted by other countries to their cleantech industries.
"This action sends a detrimental signal to the world, suggesting discrimination against Chinese enterprises and endorsing protectionism," the organization said in an April 9 statement.
'We won't ever go back'
Emerging markets will continue to be the main battleground in China's attempt to take business away from the Western OEMs, according to industry observers.
Chinese suppliers are establishing manufacturing plants in Brazil and India, and already dominate markets like Kazakhstan and Uzbekistan.
In Europe's more developed wind markets, projects tend to be smaller with inevitably lower margins. Efforts to strengthen the EU's domestic wind supply chain will also test China's expansion, as will its lack of manufacturing capacity in regions like the EU.
"There's a lot at stake when you have a project. You don't want to make a bad investment and have problems later," Busdiecker said. "That comfort level, today at least, is there with the Western OEMs."
But even in these regions, Western players are at risk of losing ground to China, according to Giovannetti.
In the year since Fintel announced the contract with Windey, other wind developers have contacted its CEO to hear about the company's experience. Many are apparently "super disappointed" having recently signed deals to buy Western turbines at much higher prices.
"They now see that they are wasting a lot of money," Giovannetti said, adding that the prospect of Fintel returning to the Western OEMs is unlikely.
"We won't ever go back there," the CEO said. "You don't go back to the dinosaurs."