China looks to Europe for global presence

CHINA: Chinese manufacturers have struggled to win business on the global stage, but that looks set to change as companies seek greater export business with the help of European expertise.

Growing presence… Dongfang Electric signing a deal to supply turbines to Sweden
Growing presence… Dongfang Electric signing a deal to supply turbines to Sweden

In 2007, Huayi Wind Energy Development, otherwise known as Hewind, exported three 780kW turbines to a Chilean developer, marking the start of the world's largest wind market stretching its reach to other corners of the globe.

Since then, approximately 850 turbines have been exported from China, an average of just over 100 units a year, and totalling a mere 1.5GW by the end of 2014. In that time, China's domestic wind capacity has exploded from 2.6GW at the start of 2007 (GWEC), to 114GW (Windpower Intelligence).

This lack of export activity has been attributed to the rapid growth of China's domestic market, which has put the country's original equipment manufacturers (OEMs) in the enviable position of not needing to look elsewhere for sales. But with development in the Chinese market expected to shrink over the next two years — with annual installations estimated to reach a low of 20GW in 2017, from more than 25GW this year, according to FTI Intelligence — OEMs are starting to look further afield for wind contracts to supplement the home sector. But to succeed in the global market, Chinese OEMS will have to address the age-old concerns in external markets surrounding turbine quality.

Western promise

Envision Energy is the latest firm to try its fortunes in the west, bringing in European know-how with the recruitment of John Childs as the company's head of business development for Europe, the Middle East and Africa (EMEA). Childs was previously Siemens Wind Power's head of construction for EMEA and Asia-Pacific, and senior vice-president of sales and marketing for Vestas Northern Europe before that.

"The scope is significantly different from what is happening in the Chinese domestic market," Childs says of Envision's strategy. "Where others have struggled is that they've taken their approach from the domestic market and tried to overlay that on the international market. We're definitely working in more of an international organisation, so it's not controlled by the core. We are creating our own business plans. That's the key difference between us and what the others have tried to do," Childs adds.

Envision set up a global innovation centre (GIC), based in Denmark, to develop its turbines for the European market, led by Anders Rebsdorf, who previously worked in research departments at Vestas and Gamesa. "The GIC is involved in three things: product development, technology development and projects with developer interaction in sales and implementation," Rebsdorf says.

Envision installed a 3MW turbine with a 120-metre rotor in July at the national test centre in Osterild, Denmark, where MHI-Vestas and Siemens have installed their large offshore prototypes. Rebsdorf believes Denmark is an ideal place to develop new turbines.

"The average wind speed at the test facility is very attractive for making the power curves," he says. "In China the market is also paying attention to power curves, and to annual and lifetime energy production, things that were standard in the more established markets in Europe."

By testing in Europe, and using European expertise, Envision hopes to prove to the global market that its turbines are competitive and reliable, and, most importantly, gain international certification. Of his team at the GIC, Rebsdorf says: "We're a group of engineers that have been in this industry for an average of more than 15 years. We have a solid overview of what it takes to negotiate with sub-suppliers to ensure quality products and to get them certified through the established bodies. This is a must to play in the international market. You need to have an A certificate from, in this case, DNV GL."

Track record

Without a track record in Europe, Chinese OEMs have found it difficult to gain market share. "The number one barrier for most Chinese manufacturers is getting a global footprint," says Feng Zhao, a Copenhagen-based director at FTI Intelligence.

Chinese manufacturers installing capacity in foreign markets must also be able to back it up with local operations and maintenance units, which can be costly for the smaller companies, he adds.

Envision's Childs agrees. "It's imperative to be a trustworthy player in this industry. We are internationally present in all major global hotspots for development of renewables technology. This shows our customers that we're not a pure China model. In the energy space that's archaic thinking and an old way of doing business. Envision is prepared to be a gamechanger in that space," he says.

"We don't call ourselves an OEM, we call ourselves a 'smart energy solution' business. It's really looking at what our customers need, whether it's a turbine solution, software solutions, or our network into financial markets," Childs adds.

One of the easiest options for Chinese OEMs to expand is by buying and operating their own projects and equipping them with their own turbines. In July Envision acquired a 25MW project in Sweden, and in October it took a controlling stake in a 600MW development portfolio of Mexican wind projects. Rival OEM Goldwind owns and operates projects in several countries, including South Africa, where it acquired rights to at least two sites totalling 152MW in 2015. And in November, Electric expanded its small European footprint by agreeing to supply the 22.5MW fourth phase of the Blaiken project owned by utilities Fortum and Skelleftea Kraft in Sweden. Dongfang also supplied the 75MW third phase in 2014.

Emerging markets are the best way for Chinese OEMs to build a track record, believes Zhao. "It's where the Chinese can break through without the same sort of challenges of the European markets," he says.

In 2013, the Chinese government launched two initiatives to help expand the country's infrastructure industry beyond its borders. The Belt and Road initiatives (see map, below) are designed to build trade routes. FTI Intelligence research found 12 of the 15 fastest growing wind markets between 2015 and 2019 will be along these trade links. The countries include Kazakhstan, Jordan, Kenya, Russia, Egypt, Iran, Thailand and Pakistan.

"If this works will it will really help the Chinese turbines out to the emerging markets along the silk road. It will create a much bigger market than they have right now," Zhao said.

REVERSE TRAFFIC: By Yang Jianxiang and David Weston

Roads are usually two-way, and October's China Wind Power 2015 conference was a positive experience for several western manufacturers trying to get a piece of the action in China.

"There is a switch from quantity to quality in China, which is good for (foreign OEMs)," says Zhao. "We will see bigger turbines installed in China in the long term, but for half of Chinese OEMs, it's a challenge to produce (machines) larger than 2.5MW. Foreign OEMs have this advantage."

In 2014, Vestas installed 262MW in China, taking 1.13% of the market, according to the Chinese Wind Energy Association. By the end of 2014, Vestas' cumulative presence in China was 4.75GW, or 4.12% of the market.

"All our products are available to China," says Vestas head of marketing for Asia Pacific and China, Giorgio Fortunato. "The 2MW machine is our best-selling in China. We have 2MW machines with different rotors, the larger rotor generally more suitable to lower wind speed," he says. "The Chinese market is evolving. In the last five years, it shifted towards the low-wind and ultra low-wind market. Now, with new transmission lines being built, it is actually coming back towards the medium and higher wind sites."

Another European manufacturer, Gamesa, is focusing on export markets following the collapse of new build in Spain as a result of policy changes. While South America and India are priority regions, China also provides valuable income for Gamesa, where it holds a 3.14% cumulative market share.

"The coming national five-year plan is expected to continue supporting wind energy and renewables, so we think the future is going to be good in China," says Gamesa China CEO Alvaro Bilbao. "We believe the target of building 200GW by 2020 will be reached in China, meaning five more years with average installations of 18-20GW a year. Our current China business accounted for about 17% of Gamesa's total wind business in terms of megawatts in 2014."

Offshore opportunities

The offshore sector is also set to become an important part of China's wind market. According to Windpower Intelligence figures, the current pipeline stands at 7.8GW, of which 1.6GW is expected to be added in 2016, and another 2.3GW in 2017.

Offshore's newest player, Adwen, the joint venture between Gamesa and Areva, hopes it can find business there. "For us, the most challenging issue in doing business in China is the market evolution and the uncertainties our clients feel about the tariff in the future," says Adwen deputy commercial officer David Guiu. "We hope that when the five-year plan is announced things will be clarified. We hope to have a 20% market share in Europe by 2020 and a comparable footprint in Asia, most notably in China."

Finally, while not becoming directly involved in China, Siemens has been collaborating with Shanghai Electric, most recently with a licensing deal. Siemens' 2.5MW onshore platform, plus its 4MW and 6MW offshore turbines have been licensed to Shanghai Electric to sell in China.

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