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A carbon free future may not be as straightforward as having access to cheap, readily available sources of green energy. Since China took over the top spot from the UK in total offshore wind installations in 2021, China’s share of global wind capacity has grown rapidly to two-thirds last year.
There are now four Chinese wind turbine equipment makers in the global top five rankings — combined with well over 80 per cent market share for Chinese companies in solar manufacturing capacity. Yet there is a question mark over these companies’ future growth.
As China’s output has expanded, the price of wind turbines produced has fallen steadily. The installed wind turbine cost in China has hit a record low price, almost halving since last year.
On the surface, abundant, cheap green energy options should mean a faster, easier transition to renewable energy. But global adoption of these technologies has been patchy. Cost is not the only factor delaying the energy switch. That is especially the case for the US, thanks to rising geopolitical tensions with China. Heavy reliance on Chinese manufacturers in solar and wind has raised energy security concerns.
For sustainable growth, Chinese makers will need access to larger markets. This includes the US and Europe, where their presence is currently small but growing. The UK is the second-largest market for offshore wind globally and represents more than 40 per cent of European offshore wind capacity. In the rest of Europe, which once had a leading position in making wind blades and other components, there are concerns about protecting local companies and jobs.
Challenges are also growing in Asia, with Japan the latest country to boost co-operation with the US and Europe to develop floating offshore wind technologies closer to home. Longer term, these efforts could start cutting into Chinese manufacturers’ sales.
Shares of China’s largest wind turbine makers Goldwind Science And Technology and Windey Energy Technology Group are down about a third in the past year. They trade at around a third of the valuation of global peers, despite fatter operating margins, reflecting concerns about overcapacity at home and obstacles to global growth.
That discount may be overdone for now. China’s manufacturers can still tap demand in markets such as Saudi Arabia. And the sector has a formidable cost advantage, as more countries with budget constraints try to ramp up renewable power generation. Chinese makers are able to supply wind turbines at a price a fifth below US and European rivals. Such discounts could prove too tempting for project developers in the west, as they struggle with high financing and labour costs.
june.yoon@ft.com
