China wind industry latest clean energy sector caught in trade crosshairs

BEIJING – China’s wind industry is the country’s latest clean energy sector to see its success draw the attention of foreign trade officials.

The European Union’s (EU) acting competition commissioner said last week that wind-power could merit investigation if Chinese firms are deemed to receive too much government aid. 

An EU anti-subsidy probe into Chinese electric vehicles is already underway, while its solar panel makers have been targeted by the US for price-dumping, circumventing tariffs and even using forced labour, a claim that Beijing denies. Joint EU-US duties on Chinese steel could also be announced later in October. 

Trade tensions are marring what otherwise has been one of the biggest success stories in the fight against climate change – China’s rapid expansion of clean energy and its supply chains.

Dr Fatih Birol, executive director of the International Energy Agency, in September cited the “spectacular growth” in solar panels and electric vehicles – both dominated by China – as the primary driver for the world to peak fossil fuel demand this decade. 

The EU wants to make itself more self-sufficient in clean tech to avoid the kind of outsourcing to China that happened with its solar sector over a decade ago. It is also aiming to produce more critical raw materials domestically to avoid over reliance on Beijing. Still, it should not be forgotten that European countries like Germany and Spain were pioneers of renewable energy subsidies to help those industries at their inception.

It is unclear in any case whether opening an investigation into wind-power will be in the EU’s interests. Commissioner for Energy Kadri Simson would not rule out a probe while speaking on a panel in Brussels on Monday, while acknowledging that the EU needs more turbines than it is able to produce through the end of the decade. 

“If there is a proof that we are facing dumping measures, then of course we have to address that this is unfair,” she said. “But fair competition is also important for our own industries because there is expectation that in several sectors our companies can be the exporters.”

Ms Simson is in Beijing this week to co-chair the EU-China Energy Dialogue with Zhang Jianhua, chairman of the National Energy Administration.

Domestic content

Until recently, Chinese wind firms have been content to stay within their domestic market, the world’s largest, with 97 per cent of sales in 2022 going to projects in China, according to BloombergNEF. That’s now changing, as manufacturers increasingly target overseas buyers, offering prices at discounts of about 20 per cent to European and US producers. 

Those discounts are possible because of diverging trends in global turbine prices. The end to China’s nationwide subsidies for onshore projects in 2020 pushed developers to press for lower prices, squeezing profit margins. At the same time, China was able to exert more control over material and fuel costs than Europe during the 2022 energy crisis by relying on its vast coal reserves, helping turbine makers lower prices even as they soared elsewhere in the world.

China’s national and local governments have myriad ways of supporting companies, from direct investments in firms to preferential land and financing arrangements. 

China also helped its wind industry develop during its early stages by promising extra payments above normal electricity rates, guaranteeing projects would be profitable at a time when they were more expensive than fossil fuel alternatives. That created enough demand for turbines, and manufacturers have been able to scale up and lower costs so that building wind generation is now about half the cost of new coal power, according to BloombergNEF.

Low penetration

In September, Beijing-based Sany Heavy Energy announced plans to install two supersized onshore turbines in Germany. Goldwind Science & Technology is looking for projects in Spain, and Mingyang Smart Energy Group is trying to enter the UK offshore market, bne IntelliNews has reported.

Any EU measures to constrain Chinese companies are unlikely to shake things up in the near term, given China’s low penetration of its market. But they would create barriers to competition further down the road, and could potentially choke off a source of growth for Chinese firms.

“Chinese manufacturers are targeting Europe for sure, but their market share remains very small,” said Mr Leo Wang, an analyst with BloombergNEF in Beijing. “Even if an anti-subsidy investigation leads to a tariff on Chinese turbines, it will have very limited impact on the dynamics of the EU wind market.” BLOOMBERG