Off the German island of Borkum, a significant offshore wind farm featuring 16 giant turbines from Chinese manufacturer Mingyang will soon join existing facilities. This marks the first large-scale involvement of a Chinese company in Germany’s wind energy sector, highlighting a shift in competition. With China dominating about 70% of global wind turbine production and offering lower prices, Western manufacturers face challenges amidst ongoing EU investigations into potential state aid for Chinese firms.
Located 90 kilometers away from the German North Sea island of Borkum, a significant amount of wind makes this area ideal for offshore wind farms. In four years, a new wind farm will make its debut, featuring 16 towering wind turbines, each with an impressive diameter of 260 meters, thereby representing the largest models available today. The supplier for this ambitious project is none other than Mingyang, a prominent wind turbine manufacturer from China, which has been turning heads in the European wind energy sector.
This marks the first significant involvement of a Chinese firm in Germany’s wind energy market, and the message regarding the choice of supplier is quite clear: “By opting for the most powerful offshore wind turbine, we’re expediting Germany’s energy transition while fostering crucial competition within the sector,” stated Holger Matthiesen, the project manager at Hamburg-based asset management firm Luxcara, which is overseeing the wind farm initiative.
The Dominance of Chinese Wind Turbine Production
Choosing Mingyang came after a competitive international bidding process. According to Luxcara, the selection was influenced by various factors, including technological advancements, financial assessments, and environmental considerations. Importantly, Mingyang also plans to collaborate with European suppliers for various components, ensuring some local economic benefit.
Does the turbine landscape near Borkum signal a newfound decline? Chinese manufacturers have successfully taken over certain technologies that once showcased Europe’s pride. This pattern is reminiscent of the solar industry, where European production has significantly diminished. Concerns now extend to electric vehicles, heat pumps, and wind turbines as well.
China is not starting from scratch; it already boasts a robust wind turbine industry. According to Wood Mackenzie, an energy consultancy, around 70% of the global wind turbine production capacity was situated in China last year, indicating a surplus of about 41% over the predicted domestic demand by 2026.
This equilibrium places China in a strong position to serve international markets. Chinese suppliers often offer their products at prices 25-33% lower than their Western counterparts, creating a competitive edge in regions such as the Middle East, Latin America, Africa, and Central Asia, where local production is not a concern. Furthermore, Chinese firms are establishing manufacturing facilities abroad and collaborating with local suppliers to enhance their market reach.
Western Manufacturers Face Challenges Globally
The wind energy market is undergoing a seismic shift, as leading Chinese manufacturers like Envision have secured orders from various Asian countries, while Windey and Goldwind have made their mark in Europe and the Middle East. Before the COVID-19 pandemic, Western manufacturers held a dominating 60% share of the global market, a figure that has drastically dropped to below 20% when factoring in competition from Chinese and Indian firms alongside immense domestic demand in China.
In April, the European Commission initiated an investigation to determine whether Chinese wind turbine manufacturers involved in projects across five EU nations have benefited from state support from Beijing. Brussels is examining similar cases related to rail contracts and solar cell procurement, especially where state funds are utilized.
The Commission aims to avoid the missteps of the past, particularly concerning the solar industry, where Western producers once helped establish manufacturing operations in China but have since been overwhelmingly displaced.
With ambitious plans to expand wind energy output from the current 220 gigawatts to 425 gigawatts by 2030 and a goal of reaching 1300 gigawatts by 2050, there’s a palpable risk that China will be responsible for producing a significant portion of the needed turbines, as noted by the industry group Wind Europe.
Prominent companies such as Vestas, Nordex, and Siemens Gamesa currently dominate the European market, but their stronghold is rapidly weakening. Chinese manufacturers not only provide their wind turbines at lower costs but also offer enticing financing options, including up to three years of deferred payments—conditions under which European manufacturers cannot compete due to OECD regulations.
Improved Protective Measures for the West
Beijing has heavily invested in the expansion of wind energy to achieve decarbonization of its electricity sector. In just the first half of 2024, global orders for wind turbines reached a record total capacity of 91 gigawatts, a 25% increase from the previous year. Notably, 82% of those orders were placed within China, predominantly directed towards domestic suppliers, whose economies of scale contribute to their affordability.
However, an imbalance is emerging in China due to its sluggish economy, leaving supply to surpass domestic demand, driving excess wind turbines into the international marketplace. Meanwhile, Western manufacturers are grappling with high operational costs and quality control challenges, particularly firms like Siemens Gamesa