China - Western wind turbine makers fall behind

Western wind turbine manufacturers are losing ground in China, the world's fastest-growing green energy market. The combined market share for companies such as General Electric and its European rivals, Vestas Wind Systems and Siemens, fell to 14 percent last year from 71 percent in 2005, according to Bloomberg New Energy Finance. Sales are being eroded by local companies including Sinovel Wind and Xinjiang Goldwind Science & Technology.

“It's a tough market,” said Jesus Zaldua, president of Gamesa Corporacion Tecnologica's Chinese subsidiary, which has four wind-turbine factories in Tianjin. “Some companies will have to leave China in the next five years.” To get back in the game, the foreign companies are introducing newer technology. Siemens, based in Munich, Germany, expects to open an $80 million plant this year in Shanghai to build 3.6-megawatt turbines — bigger than anything made by a Chinese company.

Gamesa plans to retrofit its existing plants to build 2-megawatt turbines and will open its fifth Chinese factory next year. The Spanish company's machines cost a third more and are more reliable than Chinese models, according to Beijing-based consultancy Mint Research. “Competing on cost isn't the way to go,” said Jens Tommerup, president of the Chinese business unit of Vestas, which is based in Denmark. “It's about quality.” Chinese manufacturers say they are improving their quality. Goldwind and Sino­vel plan to introduce higher-output turbines next year.

“We already have 2.5-megawatt and 3-megawatt products” under development, said Thomas Yao, Goldwind's public relations director. “We are going to produce some 2.5-megawatt, and they will be put into mass production early next year.” The head start in technology may pay off for Western companies, particularly as the Chinese venture abroad, said Keith Hays, global wind research director at Emerging Energy Research.

Western bankers, who would finance the majority of projects outside China, have more faith in U.S. and European turbine makers because of the companies' experience, he said. “For now, the West has an advantage in quality,” said Hays, an industry consultant in Barcelona and Cambridge, Mass. “But the Chinese are catching up fast.”

Buoyed by $47 billion in stimulus spending for environmentally friendly power over two years, China installed more than double the number of wind turbines in 2009 than in the previous year. This year, the country plans to add 18 gigawatts of wind capacity, the equivalent of 15 nuclear power plants. That's double what's expected in the U.S., the No. 2 market, according to estimates from New Energy Finance. Germany and Spain, Europe's largest wind energy markets, will add 1.8 gigawatts and 1 gigawatt in 2010, respectively.

Vestas, the top foreign wind turbine maker in China, installed turbines with a total capacity of 620 megawatts on the mainland last year, New Energy Finance said. Despite losing market share, Western turbine makers still are selling more units in China, UBS estimates.

“The very explicit growth targets for wind energy in China have spurred the growth and emergence of many new competitors, which has driven down the prices of wind turbines,” Tommerup said.

The biggest domestic competitor, Beijing-based Sino­vel, sold turbines with a capacity of 3,523 megawatts. Sinovel and Goldwind, the second-biggest Chinese wind-turbine maker, are among the top five global turbine manufacturers, even with almost no sales overseas, according to the Danish wind advisory firm MAKE Consulting.

Vestas and GE were respectively the first and second- largest suppliers of turbines worldwide in 2009, according to MAKE Consulting. Sinovel was third, followed by Germany's Enercon. Goldwind was fifth.

For more information please contact Trevor Sievert at ts@windfair.net