Chinese wind power projects may cost less to develop domestically, but these advantages necessarily translate directly to overseas markets. According to data from BloombergNEF, Chinese wind power turbines sell overseas for 20 per cent less than the US or European equivalents, and turbine costs account for 30-43 per cent of offshore wind project costs. But Hove points out that in European projects there are a lot of hidden costs besides the turbines.
A report co-authored by Hove says larger projects and turbines are helping to reduce the cost of offshore wind in Europe, but making everything bigger has broader consequences. One of these is for shipping costs, which increase. The shipping industry, meanwhile, is having to decarbonise, which will further increase the cost of long-distance transport, the report finds.
Financing costs are also a key variable. According to the report, banks can impose higher rates of interest, stricter covenants, or extra warranty bonds on projects using Chinese equipment, offsetting some of the capital cost advantages.
Localising manufacture
In response to these challenges, some Chinese companies are planning to set up factories in Europe. Mingyang, for example, announced it would build the UK’s biggest turbine factory in Scotland.
The GBP 1.5 billion project would create 1,500 jobs, according to Mingyang, and is expected to be in operation by the end of 2028. The idea is to make the towers and blades locally while transporting the gearboxes and bearings, which are easier to ship, from China. This would reduce shipping costs and help meets Europe’s preference for localisation.
Qin Haiyan says such “hybrid supply chains” are essential if Chinese companies are to shift from being product exporters to overseas manufacturers. Deeper cooperation with local developers and industrial chains will allow Chinese companies to make full use of local resources such as talent, capital, technology, and increase European manufacturing capacity, all of which will increase overall project efficiency, he says. But it remains to be seen if competitiveness can be maintained, and local jobs created, when working in a higher-cost environment.
The project has not yet been finalised. Although Mingyang has identified the Port of Ardersier as its preferred site and has held discussions with the UK and Scottish governments for several years, details such as the scale of investment, construction plans and final approval are subject to confirmation. Debates in the UK over energy security, scrutiny of Chinese investment and broader geopolitical concerns have added further uncertainty.
Hove warns that while Europe wants to encourage localisation of manufacturing, China manufactures 70 per cent of the global supply of key components like gearboxes, turbine blades and castings. These “European-made” turbines will still, in large part, rely on Chinese supply chains.
Working with China
To ease supply chain bottlenecks and cost pressures, some European firms have started looking at carefully delimited cooperation with Chinese manufacturers.
Hove gave Mingyang’s partnership with the UK’s Octopus as an example. Octopus will have control of the software and management system, with the Chinese party just supplying the turbines.
Octopus didn’t comment on the project specifics but told Dialogue Earth by email it is in conversation with Mingyang on how to roll out hardware to speed up the UK energy transition and bring down costs for bill payers. From Mingyang, Dialogue Earth received no response following its request for comment.
