Wind Power Expansion: Key to Profitable New Model

"In the first half of this year, wind turbine prices have rebounded somewhat, but neither domestic nor international markets have escaped the situation of price internal competition," said Zhai Endi, Chief Engineer of Goldwind Science and Technology, at a recent industry conference.

Wind power's overseas expansion has accelerated, but price competition has become a stumbling block to development. According to Wood Mackenzie statistics, from 2022 to 2023, Chinese wind turbine manufacturers secured 16GW of overseas orders, which are being delivered in succession, marking a period of continuous growth for Chinese wind power product exports. However, under the influence of price internal competition, the phenomenon of wind turbine manufacturing enterprises increasing revenue without increasing profits is evident.

On October 9, the National Energy Administration held a meeting proposing to increase innovation and support for new forms and models of new energy development, to reflect the green value of new energy, and to meet the needs of green product exports. Experts believe that wind power companies going overseas need to gradually shift from price competition to differentiated competition. In the future, it is necessary to further strengthen the maintenance of a fair competition market environment, regulate corporate pricing behavior according to laws and regulations, and promote the high-quality development of the wind power industry.

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Price competition urgently needs to be reversed

Price competition has become a double-edged sword affecting the development of wind power enterprises.

On the one hand, the overseas market share of Chinese enterprises continues to expand. According to data from the General Administration of Customs, in the first three quarters of this year, China's wind turbine generator exports increased by 73.9% year-on-year. The 2024 Hamburg International Wind Energy Exhibition held at the end of September is one of the top wind power industry exhibitions, with the number of Chinese wind power companies participating increased by 8 times compared to the last session, with more than 90 whole machine and industrial chain enterprises participating.

On the other hand, low-price competition hinders the sustainable development of the wind power industry, and the trend of wind power enterprises increasing revenue without increasing profits is significant. Bloomberg New Energy Finance released the 2023 ranking of Chinese wind turbine manufacturers in February this year, with the top seven companies being Goldwind Science and Technology, Envision Energy, Yunda Shares, Mingyang Smart Energy, Sany Heavy Energy, Dongfang Electric, and Electric Wind Power. Among these seven companies, excluding the unlisted Envision Energy, five companies achieved positive revenue growth in the first half of this year, with only Mingyang Smart Energy and Goldwind Science and Technology achieving positive net profit growth. Goldwind Science and Technology's 2024 semi-annual report shows that the gross profit margin of wind turbines and components sales is 3.75%, down 2.66 percentage points from the end of last year.

Qin Haiyan, Secretary-General of the Wind Energy Professional Committee of the Chinese Renewable Energy Society, mentioned in an article signed by him that currently, in the bidding of wind power project units, the bidding prices are obviously too low. Low-price competition is not conducive to the development of high-quality wind power projects, harms the survival foundation of wind power manufacturing enterprises, and restricts the sustainable development of the wind power industry.

"The Central Political Bureau meeting held on July 30 pointed out the need to strengthen industry self-discipline and prevent internal competition in a vicious cycle," Qin Haiyan believes that in the future, it is necessary to further strengthen the maintenance of a fair competition market environment and regulate corporate pricing behavior according to laws and regulations.

Wind power enterprises break the situation through innovationLocalization restrictions, profit demands, and other factors have prompted wind power companies to withdraw from overseas price wars and transform. A report released by Wood Mackenzie shows that by the end of 2023, nearly half of the overseas cumulative installed capacity of Chinese wind turbine manufacturers was located in Europe, with over 80% of Chinese companies' overseas wind power assets achieved through acquisitions. However, inflation, rising raw material prices, geopolitical issues, and concerns about the quality of wind turbine products have led to insufficient production capacity in Western supply chain companies. The profit pressure faced by Western supply chain companies also makes it difficult for Chinese companies to invest in and build new production capacity locally.

Diversified layout has become a focus for Chinese wind power companies to participate in differentiated overseas competition. The Wood Mackenzie China New Energy Research Team believes that currently, except for China, India, and South America, the local wind power production capacity in other regions cannot meet local market demand, presenting an opportunity for Chinese wind power supply chain companies to go global.

Wang Weiqi, the chief analyst of the electricity and new energy industry at Guoxin Securities, stated that global onshore wind power development is concentrated in China, Europe, and North America, while offshore wind power development is concentrated in China and Europe. The proportion of wind power development in regions such as Africa is very low, but from the perspective of electricity demand and resource endowment, it has good development potential, and Chinese-made wind turbines are gradually taking the initiative in the relevant markets.

Some companies are actively exploring new markets. For example, Goldwind Technology stated at the mid-2024 performance briefing that the company has achieved business breakthroughs in markets such as Morocco, the Philippines, Georgia, and Namibia, with business covering six continents and 42 countries worldwide. As of the first half of 2024, Goldwind Technology's installed capacity in North America, Oceania, Asia (excluding China), and South America has all exceeded 1GW.

Wind power companies are also actively exploring new profit models and enhancing their long-chain service capabilities. Wang Weiqi said that wind power, as green electricity, not only has resource attributes but also implies a green electricity premium, which makes wind farm operation and power station transfer profitable business models. Many wind turbine manufacturing companies are transforming their business models to a dual-drive model of manufacturing and development transfer. Some companies are also exploring paths for the integrated development of various new energy industries. Mingyang Smart Energy introduced in its 2024 semi-annual report that the company is continuously increasing investment in the photovoltaic industry, power electronics energy storage industry, and hydrogen energy industry, improving the overall energy utilization efficiency and grid stability.

In addition, offshore wind power, which has higher technical requirements, has become a target for wind power companies. A report released by Hui Bo Consulting shows that offshore wind power currently accounts for a small proportion of global wind power installations, while China's offshore wind power new installations accounted for as much as 57.6% of the global total in 2022, leading the development of global offshore wind power. In August of this year, the world's largest single-unit capacity floating wind power platform "Mingyang Tiancheng" developed by Mingyang Group went to the Mingyang Qingzhou Sihai Offshore Wind Farm in Yangjiang, Guangdong. Its design of wing-type double tower, double host, and double wind wheel, as well as the application of cable systems, are all global firsts, highlighting China's technical strength in offshore wind power.

The offshore wind power market contains significant development potential. The "Global Offshore Wind Report 2024" released by the Global Wind Energy Council predicts that over the next ten years, the world will add more than 410GW of offshore wind power installed capacity, two-thirds of which will be completed between 2029 and 2033.

Policy Frequent Issuance Helps Tap Potential

Qin Haiyan said that China has established a wind power industry system with international competitiveness, building the world's most complete industry and supply chain, with more than 60% of global wind power components and complete machines manufactured in China. The "Chinese wisdom" and "Chinese solutions" in the wind power field are becoming more and more competitive, but there is still a gap in the breadth and depth of going global compared to fields such as home appliances and construction machinery, with significant potential for development.

Since the "14th Five-Year Plan," high-quality development-related policies for the wind power industry have been introduced one after another. The "Action Plan for Accelerating the Green and Low-Carbon Innovation and Development of Power Equipment," the "14th Five-Year Plan for Renewable Energy Development," and the "14th Five-Year Plan for Scientific and Technological Innovation in the Energy Field" all propose to focus on the development of deep-sea and floating offshore wind power equipment technologies. The development of wind power towards the sea and the improvement of technical levels will become an important direction for the development of the wind power industry.Documents such as the "Regulations on the Supervision of Full Guarantee of Renewable Energy Electricity Acquisition," the "Guiding Opinions on Energy Work in 2024," and the "Notice on Doing a Good Job in the Absorption of New Energy to Ensure High-Quality Development of New Energy" that have been implemented this year have established goals for the development of the energy structure and standards for the construction and absorption of new energy from both macro and detailed levels.

Many institutions are optimistic about Chinese wind power companies going global, believing that China will continue to be a leader in the wind power industry. A report released by Wood Mackenzie predicts that the global wind power newly installed capacity will reach 1763GW in the next ten years, with China adding 915GW. A report released by Huaxia Jingwei believes that 2024 to 2025 is the peak period for offshore wind power installation during the "14th Five-Year Plan" period.