Chinese turbine makers 'doing their homework' as they get smart on Western concerns

Chinese wind turbine manufacturers are getting smart to European concerns as they look to crack markets on the continent, says a leading underwriter at Scor – and are willing to go as far as using Siemens systems in their machines.

Those are questions not just for developers but also for the insurers and financial institutions that developers need the backing of for projects to materialise.

“The London market is one of the most innovative insurance markets in the sector,” said Xu. So it is not “afraid” of the prospect of insuring Chinese turbines in Europe – but it doesn’t have experience of doing so either.

Because London underwriters are being asked “so many times” about Chinese turbines, a group of 20 leading professionals actually went on a group trip to China earlier this year to see them first hand.

Xu was one of those underwriters and helped organise the trip in his capacity as co-chair of the offshore wind subcommittee of the Lloyd's Market Association, a London-based body for underwriters.

During that five-day trip, the underwriters visited the facilities of major OEMs including Mingyang and Goldwind, speaking to their engineers and business development teams.

This helped to give the underwriters a “really good general view of Chinese turbines’ technical capability,” said Xu.

One thing that stood out, said Xu, was the openness of the manufacturers they visited. In the West it is common to think of Chinese turbine makers as being “not very transparent,” said Xu, and keeping information “quite close to the chest.”

But on this trip at least, the aforementioned OEMs were “well prepared” and happy to have their lead engineers respond to “all the technical questions we have, all the concerns that we have.”

On a visit to one “flagship” new facility, he recalled that the underwriters had the freedom of the factory floor, helping them feel they have had “first-hand” experience of these machines. As Xu noted, “It's important for the insurance market to know what we're going to insure.”

So are Chinese OEMs truly as open as their Western peers? Xu seemed to imply they may be even more so. Vestas and Siemens Gamesa “also like to share,” he said, but added that in Europe there is more “strict protection” of intellectual property.

If a Chinese blade falls into a European sea, how easy would it be to replace?

But Xu said one of the key concerns underwriters have is of a far more practical, logistical nature.

If a Mingyang blade were to suddenly plunge from a turbine into the North Sea, “how do you do the repair? Where do the components come from?”

This is just one worrying hypothetical posed by the broader issue that is the lack of facilities and trusted supply chain partners that Chinese turbine-makers have in Europe.

“That's going to reflect in your premium,” he said.

This concern has nothing to do with where the turbine and its supplier come from, said Xu. If a European manufacturer were to supply an offshore wind farm in a new market like Colombia, the questions would be “exactly the same”.

Any supplier moving into a new market is naturally “more risky,” he said.

Chinese manufacturer ‘willing to use Siemens product’ in turbine

Where would the data produced by the hundreds of sensors each turbine contains be sent? Who would handle it?

The Chinese suppliers “understand the concerns,” said Xu, adding that these had been raised on the recent China trip. Xu said the suppliers were happy to guarantee that data from turbines would “stay in Europe”.

“One of the OEMs even mentioned, ‘if you're really concerned, we can use a SCADA data system provided by Siemens,’” said Xu, who said that this would in his view “remove” that line of argument against Chinese machines.

Xu maintained that the archetypal teen hacker sitting in their bedroom (invariably with the lights turned down and the hood pulled up) presents a far greater cyber threat than Chinese suppliers.

Another hesitation of Western developers and indeed lenders concerning Chinese machines – albeit perhaps not quite as prominent – centres on the working conditions in China.

Xu said that on the recent China trip, suppliers were live to these concerns and were “really well prepared… they must have done their homework.”

During presentations to the underwriters, Xu said the suppliers raised ESG targets, including in relation to their supply chain partners. “So, I don't think that's going to be a big issue.”

He noted that in the new blade facilities of one OEM, they had clearly adopted a “European” practice regarding things like health and safety and time sheets.

No ‘red flag’ from insurers

Generally speaking, Xu said there was no “red flag” regarding Chinese wind turbines from most of the insurance market in London.

The key challenge from his perspective, he reiterated, is for Chinese suppliers to look at how they honour warranties, carry out servicing and procure their vessels and spare parts.

Addressing these issues is “not an easy task,” he said. “You can't build up the supply chain so quickly. We're talking about taking years and investing billions.”

For this reason, he said that Chinese turbine makers will be looking for partners to build partnerships and develop localised warehouses in Europe – not least so they can stash some spare parts there – and then “next stage” possibly looking at building new factories on the continent.

If manufacturers invest, “show commitment” and “stand behind” their products in Europe, he said that will make insurers “more comfortable”.