Surge in Chinese wind turbine exports to Europe likely to be short-lived spike: IEA

Chinese wind turbine manufacturers are set to enjoy a surge in exports as European competitors struggle to cope with a spike in demand ahead of 2030 deployment targets, but some of this momentum will be lost in the following decade, a new International Energy Agency (IEA) report has suggested.

In its analysis of wind turbine industries, the IEA noted that Chinese manufacturers have kept abreast of soaring domestic demand over the last five years, even though wind capacity installations have grown at an average annual rate of 30%.

Total sales of wind turbines in China reached nearly 80GW in 2023 — about 20GW up on the year before — and installed capacity hit 440GW, the IEA observed.

Domestic manufacturers were shown to have anticipated this boom by investing in new production facilities ahead of the curve, even creating some over-capacity and meeting all the demand without foreign help.

“The recent rapid expansion of Chinese turbine manufacturing capacity has led to intense competition, causing Chinese turbine prices to fall to an average $300m per gigawatt in 2023,” the report noted.

“This contrasts with trends in other parts of the world, where prices have tended to rise as a result of higher raw material or other input prices.”

Citing market intelligence outfit BNEF, the IEA report noted that Chinese turbines sold outside of China are about 30% lower than those made by companies from Europe and the United States, but still nearly double the prices at which they are sold domestically.

These lower prices, along with a backlog of orders at Western suppliers, have made Chinese OEMs more attractive to wind farm developers in other parts of the world.

In 2023, about 12% of China’s output of nacelles and 6% of its blades production was exported, the IEA found, and Europe, where wind industry technologies were first developed, has become a target market.

“Until recently, securing financing for wind parks using Chinese technology has been difficult due to inadequate information on the track record of its performance outside China. This has started to change, with Chinese OEMs such as Goldwind and Envision now supplying turbine components for wind parks overseas,” the IEA report noted.

In its analysis of the European market, the IEA found that the EU bloc is still a net exporter of nacelles, with shipments accounting for about 20% of production.

Some 25% of nacelles, 5% of blades and 20% of towers traded internationally today come from EU member states.

But the EU is already a heavy net importer of blades, despite exporting to other regions. The main sources of imported components are currently Turkey (blades), India (nacelles and blades) and China (nacelles).

Most of the factories currently supplying these imports are operated by European OEMs, the IEA noted, giving the example of a Vestas nacelle facility close to Chennai and a blade facility in Gujarat, both in India.

But the European wind industry, both onshore and offshore has faced headwinds over the last two years, leading the IEA to describe deployment as "plagued by supply chain disruptions, grid congestion and long lead times, partly due to unclear regulations and permitting issues".

Basing its forecasts on domestic and international demand — including European demand that Western suppliers are struggling to cover — the IEA predicted that said exports of Chinese nacelles will more than triple by 2030, when they will account for close to 35% of China’s total output, with Europe and Asia Pacific identified as the two key markets. This assessment was based on a ‘stated policies’ (STEPS) demand scenario.

Under a broader ‘announced policies’ (APS) scenario, the IEA predicted a sevenfold increase in exports to 2030 - accounting for more than half of total Chinese output - but stressed that there was a stronger concentration on APAC markets under this scenario.

Chinese exports of blades are also expected to increase substantially in the near term, growing sixfold to 2030 in the STEPS and eightfold in the APS, the IEA said.

European revival?

In its analysis of European wind turbine manufacturing capacity and output, the IEA suggested that investment plans already in place as well as green deal industrial policies are set to drive an expansion of indigenous European wind turbine manufacturing too

The EU’s Net Zero Industry Act stands out with targeted 36GW of annual manufacturing capacity for the entire EU wind sector by 2030, buttressed by inclusion of environmental and resilience criteria in renewable energy auctions and public procurement processes, the IEA observed.

The report also referred to initiatives by individual member states to promote wind turbine manufacturing, such as the Danish Export and Investment Fund, which provides loans to developers outside the European Union to expand the reach of European OEMs.

The IEA suggested that the NZIA’s sustainability and resilience non-price criteria, will spur domestic manufacturing to grow roughly in parallel with demand in both scenarios.

In the higher-growth APS scenario, EU output is seen increasing to over 40GW, more than doubling for nacelles and nearly tripling for blades by 2030, but even in the STEPS scenario, EU production of nacelles is forecast to jump by 50%.

Demand spike leaves gap open

In the medium term, however, the dash to install offshore wind capacity ahead of 2030 targets, means that European manufacturing capacity will continue to fall well short of demand, the IEA suggested.

“Announced manufacturing capacity expansions, taking into account committed and preliminary projects, are not sufficient to meet growth in demand… resulting in a need to import more wind components,” the report read.

“The region becomes a net importer to meet its deployment goals, with a sixfold increase in imports from India, while imports from China grow from 3GW to 4GW,” the IEA stated.

Rather than predicting runaway growth, however, the IEA said shipments from China will tail off by about 35% after 2030, when demand will fall off after a key year for deployment targets.

The IEA also forecast an increase in turbine manufacturing capacity in the US, and greater concentration on Mexican factories for imports to the US, strongly driven by US legislation such as the Inflation Reduction Act and Bipartisan 2 Infrastructure Law.

The EU is expected to recover its net exporter status, targeting markets such as the US and UK, the IEA suggested.

“After 2030, when the peak in demand has passed, the EU becomes a net exporter of nacelles to North America and the rest of Europe. Production of blades grows even more strongly, doubling to 2030 and decreasing thereafter," the IEA stated, while stressing that this will not be enough to make the EU a net exporter of blades at 2030.

"As other countries have expanded their blade facilities too, the EU does not become a major exporter of these components, causing the utilisation rate of domestic capacity to drop,” the report suggested.

“The share of domestic production in the total supply of nacelles and blades both stand at 90%, falling slightly for nacelles and increasing for blades. EU production of both nacelles and blades remains competitive in 2035, with production costs below the cost of imports from the United States, China, India and other countries in Europe,” it states.

In its analysis of the current state of European industry, the IEA said domestic production covers around 85% of blades deployed in the EU, and all of the nacelles and towers.

Trade measures

Looking at future trends, the IEA also noted a broader range of EU policy measures at work, as well steps to address allegedly unfair competition from China.

These include regulatory reforms such as a revision of the Renewable Energy Directive (RED III), which shortens the maximum permitting times for wind farms, and policy initiatives under the RepowerEU and EU Green Deal.

Under the European Wind Power Action, the EU Commission has released new auction guidelines, and the European Investment Bank (EIB) has provided counter-guarantees to improve access to finance for wind turbine manufacturers.

The report also referred to EU concerns raised about alleged unfair trade practices by state-led Chinese companies, leading the EU Commission to launch an inquiry into Chinese suppliers of wind turbines in five EU markets earlier this year.

This followed on from earlier antidumping measures affecting steel towers from China and glass fibre used in wind blade manufacturing imported from China, Egypt and Morocco

On the other hand, the IEA noted that some Chinese OEMs are now moving production outside of China due to local content requirements and other trade restrictions, as well as to be closer to other markets, given that large components are costly to ship.

Brazil to emerge

The IEA report, also reflected on the potential for Brazil to emerge as a significant global supplier of major wind turbine components, provided the South American country can drum up the investments needed to upgrade its ports and other logistics infrastructure.

"Brazil produces over 5% of all wind blades today and is an important steel producer and exporter of iron ore with relevant port infrastructure. Further improving transport infrastructure and its links to manufacturing locations, as well as reducing investment risks, would contribute to Brazil fully exploiting its high potential, and increasing wind blade exports sixfold from today to 2035, the report stated.

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