Stretched EU wind market seeks new entrant turbine makers

Expanding the number of offshore wind-turbine makers in Europe would help ease some of the pressure on the "stretched" market as it squares up to lofty capacity goals for 2030, delegates at the Offshore and Floating Wind Europe conference in London heard Oct. 25.

The barriers to entry for a new European entrant are high, while work is already underway at an EU level to stave off international competition, notably from China.

Three original equipment manufacturers (OEMs) — Denmark's Vestas Wind Systems, Siemens Gamesa, and US-based General Electric Co — dominate Europe's offshore wind market, but all are struggling to turn a profit in the face of cost inflation, supply chain logjams and uncertain demand.

At the same time, the companies are tasked with delivering significant offshore capacity growth in Europe this decade.

In the EU alone, member states aim to expand the offshore market from 16.3 GW at the end of 2022 to 111 GW by 2030. That equates to an annual build rate of 12 GW, or 10 times more than the 1.2 GW installed in 2022.

"We're kind of stretched and ... we're currently really only working with three [turbine-makers]," said Michael van der Heijden, CEO of Maple Power, a London-headquartered offshore wind developer jointly owned by the Canada Pension Plan Investment Board and Enbridge.

"I actually think we're missing an OEM or two or three in this market. I think that would definitely help a lot," van der Heijden said at the conference, organized by Reuters Events. "The question is, who will that be? And if you read the [European Commission's] plan, it's not China."

Chinese turbines have long been touted as potential options for offshore wind developers in Europe, especially in light of recent price increases by Western manufacturers.

But in its European Wind Power Action Plan, unveiled Oct. 24, the European Commission said pressure from international competitors such as China represents a "growing challenge" for EU wind manufacturing.

"Some of these non-European companies benefit from specific advantages linked to their vertical integration, domination in their home market or attractive financial conditions," the commission said. "While competition stimulates innovation and product improvements, an unlevel playing [field] could negatively affect EU wind equipment manufacturers and even reduce their competitiveness."

Referencing the growing threat from China, the commission said it would "make full use of the tools at its disposal," including trade barriers.

Until then, offshore wind auctions in Europe do not explicitly rule out the use of non-Western turbines, according to Damien Zachlod, managing director of EnBW Generation UK.

"The challenges are ... that there's a difference in the financing structures for Chinese OEMs to European OEMs," Zachlod said, adding that Chinese machines are seen as less efficient than Western models.

Still, Chinese manufacturers are seemingly pushing the envelope further in terms of technology evolution, with Mingyang Smart Energy Group earlier in October presenting a new 22-MW offshore turbine.

In 2021, Mingyang became the first Chinese company to supply machines to a European offshore project, delivering 10 3-MW turbines to a project in Italy, though van der Heijden noted that those are effectively onshore turbines installed offshore. As such, a Chinese turbine deal in Europe's offshore market is yet to be seen.

"The first one to use a Chinese turbine will get the best deal ... because it will be the price of entry," the executive said, adding that developers could receive pushback from some governments if they opt for Chinese machines.

Ultimately, given the EU's 2030 capacity targets, the market is big enough for all players, according to Wadia Fruergaard, head of policy positioning and public funding at Vestas, who added that it is crucial that any new entrant, Western or Chinese, "is playing to the same standards that we are subjected to play at."

S&P Global Commodity Insights' Alex Blackburne produces content for distribution on S&P Capital IQ Pro.