Will Mingyang disrupt non-Chinese markets?

China reinforced its position as the world’s largest offshore wind market in the first half of 2022. The country grew to 24.9GW of operational offshore wind, which is the same as the UK, Germany and the Netherlands combined.

But will that be enough for its turbine makers?

Increasingly, Chinese firms have been looking to grow overseas, including in Europe and the US. And one, Mingyang, looks like it could actually do so.

That is the argument made in a white paper from the Institute for Energy Economics & Financial Analysis (IEEFA) last week. It said Mingyang is well-placed to grow outside China due to its development experience, turbine innovations, global manufacturing footprint, and problems at western rivals.

The three largest western offshore turbine makers – Vestas, Siemens Gamesa and GE – are struggling with tight margins that are getting slimmer; and the latter two are on the cusp of potentially disruptive reorganisations.

This would shake up established ways of working. Traditionally, the market has been split between Chinese manufacturers selling their machines in their home market, and western rivals dominating elsewhere. But is this set to change?

Challenging perceptions

There is a pervasive idea in European offshore wind that Chinese machines are lower quality than those from western players. This was easier to argue during the mid-2010s, when China still lagged European countries – especially the UK – in terms of installed capacity. But the argument gets flimsier in every passing year as installations in China outstrip those in the rest of the world.

Since 2020, seven of ten offshore wind turbines globally have been installed in China; and one of every five 5MW-plus offshore turbine was from Mingyang. Experience counts and this expertise will only grow in the years ahead.

Chinese turbine makers such as Mingyang will also be able to circumvent some of the supply chain challenges faced by western rivals.

China dominates the market for the supply and processing of rare earth materials, and steel production too. Both are crucial for the manufacturing of offshore wind turbines, and we can only assume that Chinese firms will find it easier to secure these materials than rivals in the west. Lower transport costs will also mean they can get them more profitably.

This latter point cannot be ignored. Chinese firms are more insulated from inflation than players in Europe, with IEEFA pointing out that Chinese turbine makers currently enjoy profit margins 14 percentage points higher than non-Chinese rivals.

But IEEFA said Mingyang has the edge even over its Chinese rivals.

It has kept its production in-house, which bolsters its resilience; it does not have a history of state ownership, which will make its presence more palatable in western countries; and it has raised money to support its growth, including a $657m offering in London in July.

The company has also started to pick up overseas orders.

It is supplying turbines to the 30MW Taranto project, which is set to be the first offshore wind farm in the Mediterranean Sea, and to developments such as the 375MW Ca Mau intertidal offshore wind farm in Vietnam, which is set to become operational in 2023. It still needs to win a blockbuster deal in one of the large European offshore markets, but that can only be a matter of time.

The company is preparing to make 16MW offshore turbines commercially available by 2024, and is talking about 20MW units too.

It also signed a deal in late 2021 with the UK Government, which committed to help Mingyang enter the UK offshore wind market. This would help it follow the UK entry of Chinese developers such as SDIC.

It is reasonable to assume players including Mingyang will have an advantage in Asian nations such as South Korea, Japan and Vietnam due to their proximity. But their ambitions will be bigger than that as they see three weakened rivals in the west. We would not be surprised if Mingyang was looking with great interest at the US given the recent restrictions on sales of GE’s Haliade-X.

The offshore wind market may have grown up with a formidable wall between China and everywhere else, but that can change. All walls break eventually.