Last week a German offshore wind project developer announced that it had entered into a preferred supplier agreement with Ming Yang, a Chinese wind turbine manufacturer, for 16 of its 18.5 MW wind turbines. This would be the first time that a Chinese turbine manufacturer has secured a contract to supply an offshore wind project in the EU. It’s hard to overstate the significance of this. For over 12 months there has been a chorus of western offshore wind turbine manufacturers, Vestas being the loudest, and other supply chain participants arguing that the incessant move toward large wind turbines had to stop to allow the sector to return to profitability; elements of the supply chain to mature; and ensure that there are vessels able to install the WTGs, particularly in the US where the Jones Act poses unique challenges associated with vessel strategies. Earlier this year, facing continued losses GE accepted this argument and cancelled the roll-out of its 18 MW WTG, causing three project developers offering 4 GW that were relying on the WTG to be unable to finalize contract terms with NYSERDA.
Meanwhile, Chinese wind turbine manufacturers have continued to develop larger WTGs. At some point the promise of lower LCOEs from larger WTGs was likely to create an opportunity for Chinese wind turbine manufacturers to break into the Western offshore WTG market. While Vestas voiced and GE Vernova accepted the arguments around the need to industrialize the supply chain to drive costs down and increase profitability, this gave Chinese new entrants an obvious opportunity to differentiate themselves by offering a WTG that promised a lower LCOE. Furthermore, it isn’t surprising that the first offshore wind project developer to succumb to their price offering was a fringe player, without strong relationships with incumbent Western offshore wind turbine manufacturers. I expect that Ming Yang made a comprehensive supply offer that minimized the requirements on a developer that doesn’t have the full engineering and construction capabilities of a larger player.
It will be interesting to see if there is a policy intervention by the EU
