The wind energy industry in China illustrates a fascinating yet contradictory scenarioIt is characterized by intermittent ceasefires amid relentless competition—a pressure cooker of strategic maneuvering where even losing propositions seem to embed themselves deep within the industry's DNAHowever, when the entire sector subscribes to the idea of doing business at a loss, it raises critical questions about the trajectory of this rapidly growing market.

At a granular level, the situation seems untenableThe Chinese wind energy sector has become embroiled in a vicious cycle of low pricing and cutthroat competitionIndustry insiders are voicing concerns over a trend where manufacturers prioritize short-term gains over long-term sustainability"Forget about core technologies, solutions, and after-sale safety," they lament“All that matters is giving clients the lowest possible price to secure a deal.” Yet, this short-sighted thinking could backfire in the long run, as neglecting quality can lead to serious safety and operational issues.

Wind farms are complex entities

Unlike simple products, they require ongoing maintenance and supportIf manufacturers cut corners to offer a low price, they could find themselves in a financial quagmire, struggling to maintain relationships with clients while absorbing the costs of post-sale servicesAs the financial year draws to a close, many firms are realizing that they are losing considerable amounts of money, sometimes across multiple projectsIt is a hard pill to swallow, akin to the realization of a major heart attack looming in the background.

In June 2023, the global wind energy market was abuzz with news from Saudi Arabia, which signed contracts with Chinese suppliers for two massive wind projects—one with a capacity of 500 MW and another at 600 MWThe announced costs were astonishingly low, standing at about 0.11 and 0.12 RMB per kilowatt-hour respectivelyThis led to a jubilant announcement from Saudi officials proclaiming their wind energy costs as the lowest globally

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But analysts raised eyebrows: these unprecedented prices were seemingly backed by Chinese manufacturers' ability to produce at an evocatively low cost, and skepticism lingered in the air, suggesting that the final figures might indeed blow past budgeted estimates.

Examining the first half of the year, though seven out of eight major wind turbine manufacturers showed increased revenue, a significant number saw profits plummetAmong the 28 component manufacturers, 18 reported reduced profitsFor the operators of wind power plants, 19 out of 36 companies experienced revenue declinesThe prevailing cause across all segments? One consistent answer: unsustainably low electricity prices.

Despite these challenges, the Chinese wind energy sector has managed to push through significant achievementsFor the first quarter of 2023, China's wind energy generation surpassed hydroelectric power for the first time in history, solidifying its place as the second-largest source of power in the nation, right behind thermal energy

The irony is that while manufacturers seem to be backpedaling in terms of profitability, they are operating at remarkable speeds in energy transition, outpacing other industries.

The key to navigating these turbulent waters lies in finding a balanceTo achieve sustainable growth, manufacturers must focus on selling their innovations at reasonable prices to meet genuine market needs, creating win-win scenarios for both parties involved.

Interestingly, the concept of “involution”—or internal competition—eventually leads to “exvolution”—the need for companies to look outwardThis outward expansion becomes imperative for firms to offset competitive pressures domesticallyOther industries, like photovoltaics, have already tested these waters and proved that exporting capabilities can mitigate local competitionIt’s akin to a taut rubber band; the tighter it is pulled on one side, the more forcefully it snaps back on the other

The message is clear: Going global isn’t as complicated as one might imagine.

As reports hit the newsfile, it quickly becomes clear that the Chinese wind energy sector is not merely strong domestically but is also stimulating significant interest abroadIn 2023, China claimed an impressive 65% of the newly installed wind power capacity across the globe, asserting its dominance in this vital energy sectorIts prowess is reflected in the number of patents for wind energy technologies, where it has now overtaken Denmark, home to Vestas, Europe’s largest wind turbine manufacturer.

What does “going global” entail for these Chinese wind energy providers? It can be comprised of differing strategies: installing equipment offshore in places like the UK or engaging in the manufacturing of components directly on British soilIn either case, Chinese manufacturers stand as trustworthy partners, offering quality and affordability—a combination rarely encountered in the industry.

Moreover, Europe has manifested a strong need for such economic partnerships, especially as it faces its own internal challenges

The rising costs within local markets have made the European Union increasingly reliant on imports from ChinaDanish wind developers, for instance, have reported losses amounting to billions of eurosIn this application of competitive theory, while Chinese companies are grappling with domestic pressures, many European firms struggle even more under the weight of inflated operating costs and stymied commercial prospects.

While there continues to be chatter about regulatory measures aimed at restricting Chinese suppliers, the ripple effects have been rather the oppositeThe growing demand for wind energy has prompted European countries to reconsider initial hesitance and embrace Chinese technologiesThe irony lies in the fact that while there are voices against local dependency on Chinese imports, the monetary attraction remains irresistible: products that are both affordable and efficient are hard to ignore in a market desperate for sustainable solutions.

The occurrence of strong demand is further evidenced by the contracts established between Chinese manufacturers and overseas markets

In 2022, China only managed to export 85 MW of wind turbines to Europe, yet by mid-2023, orders had skyrocketed to over 546 MWIt seems the more the European market clamors for affordable energy solutions, the more Chinese companies flourish.

Furthermore, with significant growth in domestic offshore projects anticipated in China, the timing appears opportune for manufacturers to not just expand geographically but also internallyAfter overcoming bureaucratic hurdles tied to project approvals, many opportunities to proliferate are now on the horizon.

However, as the winds make their way toward international shores, a few considerations must be madeThe wind energy and photovoltaic sectors are undeniably intertwinedExamining the pitfalls that the solar sector has faced offers invaluable lessonsJust like a person shouldn't wade into the same river twice, industries must avoid repeating historical mistakes.

The variables are intricate, as Chinese advancements in affordable and powerful construction capabilities could face scrutiny overseas

Following the EU’s recent focus on monitoring imports—fueled by a pronounced trade deficit—Chinese manufacturers need to be cognizant of potential investigations that may emerge from competition fear, especially in light of the scrutiny that solar products came under.

Moreover, regulations on standards may become increasingly rigorousWhile many firms prioritize profit, regulatory adherence may escalate, posing restrictive measures against external product inputsNevertheless, as the industry matures and sheds its “beginner’s luck" stage, Chinese manufacturers are finding ways to negotiate standards and conduct necessary environmental reporting processes, thus establishing a solid foundation for their international pursuits.

Even amid excessive pressure, the natural instinct remains: diversifying market outreach is criticalDespite the hurdles faced with local policies driving down access to markets like the United States, numerous emerging markets offer fertile ground for wind energy technologies

Last year, companies like Mingyang succeeded in exporting to Japan, while Envision entered India, and SANY established a foothold in KazakhstanTo date, Chinese wind energy technologies have crossed the boundaries into over 55 nations across five continents.

As observers turn their gaze towards China’s wind energy ambitions, a German publication aptly encapsulated the sentiment: “The Chinese wind energy industry is poised to conquer the European market, unswayed by the setbacks facing domestic manufacturers in Germany.” The expected “economic miracle” from Germany's energy transition appears increasingly out of graspThe momentum created by Chinese advancements is not just a temporary glint; it's indicative of a longer, strategic vision wherein domestic firms must adapt or risk being left in the dust.

In conclusion, while the road remains bumpy with intricate dynamics, one truth stands unassailable: China's wind energy industry has found its vigor, firmly asserting itself against the backdrop of global competition.