Chinese wind turbine producers have witnessed their market share rise dramatically in the past few years, states research consultancy Frost & Sullivan (F&S).

Two of the top Chinese wind turbine producers now rank among the global top three manufacturers by megawatts of capacity sold. The rise has been fuelled by domestic demand for wind power and a requirement for 70% of wind turbine components to be manufactured locally, says F&S renewable-energy research manager Alina Bakhareva.

However, there is a dark side to this story of rapid success. China has witnessed, by far, the highest number of accidents caused by failures and malfunctions of wind turbines, including massive power outages and even some fatalities. With its domestic market saturated and clear signs of overcapacity and upcoming consolidation, some of the biggest Chinese producers have announced plans for international expansion, she explains.

While there is no doubt of the Chinese manufacturers’ ability to learn quickly, adapt and alter the technology to bring the costs down, F&S believes that the wind power market presents a tougher challenge for the Chinese to crack.

“Firstly, there are a number of technology- related quality issues that the Chinese manu- facturers will have to sort out before they are able to deliver a technology solution on a par with the established Western manufacturers. The technology gap is expanding, with US industrial group GE, wind energy company Vestas, diversified technology group Siemens and other companies investing in improvements that increase their turbines’ availability and reliability.

“A technical fault leading to reduced availability presents a huge risk to a developer and can wipe out a large chunk of expected profits. A faultless operating record will have a posi- tive impact on project developers, who will be more confident in the quality of the Chinese turbines. But we need to [take into consideration] that it will take years to build this trust. We are witnessing Chinese wind turbine manufacturers taking the first steps in the right direction, although the government had to step in and set stricter regulations”, adds Bakhareva.

The State Electricity Regulatory Commission has released stricter technical regulations, especially for low-voltage ride-through (LVRT) reformation. Additionally, 18 industry standards were released in November last year by the National Bureau of Energy.

F&S states there are two immediate effects of the regulatory changes. Adding LVRT capability will increase the cost of the Chinese turbines. This, coupled with slower demand, will lead to a squeezing out of the marginal producers, who cannot afford to fit new equipment.

Thus, the domestic wind power manufacturing sector in China is poised for tough times, and consolidation may even change the positioning of the top five players.

Bakhareva explains that the wind power industry in established markets has moved beyond the frenzied initial stage, where the emphasis was placed on the maximum number of turbines installed.

The focus is now on increasing operating effi- ciency, resolving performance issues rapidly, having real-time control and visibility, and reduc- ing the maintenance time. Providing a compelling service solution is nearly as important as supplying best-in-class equipment, she says.

Quality after-sales services can easily add a few percentage points in efficiency gains, which result in a lower levelised cost of electricity. The Chinese manufacturers can undoubtedly deliver a cheaper wind turbine, which means lower capital expenditure; however, when an entire package is considered, they are still behind their Western counterparts.

“Even if a compelling service offering is developed in their domestic market, unfolding a large-scale after-service support in overseas markets will require a large initial investment. While Chinese wind turbine manufacturers are generously sponsored by the government, there are other priorities for them to address. It is unlikely they will be channelling significant funds into expanding their service offering in those markets, where they do not even sell much.

“Thus, established wind power markets in Europe and parts of the US will be hard to pene- trate for the Chinese. Certainly, a few odd orders can come through, but the Chinese presence is unlikely to reach the dominant scale of the solar energy industry,” she says.

Upcoming wind power markets, such as Central and Eastern Europe and Latin America, may find lower equipment costs attractive, espe- cially when coupled with a generous offer of providing project financing, says Bakhareva.

However, proven safety, quality, reliability and after-sales service may well tilt the scales in favour of Western wind turbine producers, even though the initial investment will have to be bigger, she concludes.