1 00:00:00,320 --> 00:00:02,760 Speaker 1: This is Tom Ownzuie and you're listening to Switched on 2 00:00:02,920 --> 00:00:06,640 Speaker 1: the BNF podcast. Chinese wind turbine manufacturers are expanding their 3 00:00:06,640 --> 00:00:10,360 Speaker 1: global footprint on a seemingly ever increasing scale, with manufacturers 4 00:00:10,400 --> 00:00:13,600 Speaker 1: like goldwind, Envision, ming Yang and Windy leveraging their cost 5 00:00:13,600 --> 00:00:17,520 Speaker 1: advantages to undercut US and European rivals. While lower equipment 6 00:00:17,520 --> 00:00:19,959 Speaker 1: prices may be a massive carrot for developing economies and 7 00:00:20,000 --> 00:00:23,880 Speaker 1: emerging markets, barriers to adoptions still exist with low brand awareness, 8 00:00:23,920 --> 00:00:27,080 Speaker 1: a limited overseas track record, and political risk, raising concerns 9 00:00:27,120 --> 00:00:30,800 Speaker 1: from buyers, lenders and insurers. As we discuss on today Show, 10 00:00:30,920 --> 00:00:33,680 Speaker 1: the Belton Road Initiative and other financial incentives may be 11 00:00:33,720 --> 00:00:36,320 Speaker 1: in place to help mitigate some of these potential stumbling blocks. 12 00:00:36,320 --> 00:00:39,040 Speaker 1: But just how fast is the Chinese turbine export market 13 00:00:39,080 --> 00:00:41,360 Speaker 1: expanding and how large an issue does it pose for 14 00:00:41,400 --> 00:00:44,519 Speaker 1: Western manufacturers. On today Show, I'm joined by BNF's head 15 00:00:44,520 --> 00:00:47,280 Speaker 1: of Wind, Ollie Metcalf, who shares some other research fund 16 00:00:47,320 --> 00:00:50,680 Speaker 1: in his team's recent report China wind Turbine Export Update 17 00:00:50,880 --> 00:00:53,840 Speaker 1: Momentum Builds, which BNF clients can find at BNF go 18 00:00:53,960 --> 00:00:57,040 Speaker 1: on the Bloomberg Terminal or on BNF dot Com. Now 19 00:00:57,240 --> 00:01:09,919 Speaker 1: onto the pod Olie. Thanks for joining today. It feels 20 00:01:09,920 --> 00:01:12,880 Speaker 1: like only yesterday that we were doing a podcast together 21 00:01:13,000 --> 00:01:15,440 Speaker 1: in this very room, and we were talking about some 22 00:01:15,520 --> 00:01:18,280 Speaker 1: of the global pictures in the wind industry. One of 23 00:01:18,280 --> 00:01:21,959 Speaker 1: the things we briefly touched on was Chinese turbine makers. 24 00:01:22,280 --> 00:01:25,640 Speaker 1: And I always have had this view, all this understanding 25 00:01:25,720 --> 00:01:28,440 Speaker 1: of like the world of wind being almost like two 26 00:01:28,480 --> 00:01:32,600 Speaker 1: parallel universes. There's China, where there's a big market for 27 00:01:32,720 --> 00:01:36,200 Speaker 1: wind serviced by Chinese turbine manufacturers, and then there's the 28 00:01:36,200 --> 00:01:40,160 Speaker 1: rest of the world serviced predominantly by Western turbine manufacturers, 29 00:01:40,160 --> 00:01:43,640 Speaker 1: and these parallel universes kind of never meet or intersect. 30 00:01:43,760 --> 00:01:46,240 Speaker 1: But from what I'm understanding from your team's latest research, 31 00:01:46,360 --> 00:01:49,480 Speaker 1: that's not really true anymore. Is that correct? 32 00:01:49,800 --> 00:01:52,279 Speaker 2: Well, I don't think it's ever been quite that clear cut, 33 00:01:52,440 --> 00:01:55,280 Speaker 2: but we've definitely started to see those two worlds blend 34 00:01:55,440 --> 00:01:58,000 Speaker 2: a lot more over the last few years. Part of 35 00:01:58,040 --> 00:02:00,920 Speaker 2: that is because what we've seen going on in these 36 00:02:01,000 --> 00:02:05,000 Speaker 2: Chinese turbine makers home market. So the price of Chinese 37 00:02:05,000 --> 00:02:08,600 Speaker 2: turbines has tumbled fifty seven percent since the first half 38 00:02:08,639 --> 00:02:12,400 Speaker 2: of twenty twenty, and that's put intense pressure on the 39 00:02:12,600 --> 00:02:15,720 Speaker 2: profit margins they're earning on turbine sales at home. So 40 00:02:15,760 --> 00:02:18,920 Speaker 2: there's been this big push for Chinese turbine makers to 41 00:02:19,000 --> 00:02:22,760 Speaker 2: start finding export contracts. Usually they can sell turbines for 42 00:02:22,840 --> 00:02:25,400 Speaker 2: higher prices or they can at home, and so we're 43 00:02:25,560 --> 00:02:28,480 Speaker 2: starting to see more and more orders signed and slowly 44 00:02:28,560 --> 00:02:32,520 Speaker 2: more and more commissioned turbines using Chinese turbine technologies on 45 00:02:32,560 --> 00:02:35,840 Speaker 2: projects around the world compared with with the last few years. 46 00:02:35,960 --> 00:02:38,360 Speaker 2: So we're really seeing this inflection point at the moment 47 00:02:38,560 --> 00:02:40,480 Speaker 2: in Chinese turbine sales around the world. 48 00:02:40,720 --> 00:02:44,600 Speaker 1: So which companies are we talking about here and which 49 00:02:44,680 --> 00:02:47,680 Speaker 1: markets are they selling to and what kind of volumes. 50 00:02:48,200 --> 00:02:50,679 Speaker 2: So the largest turbine maker in the world is a 51 00:02:50,760 --> 00:02:53,959 Speaker 2: Chinese company called Goldwind, and they're also the company with 52 00:02:54,360 --> 00:02:58,200 Speaker 2: the longest history actually exporting their products as well. So 53 00:02:58,520 --> 00:03:02,959 Speaker 2: historically they've installed turbines in the US, they've installed many 54 00:03:02,960 --> 00:03:06,080 Speaker 2: turbines in markets like Australia and Vietnam, and they're still 55 00:03:06,080 --> 00:03:08,880 Speaker 2: one of the biggest players signing orders and kind of 56 00:03:08,919 --> 00:03:12,880 Speaker 2: driving this export story from Chinese turbine makers. The company 57 00:03:12,919 --> 00:03:16,200 Speaker 2: that's doing best in terms of signing new orders for exports. 58 00:03:16,200 --> 00:03:19,080 Speaker 2: At the moment though, is the second largest turbine maker 59 00:03:19,080 --> 00:03:22,200 Speaker 2: in China, a company called Envision. In Vision until now 60 00:03:22,240 --> 00:03:25,200 Speaker 2: has mostly been focusing on Asian markets and markets in 61 00:03:25,200 --> 00:03:28,320 Speaker 2: the Middle East for their sales, but they've starting to 62 00:03:28,800 --> 00:03:32,880 Speaker 2: install more turbines. But they've actually signed a fantastic number 63 00:03:32,960 --> 00:03:36,520 Speaker 2: of new orders. So of the new international orders secured 64 00:03:36,560 --> 00:03:39,200 Speaker 2: by Chinese turbine makers that we've tracked over twenty twenty 65 00:03:39,200 --> 00:03:42,280 Speaker 2: three and twenty twenty four, in Vision represents eighty percent 66 00:03:42,320 --> 00:03:44,600 Speaker 2: of those, and a really strong market for them is India. 67 00:03:44,720 --> 00:03:48,400 Speaker 2: So they installed the local manufacturing facility in India. That 68 00:03:48,440 --> 00:03:51,080 Speaker 2: gives you a big advantage in India because you need 69 00:03:51,160 --> 00:03:54,080 Speaker 2: to manufacture the nassel, the kind of big box on 70 00:03:54,160 --> 00:03:57,360 Speaker 2: top of the turbine in India to have that turbine 71 00:03:57,440 --> 00:04:00,400 Speaker 2: approved by the government to be installed in India. So 72 00:04:00,440 --> 00:04:04,200 Speaker 2: having that local manufacturing facility has really given Envision the 73 00:04:04,600 --> 00:04:07,880 Speaker 2: edge in India. And so from a few years ago 74 00:04:08,000 --> 00:04:11,280 Speaker 2: when it was almost completely Western turbine makers like Siemens, 75 00:04:11,320 --> 00:04:16,280 Speaker 2: Gamesa like ge that dominated the Indian wind market, if 76 00:04:16,279 --> 00:04:18,760 Speaker 2: you look at the order signed last year, it was 77 00:04:18,839 --> 00:04:23,640 Speaker 2: completely local Indian turbine manufacturers and Chinese manufacturers and predominantly 78 00:04:23,680 --> 00:04:24,119 Speaker 2: in Vision. 79 00:04:24,480 --> 00:04:26,240 Speaker 1: You touched on some of the reasons why why this 80 00:04:26,279 --> 00:04:28,440 Speaker 1: is happening, and I want us to sort of maybe 81 00:04:28,560 --> 00:04:31,480 Speaker 1: explore this a little bit more. Companies like Goldwin and Envision. 82 00:04:31,480 --> 00:04:33,200 Speaker 1: I mean you may not even know the answer. I mean, 83 00:04:33,200 --> 00:04:36,160 Speaker 1: how long have those companies been doing their thing. It's 84 00:04:36,200 --> 00:04:38,120 Speaker 1: like more than a decade. 85 00:04:38,160 --> 00:04:40,720 Speaker 2: Yeah, more than a decade. Like I say, these were 86 00:04:40,720 --> 00:04:43,000 Speaker 2: the companies that were building some of the first turbines 87 00:04:43,120 --> 00:04:44,520 Speaker 2: in the Chinese wind market. 88 00:04:44,880 --> 00:04:46,840 Speaker 1: Yeah, because you know, I kind of imagine if I 89 00:04:47,080 --> 00:04:48,440 Speaker 1: think of this in just more of sort of a 90 00:04:48,440 --> 00:04:53,640 Speaker 1: macro abstract term, if you're like a Chinese wind turbine manufacturer, 91 00:04:53,680 --> 00:04:56,760 Speaker 1: say ten to fifteen years ago, then obviously, you know, 92 00:04:56,760 --> 00:04:59,240 Speaker 1: even if there's a global demand for wind turbines, you're 93 00:04:59,279 --> 00:05:01,479 Speaker 1: not gonna be able to scare up instantly to meet that. 94 00:05:01,520 --> 00:05:03,800 Speaker 1: And there's probably a big demand domestically, so you're going 95 00:05:03,839 --> 00:05:06,360 Speaker 1: to keep scaling and scaling and selling locally and selling 96 00:05:06,360 --> 00:05:09,200 Speaker 1: locally whilst that opportunity is always there, and you know, 97 00:05:09,240 --> 00:05:11,600 Speaker 1: scaling up as quickly as as you can. And is 98 00:05:11,640 --> 00:05:14,719 Speaker 1: this just simply a case that they've now just reached 99 00:05:14,720 --> 00:05:18,039 Speaker 1: that size where they've now outgrown their domestic market, and 100 00:05:18,120 --> 00:05:20,200 Speaker 1: everything you're saying around the price difference is, is that 101 00:05:20,320 --> 00:05:21,320 Speaker 1: just a reflection of that. 102 00:05:21,680 --> 00:05:25,640 Speaker 2: In terms of manufacturing capacity, they've definitely outgrown their local market. 103 00:05:26,040 --> 00:05:30,799 Speaker 2: Last time we tracked nassell manufacturing capacity, Chinese neceelle manufacturing 104 00:05:30,839 --> 00:05:35,039 Speaker 2: capacity in China was over double the demand in their 105 00:05:35,040 --> 00:05:38,560 Speaker 2: domestic market. So there's certainly a lot of spare manufacturing 106 00:05:38,560 --> 00:05:41,560 Speaker 2: capacity going to export to other markets. And you're right, 107 00:05:41,880 --> 00:05:45,039 Speaker 2: China is by far the biggest wind market globally, and 108 00:05:45,640 --> 00:05:49,080 Speaker 2: historically these turbine makers have been and still are to 109 00:05:49,120 --> 00:05:52,880 Speaker 2: a certain extent, very much occupied with serving that really 110 00:05:53,000 --> 00:05:57,120 Speaker 2: big domestic demand. But like I say, margins are solo 111 00:05:57,160 --> 00:05:59,680 Speaker 2: at home, and they've got this spare manufacturing capacity in 112 00:05:59,680 --> 00:06:01,760 Speaker 2: their home market, and so there are these kind of 113 00:06:01,800 --> 00:06:04,600 Speaker 2: other drivers that are pushing Chinese turbine makers to try 114 00:06:04,600 --> 00:06:07,560 Speaker 2: to export. And then, obviously, from the developers perspective, a 115 00:06:07,600 --> 00:06:11,800 Speaker 2: lot of these manufacturers selling Chinese machines are offering really 116 00:06:11,839 --> 00:06:16,039 Speaker 2: attractive prices at between fifteen to forty percent cheaper. We 117 00:06:16,120 --> 00:06:19,000 Speaker 2: found in a developer survey that we ran last year. 118 00:06:19,480 --> 00:06:22,000 Speaker 1: One of the things you mentioned there was that you know, 119 00:06:22,279 --> 00:06:25,039 Speaker 1: it's almost like the manufacturing capacity is double the needs 120 00:06:25,040 --> 00:06:27,599 Speaker 1: of the local market, which suggests to me that you know, 121 00:06:27,600 --> 00:06:30,200 Speaker 1: they've been at the point of having outgrown their local 122 00:06:30,240 --> 00:06:32,000 Speaker 1: market for a while, because I'm sure it wasn't just 123 00:06:32,040 --> 00:06:34,920 Speaker 1: in the last year they doubled their capacity. So you've 124 00:06:34,920 --> 00:06:38,000 Speaker 1: talked to why this is happening now, but why was 125 00:06:38,040 --> 00:06:39,360 Speaker 1: it not happening sooner? 126 00:06:39,720 --> 00:06:42,640 Speaker 2: Well, I think what differs around the wind industry is 127 00:06:42,720 --> 00:06:46,520 Speaker 2: compared with other clean tech manufacturing sectors, is it's a 128 00:06:46,520 --> 00:06:49,320 Speaker 2: lot more difficult to ship wind components around the world. 129 00:06:49,520 --> 00:06:52,200 Speaker 2: So some of the blades that are being installed on 130 00:06:52,240 --> 00:06:54,479 Speaker 2: offs your wind turbines are well over one hundred meters 131 00:06:54,520 --> 00:06:58,160 Speaker 2: long now, and so it doesn't make sense once exports 132 00:06:58,240 --> 00:07:01,279 Speaker 2: reach a certain level ton in new shipping these massive 133 00:07:01,320 --> 00:07:04,000 Speaker 2: components all over the world. So despite the fact that 134 00:07:04,000 --> 00:07:07,360 Speaker 2: some of these Chinese taboy makers have additional manufacturing capacity 135 00:07:07,360 --> 00:07:09,880 Speaker 2: at home, we're beginning to see them also try to 136 00:07:10,200 --> 00:07:13,880 Speaker 2: expand their manufacturing capacity in foreign markets as well. I 137 00:07:13,920 --> 00:07:18,400 Speaker 2: mentioned Envisions factory in India. Goldwind has actually bought a 138 00:07:18,440 --> 00:07:22,760 Speaker 2: manufacturing facility in Brazil and has started manufacturing turbines locally 139 00:07:22,840 --> 00:07:25,240 Speaker 2: there as well. And they're really starting to see their 140 00:07:25,440 --> 00:07:29,080 Speaker 2: sales increase in Latin American markets as well. So even 141 00:07:29,080 --> 00:07:33,240 Speaker 2: though we've got this kind of great manufacturing over capacity 142 00:07:33,560 --> 00:07:36,640 Speaker 2: for turbine manufacturers in China, it still doesn't mean that 143 00:07:36,640 --> 00:07:41,160 Speaker 2: they're not kind of having to increase their manufacturing capacity elsewhere. 144 00:07:41,560 --> 00:07:44,080 Speaker 1: That's so interesting, and I suppose this is a difference 145 00:07:44,120 --> 00:07:49,200 Speaker 1: between some other technologies that are more modular, like solar batteries, 146 00:07:49,400 --> 00:07:54,360 Speaker 1: even cars or components for cars like batteries, where you 147 00:07:54,400 --> 00:07:57,200 Speaker 1: would expect if Chinese companies are dominant, then that means 148 00:07:57,240 --> 00:08:00,320 Speaker 1: that most of that manufacturing and the jobs associated it 149 00:08:00,560 --> 00:08:03,800 Speaker 1: will be concentrated in China. But because of this fact 150 00:08:03,800 --> 00:08:07,680 Speaker 1: that winds so much harder to ship, does this not 151 00:08:07,720 --> 00:08:10,640 Speaker 1: necessarily mean a concentration of all the jobs and economic 152 00:08:10,680 --> 00:08:13,679 Speaker 1: opportunity coming to China? Is just something where Chinese companies 153 00:08:13,680 --> 00:08:16,080 Speaker 1: have technical expertise that they're exporting to the rest of 154 00:08:16,120 --> 00:08:16,480 Speaker 1: the world. 155 00:08:16,640 --> 00:08:20,560 Speaker 2: Yeah, I think the distribution of jobs is likely to 156 00:08:20,600 --> 00:08:24,000 Speaker 2: be a lot more geographically diverse arising from some of 157 00:08:24,040 --> 00:08:26,040 Speaker 2: these orders. I think one of the key barriers and 158 00:08:26,080 --> 00:08:28,080 Speaker 2: another one of the reasons that we haven't seen more 159 00:08:28,360 --> 00:08:33,040 Speaker 2: Chinese turbine sold abroad recently has been around developers' concerns 160 00:08:33,040 --> 00:08:36,640 Speaker 2: around real commitment to the market. Often the turbine sale 161 00:08:36,840 --> 00:08:39,800 Speaker 2: is accompanied by a really long term operations and maintenance 162 00:08:39,840 --> 00:08:43,200 Speaker 2: agreement that can be ten, twenty, sometimes even more years, 163 00:08:43,360 --> 00:08:46,319 Speaker 2: and so developers are worried not just about signing that 164 00:08:46,480 --> 00:08:50,600 Speaker 2: contract for the cheapest price, but also feeling comfortable that 165 00:08:51,280 --> 00:08:53,520 Speaker 2: the company they're dealing with will also be in the 166 00:08:53,520 --> 00:08:55,839 Speaker 2: market in ten years and still delivering those O and 167 00:08:55,960 --> 00:08:58,120 Speaker 2: M services all that time down the road. I think 168 00:08:58,160 --> 00:08:59,840 Speaker 2: one of the key things that Chinese turbo makers have 169 00:08:59,840 --> 00:09:02,240 Speaker 2: been doing to kind of prove that market commitment have 170 00:09:02,400 --> 00:09:06,640 Speaker 2: been to set up local manufacturing facilities in some cases, 171 00:09:06,679 --> 00:09:08,680 Speaker 2: but the first step for many of these companies is 172 00:09:08,679 --> 00:09:10,640 Speaker 2: to set up local O and M teams. And you 173 00:09:10,679 --> 00:09:14,520 Speaker 2: speak to several of these Chinese manufacturers and they're trying 174 00:09:14,559 --> 00:09:17,600 Speaker 2: to hire locally and trying to train people locally, so 175 00:09:17,720 --> 00:09:20,360 Speaker 2: minimize a number of Chinese nationals that are sitting in 176 00:09:20,360 --> 00:09:24,000 Speaker 2: those O and M teams around the world and trying 177 00:09:24,040 --> 00:09:28,040 Speaker 2: to deliver that local market commitment, but also the local 178 00:09:28,080 --> 00:09:30,679 Speaker 2: economic benefit that the wind industry can bring in these 179 00:09:30,679 --> 00:09:31,400 Speaker 2: foreign markets. 180 00:09:31,760 --> 00:09:35,200 Speaker 1: And it really sounds, you know, When I'm hearing all this, 181 00:09:35,280 --> 00:09:38,199 Speaker 1: I'm like, what's not to love? You know, it sounds 182 00:09:38,240 --> 00:09:40,600 Speaker 1: like a good news story. Last time you were on 183 00:09:40,640 --> 00:09:42,199 Speaker 1: the podcast, I remember giving you a bit of a 184 00:09:42,240 --> 00:09:45,040 Speaker 1: hard time. Basically I said that wind wasn't pulling its 185 00:09:45,080 --> 00:09:48,120 Speaker 1: weight in the global energy transition, was falling short of 186 00:09:48,160 --> 00:09:52,040 Speaker 1: its potential all sorts of barriers. So this development is 187 00:09:52,040 --> 00:09:53,400 Speaker 1: it good for the industry? Do you think it could 188 00:09:53,400 --> 00:09:56,640 Speaker 1: help change that sort of picture of maybe wind not 189 00:09:56,760 --> 00:09:58,160 Speaker 1: quite fulfilling its potential. 190 00:09:58,760 --> 00:10:02,520 Speaker 2: In many cases, it's accelerating the energy transition, particularly in 191 00:10:02,559 --> 00:10:07,400 Speaker 2: developing markets. So we're seeing projects spring up in markets 192 00:10:07,440 --> 00:10:10,800 Speaker 2: sort of never built a wind farm before starting to 193 00:10:10,840 --> 00:10:14,200 Speaker 2: build these wind farms with really cheap capital costs because 194 00:10:14,240 --> 00:10:17,920 Speaker 2: they're using Chinese technology. Often it's also a big state 195 00:10:17,960 --> 00:10:20,400 Speaker 2: owned Chinese developer that will be building the projects in 196 00:10:20,440 --> 00:10:23,559 Speaker 2: these markets, and they bring the suppliers that they're used 197 00:10:23,559 --> 00:10:26,280 Speaker 2: to working within their home market to these foreign markets. 198 00:10:26,520 --> 00:10:29,360 Speaker 2: So we saw a couple of really big projects, for 199 00:10:29,400 --> 00:10:32,880 Speaker 2: example in Uzbekistan in twenty twenty four come online and 200 00:10:32,920 --> 00:10:37,559 Speaker 2: those will be using Chinese machines. Countries like Georgia, some 201 00:10:38,160 --> 00:10:41,760 Speaker 2: countries in Africa are really switching towards Chinese machines or 202 00:10:41,760 --> 00:10:45,079 Speaker 2: in some cases building their first projects at cheaper prices. 203 00:10:45,240 --> 00:10:48,280 Speaker 2: So in many markets around the world, particularly those that 204 00:10:48,360 --> 00:10:53,520 Speaker 2: are less interested in the competitive dynamics and geopolitics surrounding 205 00:10:53,520 --> 00:10:56,520 Speaker 2: whether you source your equipment from a US or European 206 00:10:56,559 --> 00:11:00,880 Speaker 2: country versus China, they're really benefiting from the cheaper prices. 207 00:11:01,160 --> 00:11:03,920 Speaker 2: And like I say, that's what's kind of delivered this 208 00:11:04,120 --> 00:11:09,680 Speaker 2: inflection point in Chinese turbine installations and also orders we're 209 00:11:09,840 --> 00:11:12,680 Speaker 2: orders we're seeing. So last year we saw a record 210 00:11:12,920 --> 00:11:16,760 Speaker 2: commissioning of Chinese turbines around the world at around two 211 00:11:16,800 --> 00:11:19,720 Speaker 2: point two gigawatts, but we also tracked around five point 212 00:11:19,720 --> 00:11:23,120 Speaker 2: three gigawatts of Chinese turbine orders. So you can see 213 00:11:23,160 --> 00:11:26,040 Speaker 2: over the next couple of years the number of machines 214 00:11:26,040 --> 00:11:28,320 Speaker 2: that are going to come online is is going to 215 00:11:28,360 --> 00:11:29,680 Speaker 2: start ramping up as well. 216 00:11:30,120 --> 00:11:33,080 Speaker 1: So there is a lot of potential upsides, or maybe 217 00:11:33,120 --> 00:11:36,560 Speaker 1: not even potential upsides that we're already seeing, but maybe 218 00:11:36,559 --> 00:11:39,720 Speaker 1: we talk about, you know, downsides. And obviously you know 219 00:11:39,760 --> 00:11:41,960 Speaker 1: I painted this picture at the start of these parallel universe, 220 00:11:42,000 --> 00:11:43,680 Speaker 1: which you know, you Julie told me was wrong. So 221 00:11:44,000 --> 00:11:49,040 Speaker 1: thanks for that you know, but if we just hold 222 00:11:49,080 --> 00:11:51,000 Speaker 1: on to that, in this parallel universe that was the 223 00:11:51,040 --> 00:11:53,319 Speaker 1: sort of the Western market with Western manufacturers, you had 224 00:11:53,320 --> 00:11:57,280 Speaker 1: companies like Vesta's, Jeevanova, Zieman's dominant. So what does this 225 00:11:57,360 --> 00:11:58,000 Speaker 1: mean for them. 226 00:11:58,200 --> 00:12:00,600 Speaker 2: Well, in a couple of cases is it means that 227 00:12:00,600 --> 00:12:05,160 Speaker 2: they're significantly changing the footprint, the kind of their footprints, 228 00:12:05,200 --> 00:12:08,360 Speaker 2: the markets they're looking at to sell turbines too. So 229 00:12:08,480 --> 00:12:12,560 Speaker 2: we've seen several of these Western companies leave markets. One 230 00:12:12,600 --> 00:12:16,560 Speaker 2: market is Brazil, where g and Semans can may send. Also, 231 00:12:16,640 --> 00:12:19,920 Speaker 2: Nordics have significantly rained back their plans to sell turbines 232 00:12:19,960 --> 00:12:22,520 Speaker 2: in Brazil or left the market completely. And I think 233 00:12:22,520 --> 00:12:25,320 Speaker 2: in many of these markets that again are happy to 234 00:12:25,360 --> 00:12:29,920 Speaker 2: be installing Chinese machines and working with Chinese companies. Then 235 00:12:30,160 --> 00:12:34,560 Speaker 2: Western manufacturers in many cases just can't compete two of 236 00:12:34,600 --> 00:12:37,840 Speaker 2: the biggest markets around the world for wind energy, the 237 00:12:38,000 --> 00:12:41,000 Speaker 2: US and Europe. I says one market is actually many 238 00:12:41,000 --> 00:12:44,520 Speaker 2: different markets because the wind industry and the drivers are 239 00:12:44,600 --> 00:12:47,160 Speaker 2: very different in lots of different European countries. But two 240 00:12:47,160 --> 00:12:49,960 Speaker 2: of the biggest markets in the world aren't really buying 241 00:12:50,080 --> 00:12:55,280 Speaker 2: Chinese turbines, and due to tariffs or political barriers, we're 242 00:12:55,320 --> 00:12:58,520 Speaker 2: not seeing sales, and so those are markets where some 243 00:12:58,559 --> 00:13:01,800 Speaker 2: of those Western companies like Vested, like Jievanova are able 244 00:13:01,840 --> 00:13:06,000 Speaker 2: to sign higher price contracts and deliver some of the 245 00:13:06,080 --> 00:13:09,839 Speaker 2: volume that they're losing in, especially some emerging markets that 246 00:13:09,920 --> 00:13:11,840 Speaker 2: they were dominating in the past. 247 00:13:12,160 --> 00:13:15,280 Speaker 1: I mean on this point about how Western manufacturers can 248 00:13:15,320 --> 00:13:19,400 Speaker 1: cope with this. On our podcast on Latin, there was 249 00:13:19,440 --> 00:13:21,920 Speaker 1: this sense of a changing of the guard moment when 250 00:13:22,160 --> 00:13:25,880 Speaker 1: BYD the Chinese auto manufacturer, took over a Ford plant 251 00:13:25,920 --> 00:13:29,400 Speaker 1: in Brazil and you just mentioned that, you know, Goldwind 252 00:13:29,400 --> 00:13:32,480 Speaker 1: have taken over a Brazilian wind turbine factory from a 253 00:13:32,559 --> 00:13:35,680 Speaker 1: General Electric. Now in the auto industry, there's this sort 254 00:13:35,720 --> 00:13:38,920 Speaker 1: of sense of pushback from a lot of Western governments, 255 00:13:39,240 --> 00:13:41,560 Speaker 1: particularly the US, or at least I'm more familiar with 256 00:13:41,559 --> 00:13:43,400 Speaker 1: what's happening in the US there because this is where 257 00:13:43,440 --> 00:13:46,439 Speaker 1: I'm based, you know, trying to fight for the domestic 258 00:13:46,640 --> 00:13:48,760 Speaker 1: auto industry one way or the other, and you know, 259 00:13:48,880 --> 00:13:52,280 Speaker 1: different administrations have different strategies. But do you think we 260 00:13:52,400 --> 00:13:56,520 Speaker 1: might see something similar for Western turbine makers as some 261 00:13:56,559 --> 00:14:00,480 Speaker 1: sort of support or assistance to help them compete against 262 00:14:00,559 --> 00:14:03,480 Speaker 1: Chinese manufacturers so that it doesn't become a sort of 263 00:14:03,600 --> 00:14:04,920 Speaker 1: global Chinese monopoly. 264 00:14:05,400 --> 00:14:10,000 Speaker 2: Well, there's already been some moves to protect the industry 265 00:14:10,360 --> 00:14:13,120 Speaker 2: in Europe in particular. So some of the biggest winter 266 00:14:13,240 --> 00:14:16,200 Speaker 2: ber makers in the world are European. So Vestis is 267 00:14:16,200 --> 00:14:20,760 Speaker 2: a Danish company, Siemens Energy is a German company. So 268 00:14:21,440 --> 00:14:25,320 Speaker 2: I think Europe is looking at this industry where it 269 00:14:25,480 --> 00:14:28,400 Speaker 2: has been a clear leader in the past, and it 270 00:14:28,440 --> 00:14:30,400 Speaker 2: doesn't want that industry to go the same way as, 271 00:14:30,440 --> 00:14:33,040 Speaker 2: for example, solar manufacturing, where Europe used to have a 272 00:14:33,040 --> 00:14:37,120 Speaker 2: significant footprint and doesn't so much today. So a couple 273 00:14:37,120 --> 00:14:40,000 Speaker 2: of years ago, the EU announced a Wind Power Action 274 00:14:40,120 --> 00:14:43,280 Speaker 2: Plan to provide support for its wind industry, so laying 275 00:14:43,280 --> 00:14:46,960 Speaker 2: out a number of actions to ease the challenges facing 276 00:14:47,000 --> 00:14:48,880 Speaker 2: the sector. And one of the things that the package 277 00:14:48,920 --> 00:14:53,040 Speaker 2: suggested was that the EU could use trade defense instruments 278 00:14:53,080 --> 00:14:56,560 Speaker 2: if it found that foreign companies had been unfairly subsidized. 279 00:14:56,760 --> 00:15:01,000 Speaker 2: That kind of raised the potential of tariffs. And there's 280 00:15:01,200 --> 00:15:05,440 Speaker 2: a peaceful legislation called the Foreign Subsidies Regulation that has 281 00:15:05,720 --> 00:15:09,200 Speaker 2: limited the success of Chinese turbine makers in public tenders, 282 00:15:09,360 --> 00:15:12,880 Speaker 2: basically because the EU has started investigations into Chinese turbine 283 00:15:12,880 --> 00:15:16,320 Speaker 2: providers to certain projects to determine the extent to which 284 00:15:16,320 --> 00:15:19,680 Speaker 2: they've benefited from non EU government subsidies. So in some 285 00:15:19,720 --> 00:15:21,840 Speaker 2: of these cases, Chinese turbine makers are having to open 286 00:15:21,880 --> 00:15:26,240 Speaker 2: their books to the EU to basically establish how much 287 00:15:26,600 --> 00:15:30,400 Speaker 2: subsidies they've received from the Chinese governments. And in some 288 00:15:30,520 --> 00:15:33,080 Speaker 2: other public tenders, there was a tender for a railway 289 00:15:33,320 --> 00:15:35,720 Speaker 2: in Eastern Europe that was won by a Chinese company, 290 00:15:35,800 --> 00:15:37,920 Speaker 2: and when asked to provide all that data and all 291 00:15:37,960 --> 00:15:40,720 Speaker 2: that information to the EU, the company just decided it 292 00:15:40,720 --> 00:15:43,240 Speaker 2: it wouldn't continue with the tender and it dropped the contract. 293 00:15:43,440 --> 00:15:45,920 Speaker 2: It's just very unclear at the moment in the EU 294 00:15:46,200 --> 00:15:49,120 Speaker 2: which projects are going to be investigated, which companies are 295 00:15:49,160 --> 00:15:51,280 Speaker 2: going to be investigated, And so that means if you're 296 00:15:51,360 --> 00:15:53,800 Speaker 2: a Chinese turbine maker, it makes it very difficult to 297 00:15:54,040 --> 00:15:57,200 Speaker 2: speak with your customers and let them know exactly what 298 00:15:57,240 --> 00:15:59,880 Speaker 2: could or what could not happen if they're considering some 299 00:16:00,240 --> 00:16:01,880 Speaker 2: one of these deals. So I was in Beijing at 300 00:16:01,920 --> 00:16:02,920 Speaker 2: the end of last year, and I was I was 301 00:16:02,920 --> 00:16:05,080 Speaker 2: speaking to some Chinese turbine makers and they were saying, 302 00:16:05,120 --> 00:16:08,040 Speaker 2: it's that uncertainty in the market that's really kind of 303 00:16:08,120 --> 00:16:10,400 Speaker 2: killing deals in the EU at the moment. If there 304 00:16:10,440 --> 00:16:12,680 Speaker 2: was just a hard tariff, they said that they prefer 305 00:16:12,720 --> 00:16:14,960 Speaker 2: a hard tariff because then they can look at their costs, 306 00:16:15,000 --> 00:16:16,320 Speaker 2: they can look at the price that they're going to 307 00:16:16,400 --> 00:16:18,840 Speaker 2: receive for these turbines and work out with the tariff 308 00:16:18,960 --> 00:16:21,280 Speaker 2: is it's still going to be worth signing that contract. 309 00:16:21,360 --> 00:16:23,200 Speaker 2: But at the moment, they're customers are nervous to sign 310 00:16:23,200 --> 00:16:26,280 Speaker 2: these deals because they're kind of foreign subsitas. Regulation is 311 00:16:26,280 --> 00:16:28,880 Speaker 2: a little bit unclear about how it's going to be applied, 312 00:16:29,040 --> 00:16:31,480 Speaker 2: and they're unclear on what the results of some of 313 00:16:31,480 --> 00:16:34,240 Speaker 2: these investigations could be. And so that kind of political 314 00:16:34,320 --> 00:16:36,440 Speaker 2: risk and trade barriers is one of the key things 315 00:16:36,480 --> 00:16:39,880 Speaker 2: that are stopping Chinese turbine makers making more sales in Europe, 316 00:16:39,880 --> 00:16:42,400 Speaker 2: and that's benefiting those Western players at the moment. 317 00:16:42,640 --> 00:16:43,960 Speaker 1: One of the things that it makes me want to so, 318 00:16:44,040 --> 00:16:46,240 Speaker 1: I mean, we see in Europe there's a huge amount 319 00:16:46,240 --> 00:16:49,360 Speaker 1: of uncertainty if you're a Chinese turbine manufacturer. In the 320 00:16:49,480 --> 00:16:52,840 Speaker 1: US right now, there's just uncertainty around wind full stop. 321 00:16:53,000 --> 00:16:56,240 Speaker 1: And even if the market does kind of make it 322 00:16:56,280 --> 00:16:58,200 Speaker 1: through I would imagine there's still going to be some 323 00:16:58,360 --> 00:17:01,840 Speaker 1: kind of similar situation. So that's the EU and the US. 324 00:17:02,120 --> 00:17:04,879 Speaker 1: I don't imagine anyone else in the world. I mean India, 325 00:17:04,920 --> 00:17:07,760 Speaker 1: another major market, seems to have found an equilibrium with 326 00:17:07,880 --> 00:17:11,439 Speaker 1: local manufacturers and Chinese manufacturers. So it's really that the 327 00:17:11,440 --> 00:17:13,720 Speaker 1: EU and the US might be shutting off. I mean, 328 00:17:13,880 --> 00:17:16,840 Speaker 1: does that really matter right now if you're a Chinese manufacturer, 329 00:17:16,840 --> 00:17:19,919 Speaker 1: Given like there's the rest of the world is open 330 00:17:20,000 --> 00:17:23,480 Speaker 1: for business and receptive to these turbines, is it really 331 00:17:23,480 --> 00:17:25,399 Speaker 1: going to harm them that much? Is it really the 332 00:17:25,480 --> 00:17:28,439 Speaker 1: case that there's maybe a sort of slightly isolationist thing 333 00:17:28,480 --> 00:17:31,720 Speaker 1: where Europe and maybe the US will kind of have 334 00:17:31,840 --> 00:17:34,760 Speaker 1: their own little industry at maybe a higher cost to 335 00:17:34,760 --> 00:17:38,800 Speaker 1: support local companies, but the Chinese manufacturers will still have 336 00:17:38,880 --> 00:17:40,720 Speaker 1: plenty of pie left over for them. 337 00:17:40,800 --> 00:17:43,320 Speaker 2: Yeah. Well, mayby be looking at those two separate worlds again, 338 00:17:43,400 --> 00:17:48,160 Speaker 2: But the world supplied by the Chinese manufacturers has drastically increased, 339 00:17:48,200 --> 00:17:50,600 Speaker 2: because if you look at the numbers, then that's certainly 340 00:17:50,640 --> 00:17:54,960 Speaker 2: playing out. So Chinese Taiwian manufacturers orders have been shooting up. 341 00:17:55,119 --> 00:17:58,080 Speaker 2: Like I said, we tracked five point three gigwats of 342 00:17:58,320 --> 00:18:01,240 Speaker 2: firm orders that were signed by Chinese turbine makers last 343 00:18:01,320 --> 00:18:03,399 Speaker 2: year when we actually spoke with these players, they actually 344 00:18:03,400 --> 00:18:06,399 Speaker 2: claimed an extra twenty one point two gigwats of orders. 345 00:18:06,480 --> 00:18:08,440 Speaker 2: We're still in the process of working out whether those 346 00:18:08,440 --> 00:18:10,720 Speaker 2: are firm deals or whether those are kind of conditional 347 00:18:10,760 --> 00:18:13,920 Speaker 2: agreements or preferred supplier agreements, so they might not be 348 00:18:14,080 --> 00:18:16,119 Speaker 2: locked in, but it goes to show the kind of 349 00:18:16,200 --> 00:18:20,040 Speaker 2: volume that these Chinese turbine makers are beginning to realize 350 00:18:20,080 --> 00:18:22,679 Speaker 2: in the conversations and the deals they're signing around the world. 351 00:18:22,920 --> 00:18:25,960 Speaker 2: So for the moment, there's plenty of growth out there 352 00:18:26,000 --> 00:18:28,720 Speaker 2: for these Chinese turbine makers, despite the fact that they 353 00:18:28,720 --> 00:18:33,080 Speaker 2: still represent a kind of sliver of the EU US market. 354 00:18:33,320 --> 00:18:35,399 Speaker 1: I mean coming at it from a slightly different angle, 355 00:18:35,440 --> 00:18:37,960 Speaker 1: because I can see, for a Chinese turbine manufacturer, yeah, 356 00:18:38,000 --> 00:18:40,199 Speaker 1: there's the world as their oyster right now. But the 357 00:18:40,280 --> 00:18:43,200 Speaker 1: US and the EU may only be a fraction of 358 00:18:43,240 --> 00:18:46,359 Speaker 1: the overall market for wind turbines, but they are more 359 00:18:46,400 --> 00:18:49,520 Speaker 1: than just a fraction of global emissions. And so there's 360 00:18:49,560 --> 00:18:52,160 Speaker 1: this other question of you know, what is best for 361 00:18:52,520 --> 00:18:57,520 Speaker 1: bringing emissions down, and the CEO of French turbine manufacturer Neo, 362 00:18:57,640 --> 00:19:00,880 Speaker 1: and in an investigle recently, they mentioned that they're open 363 00:19:00,920 --> 00:19:04,000 Speaker 1: to Chinese turbine manufacturers and they spoke a little bit 364 00:19:04,080 --> 00:19:07,720 Speaker 1: to you know, maybe this is needed to break what 365 00:19:07,800 --> 00:19:12,720 Speaker 1: they termed as an oligopoly of the Western manufacturers, and 366 00:19:12,800 --> 00:19:15,600 Speaker 1: so I suppose my question is, is this, you know, 367 00:19:15,720 --> 00:19:20,720 Speaker 1: a necessary development to really spur the wind market in 368 00:19:20,720 --> 00:19:22,960 Speaker 1: those markets that may not be as open to US 369 00:19:22,960 --> 00:19:25,600 Speaker 1: and EU manufacturers, but at least the threat of these 370 00:19:25,680 --> 00:19:29,520 Speaker 1: Chinese turbine manufacturers might force prices down for wind turbines. 371 00:19:29,600 --> 00:19:31,120 Speaker 1: Is that something that we could see happening. 372 00:19:31,280 --> 00:19:34,439 Speaker 2: We've certainly seen many developers, not just the one you mentioned, 373 00:19:34,480 --> 00:19:37,480 Speaker 2: but developers around the world say that they're open to 374 00:19:37,960 --> 00:19:43,240 Speaker 2: assigning agreements and securing turbines from Chinese companies, some really 375 00:19:43,280 --> 00:19:46,920 Speaker 2: big players of the European wind power industry, particularly offshore. 376 00:19:47,000 --> 00:19:49,520 Speaker 2: If you look at the offshore wind industry outside of China, 377 00:19:49,600 --> 00:19:53,720 Speaker 2: it's really only served by three major players. So that's Vestis, 378 00:19:53,800 --> 00:19:56,760 Speaker 2: that's Semen's Energy, and that's Gee even over it's a 379 00:19:56,840 --> 00:20:00,840 Speaker 2: very concentrated market. Gee even said amidst some issues around 380 00:20:00,840 --> 00:20:02,840 Speaker 2: profitability of some of the contracts they've signed in the 381 00:20:02,880 --> 00:20:05,000 Speaker 2: past that they're going to pull back from the offshore 382 00:20:05,040 --> 00:20:07,399 Speaker 2: wind market and hold off signing new orders at the moment. 383 00:20:07,560 --> 00:20:10,919 Speaker 2: So there aren't many options for developers out there today, 384 00:20:11,000 --> 00:20:15,439 Speaker 2: particularly in offshore wind, and so the potential entry of 385 00:20:15,720 --> 00:20:18,840 Speaker 2: new players into those markets, particularly new players that are 386 00:20:19,000 --> 00:20:22,639 Speaker 2: offering really attractive prices, you can see why developers in 387 00:20:22,680 --> 00:20:26,120 Speaker 2: Europe are interested as well. So an example is for RWE, 388 00:20:26,280 --> 00:20:29,720 Speaker 2: a big German utility, sent a delegation to China to 389 00:20:30,560 --> 00:20:33,199 Speaker 2: meet with a load of load of turbine makers understand 390 00:20:33,359 --> 00:20:36,760 Speaker 2: their technology, to try and kind of better understand the 391 00:20:37,200 --> 00:20:41,680 Speaker 2: various technological characteristics the risks perhaps that come with buying 392 00:20:41,880 --> 00:20:45,600 Speaker 2: these machines. But yeah, there are many European developers that 393 00:20:45,600 --> 00:20:47,800 Speaker 2: are kind of flirting with Chinese technology at the moment, 394 00:20:48,080 --> 00:20:50,479 Speaker 2: given that they're purchasing from a market which is very 395 00:20:50,520 --> 00:20:52,600 Speaker 2: concentrated around two or three players at the moment. 396 00:20:53,200 --> 00:20:56,240 Speaker 1: So in terms of offshore wind, is it the same manufacturers, 397 00:20:56,240 --> 00:20:59,480 Speaker 1: say Goldwyn and Vision who are competing from China. 398 00:21:00,080 --> 00:21:03,520 Speaker 2: Actually there's a company called Minyang which is really targeting 399 00:21:03,720 --> 00:21:07,439 Speaker 2: the offshore wind sector. So while Goldwind and Envision have 400 00:21:07,520 --> 00:21:11,120 Speaker 2: sold a few turbines that have been installed offshore, particularly 401 00:21:11,160 --> 00:21:13,879 Speaker 2: in Vietnam where they've been building near shore projects, so 402 00:21:14,040 --> 00:21:18,040 Speaker 2: projects typically using onshore turbines but built very close to 403 00:21:17,680 --> 00:21:21,479 Speaker 2: the shore, but offshore. Min Yang is really targeting some 404 00:21:21,560 --> 00:21:25,800 Speaker 2: of the big European projects that are being installed today 405 00:21:26,160 --> 00:21:28,480 Speaker 2: where kind of the largest scale offshore wind projects in 406 00:21:28,480 --> 00:21:31,000 Speaker 2: the world are currently being built, and they're doing that 407 00:21:31,040 --> 00:21:34,920 Speaker 2: by really ramping up their plans for technology scale. So 408 00:21:35,200 --> 00:21:39,159 Speaker 2: Minyang currently offers a turbine that's around eighteen megawats, and 409 00:21:39,200 --> 00:21:42,400 Speaker 2: that's larger than any of the turbines that is commercially 410 00:21:42,400 --> 00:21:45,680 Speaker 2: available at the moment from Western turbine makers, and that's 411 00:21:45,680 --> 00:21:49,120 Speaker 2: starting to turn some heads in the European offshore wind industry. 412 00:21:49,560 --> 00:21:54,479 Speaker 2: So a German developer called Lukskara last year signed a 413 00:21:54,600 --> 00:21:58,040 Speaker 2: two hundred and seventy megawat turbine supply contract with Minyang 414 00:21:58,119 --> 00:22:01,840 Speaker 2: for their Waacant project in Germany, and that's set to 415 00:22:01,960 --> 00:22:06,199 Speaker 2: use Mnyang's eighteen megawatt turbines. So we're beginning to see 416 00:22:06,520 --> 00:22:10,600 Speaker 2: the first kind of iteration of maybe the big incumbent 417 00:22:10,640 --> 00:22:14,240 Speaker 2: two or three offshore wind turbine manufacturers in Europe. Start 418 00:22:14,280 --> 00:22:16,919 Speaker 2: to see some Chinese competition. I think a lot of 419 00:22:16,920 --> 00:22:20,000 Speaker 2: developers are watching to see how that deal progresses, whether 420 00:22:20,240 --> 00:22:24,800 Speaker 2: the EU raises objections, how those turbines operate offshore, because 421 00:22:24,800 --> 00:22:29,280 Speaker 2: there's very little operational track record for Chinese offshore wind 422 00:22:29,280 --> 00:22:32,719 Speaker 2: turbines outside of their home market, and so these pathfinder 423 00:22:32,760 --> 00:22:35,000 Speaker 2: deals are going to be crucial to see the kind 424 00:22:35,000 --> 00:22:37,960 Speaker 2: of uptake that they'll get on a wider basis across 425 00:22:38,000 --> 00:22:40,760 Speaker 2: the offshore wind industry, particularly in Europe where so much 426 00:22:40,760 --> 00:22:41,879 Speaker 2: build has happened in the past. 427 00:22:42,560 --> 00:22:46,600 Speaker 1: Generally speaking, obviously there's a lot of momentum and clear 428 00:22:46,760 --> 00:22:51,639 Speaker 1: advantages currently that favor Chinese turbine manufacturers. Generally speaking, what 429 00:22:51,800 --> 00:22:52,800 Speaker 1: barriers do they face? 430 00:22:53,119 --> 00:22:56,040 Speaker 2: Well, yeah, given the kind of cheaper pricing that some 431 00:22:56,119 --> 00:22:59,720 Speaker 2: of these manufacturers are offering. We were asking developers in 432 00:22:59,720 --> 00:23:02,880 Speaker 2: our a what stopped the faster uptake of these machines, 433 00:23:02,960 --> 00:23:04,640 Speaker 2: and there are a few different things that came up. 434 00:23:05,080 --> 00:23:08,080 Speaker 2: So one of them was just lower brand awareness. So 435 00:23:08,160 --> 00:23:10,400 Speaker 2: I would say most developers around the world know who 436 00:23:10,720 --> 00:23:13,840 Speaker 2: Goldwind is. They also probably have heard of Envisioned before. 437 00:23:13,880 --> 00:23:16,080 Speaker 2: But there are some other Chinese turbine makers that are 438 00:23:16,080 --> 00:23:19,040 Speaker 2: trying to sell turbines around the world that are less 439 00:23:19,040 --> 00:23:20,960 Speaker 2: well known. They may be very well known and have 440 00:23:21,160 --> 00:23:24,719 Speaker 2: huge order books in China, but companies like Windy, like 441 00:23:24,800 --> 00:23:28,320 Speaker 2: Sanny are just starting to try and accelerate their exports 442 00:23:28,320 --> 00:23:33,040 Speaker 2: of their turbines. But because many international developers prioritize proven 443 00:23:33,119 --> 00:23:37,880 Speaker 2: reliability and an operational record for the machines that they procure, 444 00:23:38,119 --> 00:23:39,840 Speaker 2: it takes a bit of a leap of faith in 445 00:23:39,960 --> 00:23:42,880 Speaker 2: order to buy some of these kind of machines from 446 00:23:42,960 --> 00:23:45,560 Speaker 2: lesser known brands. So that kind of lower brand awareness 447 00:23:45,680 --> 00:23:48,800 Speaker 2: provides a barrier in some markets. I mentioned market commitments, 448 00:23:49,040 --> 00:23:51,880 Speaker 2: So most wind filem owners plan to operate their projects 449 00:23:51,880 --> 00:23:54,040 Speaker 2: for twenty five to thirty years, so you really want 450 00:23:54,040 --> 00:23:56,000 Speaker 2: to know that that company is still going to be 451 00:23:56,040 --> 00:23:59,359 Speaker 2: around to potentially service your machines twenty years down the road, 452 00:23:59,560 --> 00:24:02,040 Speaker 2: and so kind of really demonstrating that they're in the 453 00:24:02,080 --> 00:24:04,640 Speaker 2: market to stay is something crucial for some of these 454 00:24:04,760 --> 00:24:07,919 Speaker 2: Chinese turbine makers in order to make more sales. Also, 455 00:24:08,280 --> 00:24:12,640 Speaker 2: we've seen some financing and insurance barriers, So some financiers, 456 00:24:12,760 --> 00:24:16,320 Speaker 2: some insurers are less familiar with these Chinese turbines, and 457 00:24:16,359 --> 00:24:18,760 Speaker 2: so they've been a little bit more reluctant to lend 458 00:24:18,840 --> 00:24:22,880 Speaker 2: to these projects, to ensure these projects using lesser known 459 00:24:23,080 --> 00:24:26,840 Speaker 2: machines that historically in some cases haven't been certified by 460 00:24:27,040 --> 00:24:31,480 Speaker 2: a big international certification agency. We actually at Bloomberg NIF's 461 00:24:31,680 --> 00:24:35,000 Speaker 2: London summit, we had a representative from abn Amro that 462 00:24:35,080 --> 00:24:38,840 Speaker 2: said that she still would be hesitant to finance a 463 00:24:38,880 --> 00:24:42,560 Speaker 2: project using Chinese technology. So there are still some barriers 464 00:24:42,600 --> 00:24:45,040 Speaker 2: there and kind of linking back to that kind of 465 00:24:45,080 --> 00:24:48,359 Speaker 2: lower brand awareness, that kind of market commitment question. But 466 00:24:48,480 --> 00:24:50,920 Speaker 2: some of the most risk averse players across the wind 467 00:24:50,920 --> 00:24:55,159 Speaker 2: market are financiers and insurers, and so in some markets 468 00:24:55,160 --> 00:24:56,680 Speaker 2: it's going to take a little bit of time for 469 00:24:57,119 --> 00:25:00,439 Speaker 2: those players to become comfortable with these new competitors in market. 470 00:25:00,680 --> 00:25:03,040 Speaker 2: And then the final thing I think that we discussed 471 00:25:03,119 --> 00:25:07,080 Speaker 2: previously was around political risk and so yeah, some trade tensions. 472 00:25:07,080 --> 00:25:09,879 Speaker 2: We've seen some protectionist policies around the world, but also 473 00:25:10,040 --> 00:25:12,560 Speaker 2: markets around the world want to benefit from a growing 474 00:25:12,600 --> 00:25:14,840 Speaker 2: wind industry as well, so we see some kind of 475 00:25:14,880 --> 00:25:19,080 Speaker 2: strong incentives for local manufacturing. In some markets, like South Korea, 476 00:25:19,160 --> 00:25:22,880 Speaker 2: for example, awards subsidies partly on the basis of local 477 00:25:23,080 --> 00:25:26,240 Speaker 2: economic impact and market commitment, and so that can sometimes 478 00:25:26,280 --> 00:25:29,360 Speaker 2: provide a barrier if Chinese turbine makers don't have existing 479 00:25:29,560 --> 00:25:31,320 Speaker 2: manufacturing capacity in these markets. 480 00:25:31,920 --> 00:25:34,639 Speaker 1: I suppose all of this that we're talking about is 481 00:25:34,800 --> 00:25:38,840 Speaker 1: built around the idea that Chinese manufacturers are making wind 482 00:25:38,880 --> 00:25:41,679 Speaker 1: turbines for a lot less money, and therefore they're cheaper, 483 00:25:41,920 --> 00:25:45,600 Speaker 1: and therefore developers prefer them because who doesn't like getting 484 00:25:45,640 --> 00:25:49,320 Speaker 1: something cheaper. But you also mentioned this kind of overcapacity 485 00:25:49,440 --> 00:25:53,280 Speaker 1: relative to the local market that had existed, and therefore 486 00:25:53,280 --> 00:25:55,840 Speaker 1: they're expanding. Could it be that this is a sort 487 00:25:55,840 --> 00:25:57,240 Speaker 1: of a little bit of a flash in the pan 488 00:25:57,359 --> 00:26:01,800 Speaker 1: moment that once these Chinese turbine manufacturers really sort of 489 00:26:02,040 --> 00:26:05,119 Speaker 1: max out on these new markets and they no longer 490 00:26:05,119 --> 00:26:07,640 Speaker 1: have this over capacity, they're no longer going to be 491 00:26:07,720 --> 00:26:11,000 Speaker 1: selling turbines so cheaply, and that the price difference between 492 00:26:11,160 --> 00:26:15,040 Speaker 1: the Western incumbents and the Chinese turbine manufacturers will just 493 00:26:15,040 --> 00:26:17,400 Speaker 1: sort of become a little bit more similar. We're talking 494 00:26:17,400 --> 00:26:19,919 Speaker 1: about everything like this is a new phase maybe for 495 00:26:19,960 --> 00:26:23,120 Speaker 1: the industry, But could this just be a temporary thing. 496 00:26:23,600 --> 00:26:25,399 Speaker 2: There's certainly a bit of evidence that some of these 497 00:26:25,480 --> 00:26:28,600 Speaker 2: Chinese turwine makers are offering really cheap prices in an 498 00:26:28,640 --> 00:26:31,520 Speaker 2: effort to enter these markets, so trying to undercut the 499 00:26:31,560 --> 00:26:35,199 Speaker 2: competition that's there already. When we ran that developer survey 500 00:26:35,280 --> 00:26:38,600 Speaker 2: asking why these companies were buying these machines and what 501 00:26:38,640 --> 00:26:41,880 Speaker 2: these price differences were, we saw quite a big regional difference. 502 00:26:42,240 --> 00:26:45,000 Speaker 2: I said, between kind of fifteen and forty percent cheaper. 503 00:26:45,440 --> 00:26:47,919 Speaker 2: In some markets, particularly close to China, is where you 504 00:26:47,960 --> 00:26:50,439 Speaker 2: see some of the deepest discounts compared with the Western machines, 505 00:26:50,480 --> 00:26:53,879 Speaker 2: because they can use that local manufacturing capacity to serve 506 00:26:54,160 --> 00:26:58,520 Speaker 2: those orders, serve those contracts in some markets, and then 507 00:26:58,560 --> 00:27:02,640 Speaker 2: particularly in newer market we're seeing these really steep discounts 508 00:27:02,720 --> 00:27:04,720 Speaker 2: in order to try and enter the space. I think 509 00:27:04,720 --> 00:27:07,199 Speaker 2: when we talk about the ability of Chinese turbine makers 510 00:27:07,240 --> 00:27:10,520 Speaker 2: to sell contracts in the EU, and I mentioned how 511 00:27:10,560 --> 00:27:13,639 Speaker 2: it makes sense to have local manufacturing capacity when you 512 00:27:13,720 --> 00:27:16,119 Speaker 2: reach a certain scale just purely because of the size 513 00:27:16,160 --> 00:27:19,119 Speaker 2: of components. So I think if a Chinese turbine maker 514 00:27:19,400 --> 00:27:21,840 Speaker 2: was to try and deliver more contracts in the EU 515 00:27:21,880 --> 00:27:23,879 Speaker 2: and there are fewer barriers to allow it to do so, 516 00:27:24,160 --> 00:27:27,600 Speaker 2: I think with a local O and M team, with 517 00:27:28,000 --> 00:27:31,960 Speaker 2: European nationals, with local manufacturing facilities in Europe, we may 518 00:27:32,080 --> 00:27:36,040 Speaker 2: see the kind of price differential erodes slightly compared with 519 00:27:36,560 --> 00:27:40,320 Speaker 2: a super cheap Chinese turbine that's manufactured in those facilities 520 00:27:40,359 --> 00:27:43,160 Speaker 2: in China. So it doesn't necessarily mean that a Chinese 521 00:27:43,160 --> 00:27:45,400 Speaker 2: turbine maker would be able to deliver that same discount 522 00:27:45,440 --> 00:27:48,440 Speaker 2: if it was manufacturing the machine in Europe. And that's 523 00:27:48,520 --> 00:27:51,399 Speaker 2: kind of another silver lining for Western players, kind of 524 00:27:51,560 --> 00:27:55,120 Speaker 2: European wind turbine manufacturers, when they're looking at this potential 525 00:27:55,119 --> 00:27:57,760 Speaker 2: competition coming from Chinese manufacturers. 526 00:27:58,200 --> 00:28:02,399 Speaker 1: Right In other words, if they're not operating at scale 527 00:28:02,400 --> 00:28:05,639 Speaker 1: in Europe, Chinese manufacturers can offer these cheap turbines, you know, 528 00:28:05,680 --> 00:28:08,320 Speaker 1: almost as like lost leaders against the market. But if 529 00:28:09,000 --> 00:28:14,040 Speaker 1: if you're vestas your jeevanova Zeman's, it seems like this 530 00:28:14,119 --> 00:28:16,639 Speaker 1: might be a challenging moment, might be a sort of 531 00:28:16,840 --> 00:28:18,840 Speaker 1: scary moment. But what you're saying is they can if 532 00:28:18,840 --> 00:28:20,960 Speaker 1: they can ride it out and get to the other side, 533 00:28:21,000 --> 00:28:22,919 Speaker 1: then then it'll probably be fine. 534 00:28:23,080 --> 00:28:27,159 Speaker 2: Yeah. I wouldn't want to make big sweeping predictions in 535 00:28:27,200 --> 00:28:29,800 Speaker 2: the market, And like I say, we've seen market some 536 00:28:29,960 --> 00:28:34,400 Speaker 2: markets completely swing towards Chinese manufacturers. I think it would 537 00:28:34,440 --> 00:28:38,160 Speaker 2: be more difficult for Chinese turbine makers to come in 538 00:28:38,200 --> 00:28:41,320 Speaker 2: and completely dominate the EU market or the US market. 539 00:28:41,560 --> 00:28:45,360 Speaker 2: It's certainly a very strong form of competition that represents 540 00:28:45,360 --> 00:28:48,720 Speaker 2: a risk to these US and EU companies, but I 541 00:28:48,760 --> 00:28:51,360 Speaker 2: think it'll be difficult, like I say, to deliver those 542 00:28:51,400 --> 00:28:54,560 Speaker 2: same price discounts in the long term within those markets 543 00:28:54,560 --> 00:28:56,120 Speaker 2: for their Chinese competitors. 544 00:28:56,360 --> 00:28:59,320 Speaker 1: Sounds to me like this is a challenging moment for 545 00:28:59,400 --> 00:29:02,280 Speaker 1: some players, but ultimately it seems like an inevitable and 546 00:29:02,320 --> 00:29:06,520 Speaker 1: exciting development. The market is becoming more competitive, more global, 547 00:29:06,800 --> 00:29:10,440 Speaker 1: and that has to overall be an exciting moment for 548 00:29:10,480 --> 00:29:13,400 Speaker 1: this industry, which, like I mentioned, you could say has 549 00:29:13,560 --> 00:29:16,040 Speaker 1: underperformed its potential to date definitely. 550 00:29:16,080 --> 00:29:18,720 Speaker 2: I mean, when you're seeing new markets opening up for 551 00:29:18,800 --> 00:29:22,640 Speaker 2: wind because of these cheaper prices, new markets across Central Asia, 552 00:29:22,840 --> 00:29:27,360 Speaker 2: across Eastern Europe, in Africa, accelerating the energy transition, especially 553 00:29:27,640 --> 00:29:30,000 Speaker 2: in my line of work by building wind farms, is 554 00:29:30,000 --> 00:29:33,320 Speaker 2: a really positive thing. And so yes, there's definitely risks 555 00:29:33,360 --> 00:29:35,560 Speaker 2: to some of the incumbent players in this sector here, 556 00:29:35,600 --> 00:29:38,880 Speaker 2: but in many markets this is representing new avenues of 557 00:29:38,920 --> 00:29:43,240 Speaker 2: growth and real progression in those countries energy transition strategies. 558 00:29:43,560 --> 00:29:46,040 Speaker 1: Well, it's really good to finish on a positive note, 559 00:29:46,040 --> 00:29:49,000 Speaker 1: so let's call it there. Ollie, thank you very much 560 00:29:49,040 --> 00:29:49,800 Speaker 1: for joining today. 561 00:29:49,960 --> 00:29:50,720 Speaker 2: Thanks for having me. 562 00:29:50,680 --> 00:30:02,080 Speaker 1: On Today's This episode of Switched On was produced by 563 00:30:02,160 --> 00:30:06,360 Speaker 1: Cam Gray with production assistance from Kamala Shelling. 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