Earlier this month, we hosted our panel discussion ‘Chinese Wind Turbines for European Projects’ in partnership with Infravenir and Augusta & Co. in our London office. It proved to be a sell-out event – a testament to the importance of the topic to professionals across the industry in the current environment. The event included a panel discussion followed by a lively Q&A.
Moderated by Augusta & Co. Director Michael Rice, the panel was made up of WFW Senior Associate James Fryer; Edmond de Rothschild MD and Head of Energy, Energy & Infra Shirley Chojnacki; OWC Innovation Director Tim Camp; HSBC VP Renewables & Infra Finance Georgios Kalpias; and GCube Underwriting Founder and CEO Fraser McLachlan.
Initially exploring the definition of a ‘Chinese wind turbine’, the panel discussion then moved on to note the technical and commercial differences with their Western counterparts, bankability and risk factors, geopolitical and regulatory considerations and concluding with a look to the future, including touching on floating technologies.
Key takeaways
Technical and commercial differences
Whilst Chinese turbines use similar drivetrain technology to their European counterparts, what tends to set them apart in today’s market is their larger turbines sizes. Larger turbines mean fewer support structures, fewer maintenance visits, shorter cabling and reduced land use – all helping drive a perception of cost-effectiveness. On the other hand, bigger, newer machines present more installation challenges compared to smaller, preexisting ones, which will also have a better track record for success. Further, whilst the panel acknowledged that Chinese turbines are touted as significantly cheaper from an initial CAPEX point of view than their Western rivals, concerns were raised as to how that upfront cost saving will play out over the lifetime of the wind farm, particularly considering long-term operation and maintenance costs.
Bankability challenges
The panel discussed various challenges that lenders and insurers face concerning Chinese original equipment manufacturers (“OEMs”). Concerns around warranty enforcement and whether Chinese OEMs will stand by their turbine supply agreements (“TSAs”) means lenders and insurers require clarity on who bears the risk when defects or failures occur. A further concern is certification: although many Chinese turbines are certified under IEC standards, some are certified by Chinese bodies such as CGC which are not considered as bankable as European bodies. Consequently, some Chinese OEMs are re-certifying their products with European bodies such as DNV and TÜV in order to attempt to improve credibility and, ultimately, bankability.
Cyber security
Cyber security aspects were discussed in depth. It was noted that because energy assets are susceptible to being the target of cyber criminals, a number of mitigation strategies are being put in place by Chinese OEMs, including replacing network hardware to European supplied hardware and creating localised date centres and control systems in the host country. Despite this, it was noted that the insurance industry remains highly cautious; making cyber coverage for Chinese turbines particularly difficult to underwrite.
Looking to the future
Whilst the panel acknowledged that the overall picture regarding Chinese turbines in European markets has improved (and continues to improve), there remain significant hurdles to cross. It was however noted that the most foreseeable “in” to the European market for Chinese OEMs could be via the floating sector, a market that the major Western OEMs continue to appear reluctant to move into.
To discuss any of the insights above or to hear more about the impact Chinese OEMs may have on projects in Europe, please reach out to James or your usual WFW contact.
