Setting aside the matter that wind turbines are not an effective means to supply utility-scale electricity, the claims of job creation and 21st century industrial development are equally illusory. A New York Times (NYT) article last month spoke volumes on this.
I have frequently claimed that the recently created wind turbine manufacturing industries in Europe (Denmark, Germany and Spain) are in jeopardy from competition by the emerging giants, China, India and the U.S. The Times article reports that China now controls almost half of the global market, having absorbed billions of dollars in government assistance and consumer subidies.
The wind businesses in these European countries have existed for little more than a decade, and having saturated their domestic markets, have enjoyed a brief, and unsustainable, dominance of global markets. I may have been mistaken in including the U.S. in the emerging giants list, but one cannot realistically exclude it, at least at first glance.
I now suggest it should be added to the same list as the European countries.
By encouraging foreign manufacturers to participate in the lucrative Chinese market in the early stages, China has learned their hard-won knowledge. China then turned the tables by insisting on 70% domestic content for the wind turbines it uses internally. So companies like Spain’s Gamesa have seen their domestic China market share fall from about 35% in 2005 to 3% today. However, because of the size of the Chinese market, this still means that Gamesa sales have increased.
Is this cause for celebration? No, because it represents a small carrot in the carrot and stick game. Like other European manufacturers, it must be satisfied with the “crumbs” because their businesses depend on it. What does this auger for the long term? Substantially diminishing market share is not a healthy sign for a company dependent upon global markets.
When pressed by the U.S. on the domestic content issue, a violation of WTO rules, China agreed to drop it, but the damage had been done and Chinese suppliers have emerged dominant in their own market. What about further growth from the associated crumbs? The Chinese government has slowed new wind plant approvals. The NYT article stated:
The Chinese government is now slowing the approval of new wind farms at home. The pause, whose duration is unclear, is meant to give the national electricity system time to absorb thousands of new turbines that have already been erected and not yet connected to the grid.
Do not be misled by the grid limitation excuse. As reasonable as it may be, I do not believe China will make the same mistake that some western countries appear to be determined to do. The Chinese government will not jeopardize their electricity systems, nor make unaffordable investments in utility-scale wind energy that will endanger their economies. On the economic front, they have the ability to outstay the relatively fragile western world economies in wind turbine installation, much like the U.S. could economically outstay the fragile economy of the former Soviet Union in the arms race. Is China above actions that further encourages the West to continue on this path? We shall see.
The global market for wind turbines promises to be a lucrative one, due to the West’s projected almost insatiable demand, which has been stoked by extensive government support, financial and other, and global warming concerns. The NYT article reports that China plans to dominate it, for example:
“Sinovel is among the Chinese companies now opening sales offices across the United States in preparation for a big export push next year. They are backed by more than $13 billion in low-interest loans issued this past summer by Chinese government-owned banks; billions more are being raised in initial public offerings led mainly by Morgan Stanley this autumn in New York and Hong Kong.”
The energy/electricity story and China has many dimensions and is almost without end. Other examples worthy of discussion are the risks to energy independence related to the supply of rare earth and lithium, previously reported on at MasterResource here, here, and here. Another, and I emphasize this is only one example, is that China is also a leader in clean coal technology as reported in the December 2010 issue of the Atlantic. Coal sceptics must read this dose of reality.
If the West persists with extensive wind plant implementation, this will turn out to be a dead end with substantial consequences in financial, economic and energy leadership terms, while China surges ahead on the real, optimal solutions to our future electricity generation needs.