Asian wind turbine manufacturers jostle for export supremacy

Exports have been the driving force behind the spectacular economic growth rates seen across much of Asia over the past decade. So it comes as little surprise that exports have fuelled the rapid growth of the region’s clean energy sector as well.

Less than a decade ago, Asia’s domestic renewable energy equipment sector was nearly non-existent. Today, the region produces more than half the world’s wind turbines and nearly three quarters of its solar photovoltaic (PV) modules. As of the end of 2010, four of the top ten wind turbine manufacturers and eight of the top ten solar PV manufacturers were Asian. China has, of course, played a key role in this incredible growth but Indian, Korean, Japanese, and Taiwanese companies have also played their part in helping to shift clean energy manufacturing eastwards.

Asia’s wind energy business began modestly. In 1994, Tulsi Tanti, at the time managing his [BU1] family’s textile business in western India, acquired two wind turbines to power his factory from what was then a farm equipment maker known as Vestas based in Denmark. A year later, Tanti formed Suzlon, which collaborated with German wind turbine manufacturer Südwind and paid it royalties for each turbine using the licensed technology.

A decade later, Suzlon not only adopted and improved on this foreign technology, but also built factories and manufactured turbines at home on a large scale, driving down production costs. Tanti proceeded to export to Europe and the US then acquired two of the world’s leading wind manufacturing companies, Belgium's Hansen Transmission and Germany's REpower. All of this was achieved in just a dozen years - and was enough to put Suzlon into direct competition with Vestas, which in the intervening years became the world’s leading wind turbine maker.

Chinese wind turbine manufacturers have pursued the same model – license, scale, export, acquire – but in a much tighter time frame, with Goldwind exporting its first turbine and acquiring a foreign company in about a decade, and Sinovel exporting its first turbine a mere three years after being founded in 2005.
As latecomers with little prior technological experience, Asian wind turbine manufacturers have had to scale fast. The result has been a dramatic drop in wind turbine prices. In the rest of the world, the price of a wind turbine has fallen by about 7% for every doubling of installed capacity from 1984 to 2011. That same 'experience curve' for Chinese makers has been double that: 13%.

Now, the game to watch is the emerging competition between China’s recently established wind powerhouses and Korea’s experienced, deep-pocket industrial giants. A dozen large Korean conglomerates are looking to diversify into wind turbine manufacturing. These chaebols have strong backgrounds in shipbuilding, electronic equipment manufacturing, offshore infrastructure and a host of other businesses. Some are household names like Samsung and Hyundai while others, like Daewoo or Hyosung, are less well known outside of the industry but are among the world’s largest companies. None of these Korean wind turbine manufacturers have achieved scale and only a few have moved their products beyond the prototype stage, but nearly all harbor ambitions of being the next Suzlon or Goldwind and working their way into the global top 10 within the next few years.

The global wind turbine market is already over-supplied, putting equipment makers under pressure to improve performance and cut costs. Thanks to their head start, Chinese companies will be tough to dislodge as Asia’s manufacturing leaders. But with their experience, strong reputations, and deep pockets, the Korean players will be formidable players. The competition is sure to be fierce. 

Justin Wu, Head of Wind Industry Research, Bloomberg New Energy Finance