(RCH) THE FUTURE OF WIND TURBINES IS IN CHINESE HANDS

For the past 15 months, wind turbine original equipment manufacturers (OEMs) in Western Europe and the Americas have seen thinning profit margins.

With the industry becoming more capital efficient and OEMs incurring higher commodities costs, several Western European OEMs have seen profits trounced.

This has resulted in layoffs and shifting patterns in production venues to markets such as Brazil, Turkey and China which have a more favorable currency trade than the US, Denmark, Germany, Spain or Italy.

The challenge of the energy transition has always been the dichotomy between power generation costs and power sales prices for the independent power producers (IPPs) and utilities. Higher prices in a spot market, or a regulatory environment that does not mandate the switch to renewables, provides IPPs and utilities an opportunity to maintain coal, natural gas or oil sources for power generation in spite of the fact that renewables are cheaper.

While the switch to renewable based power generation sources would provide the IPPs and utilities more spread, i.e., larger window between power generation costs and power sales prices to companies, consumers, etc, this also comes at a price. They would spend significantly more capital on installing a new power generation source rather than the cost to continue operating with a dirty power source.

The power generation costs for wind turbine OEMs are often governed by the cost of raw materials and production/ labour rates. The total cost to produce a wind turbine and tower is referred to as the Ex Works cost, or the cost which is incurred before wind turbine parts are shipped from one, or several factories to a single project site. This cost is often used as a benchmark, normalized in $ per MW of rated power of the turbine, between the production of different OEMs and the cost to produce wind turbine components in different parts of the world.

Onshore wind turbine ExWorks costs for most of the Western OEMs have been hovering around $650,000–800,000 per MW depending on the market. The sale prices for those turbines has varied anywhere from $680,000–1,200,000 per MW over the past few years.

However, the Chinese OEMs have seen unprecedented low costs, partly due to labour rates and raw material availability, with wind turbine ExWorks costs at an eye wateringly low range of 2,027-2,618 yuan/kW ($342,328-411,107/MW). This is almost half the cost of the Western companies. Recharge - link - Philip Totaro - link - more like this (China) - link - more like this (turbines) - link