The Next Surprise in China’s Wind Sector Could Be More Mergers

(Bloomberg) -- China’s wind industry is headed for a bout of consolidation after a record-setting rush of installations, according to the country’s second-largest turbine manufacturer.

There’s rising pressure on the country’s crowded field of equipment producers, despite strong demand, Envision Group Chief Executive Officer Lei Zhang said in an interview. “The competition level is increasing,” he said. “The market will start to consolidate.”

The push to add more renewables and a deadline to secure key government incentives drove a surge in wind installations in 2020, when China added almost as much new capacity as the rest of the world combined.

China has the most fragmented wind market in the world, with at least 21 companies supplying onshore wind turbines, according to BloombergNEF. The five largest suppliers, including Envision and Xinjiang Goldwind Science & Technology Co., accounted for about two-thirds of installations last year.

“The market will become more rational,” Zhang said by phone Thursday. “All the customers are looking for good quality, and at the same time, low-cost turbines.”

Xiangtan Electric Manufacturing Company Ltd. last year sold its wind unit after its market share declined, the first time one of China’s top 10 turbine manufacturers had changed hands.

China is forecast to add about 29 gigawatts of onshore capacity this year, more than any other nation, though still a 46% fall on 2020. Demand for both onshore and offshore projects will accelerate again from 2022 as the nation seeks to meet a 2060 target for net zero emissions, according to the Global Wind Energy Council.

There are also future export opportunities for China’s manufacturers as the global wind sector grows, Zhang said. Nations including Chile, Mozambique and Vietnam, where Envision already has strong market share, are emerging as potential growth markets, the council said in a March report.

China’s producers have become more competitive with global peers after they were forced to innovate to meet last year’s capacity rush, with some manufacturers able to cut the time it takes to make a giant turbine blade to 24 hours from 72 hours previously, said BNEF analyst Leo Wang.

Envision accelerated its own production processes and has identified other areas to help make savings, according to Zhang. Using sensor technology to identify tiny cracks on offshore turbine blades -- which are frequently struck by lightning -- helps prevent long outages. The company has cut maintenance staff at offshore wind farms from as many as 10 people to two, he said.

Privately-held Envision, founded in 2007, is “open to the public market,” according to Zhang, though the firm doesn’t have any specific time-frame in mind for a potential listing.

The Shanghai-based company has made a raft of recent announcements on projects and investments, including an offshore wind turbine factory in the U.K. Envision will also spend as much as 2 billion euros ($2.4 billion) on an electric vehicle battery plant in northern France to supply Renault SA, while a unit will set up another facility in Sunderland, in northeast England.

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