Siemens Disappointed by Stagnant China Offshore Wind Market

Aug 12, 2014 4:35 am ET

Aug. 11 (Bloomberg) -- Siemens AG, Europe’s largest engineering company, said Chinese offshore wind investment has failed to match expectations and that it’s evaluating growth prospects in the country.

The market has scarcely grown since Siemens opened a 35 million-euro ($47 million) blade manufacturing facility in Lingang, China, in 2010, said Michael Hannibal, the head of Siemens’s offshore wind power unit.

“We felt that we would like to go there to learn and to see if it would develop into a market where Siemens could be a contributor,” Hannibal said in a phone interview. “Basically we are at the same stage, investigating the market because the market didn’t take off in the way some market experts expected. So it’s definitely been a slower start.”

China is at least three years behind schedule on a plan that would make it the world’s biggest market for offshore wind. In 2011, it announced plans to build 5,000 megawatts of offshore turbines in four years, enough to power 5.4 million homes. With less than 10 percent of that capacity in place, officials now say they won’t meet that goal.

Siemens formed a wind joint venture with Shanghai Electric Group Co. in 2011 and is targeting a 30 percent share of the market.

“Some are still predicting a large market if you look over the period of 10 to 15 years,” Hannibal said. “But the question is when and where it will take off in China.”

Wind Targets

There were 429 megawatts of offshore wind power operating in China at the end of 2013. The country may install about 500 megawatts of offshore capacity next year and 1,000 megawatts in 2016, according to Bloomberg New Energy Finance.

The U.K., where Siemens is building a 160 million-pound wind turbine factory, remains the leading market, boosted by new regulations which provide longer-term stability for investors, according to Hannibal.

New contract structures from the government are opening the way for “new investors to come in because the stability in that system and the long-term perspective is kind of predictable and you can use pension funds, industrial players -- they are willing to invest in this system,” he said. “So I do see the U.K. market as the number one, leading market, strongly followed by Germany.”