Recharge News: China's Goldwind poised for North America breakthrough
IN DEPTH | Patience pays off as China’s largest wind turbine maker eyes prospect of up to 2GW installed across the US, Canada and Mexico by 2020
by Karl-Erik Stromsta
It’s been a long and sometimes bumpy road for Goldwind in the US, but China’s leading wind turbine maker is convinced that nearly a decade after installing its first turbine on American soil, its patience is about to pay off — with implications that could reverberate globally.
Xinjiang Goldwind Science & Technology, as it is formally known, is easily the leading turbine OEM in China, installing 6.3GW in 2016 alone — more than treble that of its nearest rival, Envision (2GW). But in the US, the world’s number-two market, Goldwind has struggled to make inroads into what is effectively a turbine oligopoly — with Vestas, GE and Siemens Gamesa controlling 95% of the market in 2016. All three have sizeable US wind manufacturing bases, while Goldwind’s main factories are in China.
Having installed its first turbine in the US in 2009, Goldwind had just 182MW in place here at the end of 2017 — far behind even now-defunct onshore suppliers such as Clipper and Mitsubishi.
But that number will surge to 1GW by 2020, with an additional 500-1,000MW in Canada and Mexico, predicts David Halligan, chief executive of Chicago-headquartered Goldwind Americas. In the 2020s, he adds, the sky’s the limit.
One curious aspect of the global renewables market is the divergent paths of China’s wind and solar manufacturers. While Chinese producers like JinkoSolar now utterly dominate the global PV panel market, Chinese wind manufacturers like Goldwind and Envision have struggled to gain traction outside their home patch.
Goldwind in particular wants to change that. Its international push is intensifying, and despite the fading production tax credit (PTC) and uncertainty over US-China trade relations under President Donald Trump, the US market remains a “primary” focus, Halligan says.
A number of factors held Goldwind back in its early years in the US, including a lack of name recognition, limited local performance data for its permanent-magnet direct-drive (PMDD) turbines, and — it’s fair to assume — its Chinese heritage. Most problematic of all, Halligan says, was a lack of acceptance of Goldwind’s technology by the US financial community.
That last issue would have been easier to remedy in a market with more policy certainty. But until recently the US wind market was characterised by wild gyrations in annual installations as the PTC was repeatedly extended and allowed to expire again. Convincing investors to move beyond their comfort zone in the midst of the usual mad rush to finance projects was a tough sell.
“The tax-equity market wasn’t going to invest a lot of time rolling up their sleeves and learning about Goldwind’s technology when the PTC might be going away,” Halligan tells Recharge. “But with the five-year extension [at the end of 2015], all of a sudden there was an opportunity for the tax-equity market to invest some time learning about our technology.
“That provided the opportunity for Goldwind to shift into another gear.”
‘A huge, huge sign’
Part of Goldwind’s recent strategy in some foreign markets has been building its own projects to get its technology on the local map. To that end, in 2016 the company acquired the 160MW Rattlesnake development in Texas from RES Americas, and followed up last year by negotiating the purchase of RES’s Heart of Texas project, also 160MW.
Rattlesnake is currently under construction using Goldwind’s GW109/2.5MW PMDD turbines and due on line in the second quarter of 2018. Heart of Texas will follow immediately, and is slated for commercial operation by the end of this year. Both are qualified for the full PTC. Goldwind may sell the projects, in whole or in part, in the future, Halligan says.
Building projects in-house is one thing. But in Halligan’s eyes, Goldwind’s most important US breakthrough came last May, when Warren Buffett’s Berkshire Hathaway Energy and Citibank — two influential US tax-equity investors — invested in Rattlesnake, in a big vote of confidence in the OEM’s technology.
That was a “huge, huge sign for Goldwind, and not just in this market”, Halligan says. “It has had ripple effects across the globe, frankly. We’re seeing the effect in Canada and Mexico, and there are project opportunities down in South America where the financing community is stepping up to back us.”
Halligan says a different group of tax-equity investors will back Heart of Texas, though Goldwind is not yet ready to announce the deal.
Goldwind may not threaten the dominance of the big three turbine suppliers any time soon, but “I think they’re in a good position in the US”, says Luke Lewandowski, Chicago-based research manager at MAKE Consulting.
“They have turbines installed, they’ve collected data on their technology, they have their certifications and now they’ve apparently been able to secure some tax-equity financing with additional banks for their second project in Texas,” he tells Recharge. “They’ve achieved critical milestones in their evolution in the US.”
Two-way street to China
Halligan is at ease in the world of project development and construction, having worked for developers First Wind (acquired by SunEdison in 2014) and Enel North America. Ultimately, however, Goldwind aims to become a “traditional turbine supplier” in North America, he says.
Given Goldwind’s lack of factories and still-limited installed base in North America, its lowest-hanging fruit in the short term may be projects sited close to the coasts, in places like Texas, Lewandowski says — “anywhere near a port to help avoid logistics costs”.
Other turbine makers that have chalked up recent successes in the US without a local manufacturing base, including Nordex Acciona, seem to have the same idea.
As the PTC winds down, one group of potential customers that would seem to make sense for Goldwind is lower-tier developers that might need a little help with financing or getting a project over the finish line.
For Halligan, though, the ultimate target is “the big players, the global players”.
“They’ve all been to our factories in China,” he says. “One of the last questions for any of these customers was, ‘Can Goldwind’s technology be financed — and financed on market terms?’ Today we can say, ‘yes’. It’s only a matter of time before we start supplying these large, large customers.”
One potential ace up Hong Kong-listed Goldwind’s sleeve is its ability to help open doors for Western developers in the immense Chinese wind market.
China installed 23GW of wind in 2016, three times as much as the US and nearly as much as the rest of the world put together, but it remains an extremely difficult market for non-Chinese developers to get a foothold.
“I think that’s definitely something Goldwind can do,” Halligan says.
“I don’t want to speak for my colleagues in Beijing, but the renewables market is becoming completely global, and Goldwind is active on six continents. So you’re going to see us partnering with customers who are active across the globe.”
Goldwind's 1.9GW Wyoming mega-project
One of the most interesting — if still uncertain — opportunities on the horizon for Goldwind in the US is the exclusive turbine supply agreement it signed in late 2016 with Viridis Eolia, a little-known Venezuelan developer that has spent years developing a 1.9GW multi-phase wind project in Wyoming.
Like Power Company of Wyoming’s 1,000-turbine Chokecherry and Sierra Madre project, Viridis Eolia’s project would be built in Carbon County, southern Wyoming, which boasts exceptionally good wind conditions. For both mega-projects, the economics may hinge on being able to sell power into California — meaning transmission will be a challenge.
Halligan says turbine installation could begin in Wyoming as soon as this year, though he admits the project “might be a little bit more long-dated too”. Even if the timeline slips, he’s optimistic it will get built eventually. “As turbines get bigger and the technology gets more efficient, I think the economics might still work very well post-PTC.”
Halligan declines to comment on whether Goldwind is considering investing directly in the Wyoming project, as it has done elsewhere in the US.
“There are lots of pieces that need to come together to make it happen, and a lot of that may be dependent on Wyoming-specific matters,” he says. “We’re just the turbine supplier. But we hope they can bring those projects to fruition very soon.”
Among the issues specific to Wyoming are a state tax on wind-energy production of $1/MWh, which some local legislators want to quadruple.
Might the logistics of supplying 600 or more turbines to Wyoming lead Goldwind to consider a US factory? Maybe, Halligan says. “If the economics and logistics of transporting the equipment dictate the need for a local supply chain, then that’s on the table.
“As we ramp up the number of turbines we’re installing not only here in the US but also in other markets, we’ll be investigating opportunities for Goldwind to participate in the local supply chain.”
Goldwind has been making incursions into Latin America’s fledgling wind market for the past few years. But like in the US, it has faced a lot of competition from Western competitors.
So far, it has installed 215MW in Panama, 16.5MW in Ecuador, 4.5MW in Cuba and 3MW in Bolivia, and is due to have 80MW installed in Chile by the end of this year — a drop in the ocean for a region with installed capacity of about 20GW. But the company is still hoping to break the big wind markets of Brazil and Argentina.
In Argentina — which plans to install 10GW of renewables capacity by 2025 — Goldwind was the preferred partner for Sinohydro’s 100MW Pampa wind farm, which was awarded construction rights at the Round 1.5 tender in 2016, but the OEM has not yet signed a firm contract with the Chinese developer.
It has also acquired a 350MW project pipeline in the country, which will bid at forthcoming annual tenders.
Goldwind has been looking at the possibility of building a turbine factory in Brazil since at least 2015 in order to meet the strict local-content requirements that would enable developers purchasing its turbines to access cheap funding from national development bank, BNDES.
The company carried out due diligence on acquiring bankrupt Argentine OEM Impsa’s shuttered Brazilian plants, but eventually decided against purchasing the facilities. It then looked into acquiring a project pipeline, which would have meant financing projects without cheap BNDES loans and importing turbines from China, but also decided against that. It is, however, currently negotiating with developers that have won the rights to build projects with Impsa turbines. Both OEMs based their machines on designs licensed from Germany’s Vensys.
Nevertheless, Goldwind’s general director for South America, Xuan Liang, told Recharge in August that the company still wants to build a factory in Brazil, but that there has to be significant local and regional demand to justify such an investment.
The Chinese company has set up its South American headquarters in São Paulo and has also opened offices in Argentina, Chile, Cuba and Ecuador.
Goldwind’s overseas strategy is also marked by a focus on emerging markets in Asia and Africa, a plan that benefits from Beijing’s Belt & Road Initiative (BRI), which encourages Chinese energy players to seek greater influence in developing countries.
It has already won business in Southeast Asia, Central Asia, the Middle East, Eastern Europe and East Africa — having installed projects in Pakistan, Thailand, Uzbekistan, Romania, Turkey and Ethiopia, and been awarded turbine orders in the Philippines, South Africa, Serbia and Kazakhstan.
Goldwind’s international journey started in Cuba and Pakistan in 2009. And since then, Pakistan has become the company’s biggest market outside China, with five projects installed totalling 400MW, which account for 35% of the country’s wind installations. With Islamabad aiming to increase the proportion of renewables in its energy mix from 3% to 10%, and BRI offering financial and political support, Pakistan remains a promising market for the company.
Goldwind has installed three projects totaling 100MW in Thailand, a 51MW wind farm in Ethiopia, and last year won a turbine supply deal for the 132MW Pasuquin in the Philippines.
In Central Asia, Goldwind is among the first arrivals. It supplied the 750kW turbine to the first experimental wind project in Uzbekistan, which started operation last September. And the company recently secured its first deal in Kazakhstan, where it will provide two 2.5MW machines to the Shelek wind project.
The company is also actively seeking opportunities in Saudi Arabia and Jordan, but Western Europe is on the backburner for now.
Goldwind’s strategy in Australia is similar to that in the US — building projects using its own turbines to get a foothold in the market.
Shortly before Christmas, the company closed financing of almost A$700m ($538m) from a nine-strong international syndicate of banks to build the 530MW Stockyard Hill wind farm in the state of Victoria. It had purchased the project from local utility Origin Energy in May for A$110m, and Origin will buy all the power from the wind farm “for a market-leading PPA price of below A$60/MWh”.
Full-scale construction of the project — which will showcase Goldwind’s 3.6MW turbines from its new GW3S platform — will begin in the first quarter of 2018.
It is also building the 175MW White Rock wind farm in New South Wales (NSW) and has two other operational projects in Australia: the 19.5MW Mortons Lane installation in Victoria and the 165.5MW Gullen Range wind farm in NSW.