Ming Yang in Scotland

Jamie Bernthal-Hooker (00:20)

Hello and welcome from 4C, the hub for offshore wind intelligence at TGS. My name is Jamie Bernthal-Hooker and I work with the research team at TGS | 4C.

Now, Scotland may be getting a new wind turbine factory and a huge investment into the renewable economy, by some estimates £1.5bn and over 1,500 new jobs. But the idea is controversial as it comes from Ming Yang Smart Energy, a major Chinese player, and some are concerned about security implications.

Announcing a factory with no confirmed orders can be unusual and the timing ahead of Allocation Round 7 feels significant. Meanwhile, Europe is looking at potential turbine shortfalls and not long after Ming Yang's announcement, Vestas put its Polish Blade factory on hold.

So, this is a story with a lot of backstory, a lot of emotion and a lot of implications and I'm pleased to be joined by not one, not two, but three of our senior analysts today to discuss it. So, welcome to Jordan May, Chao Guo, and Rameeza Haq Duggal. Would you like to introduce yourselves?

 

Jordan May (01:30)

My name is Jordan May. I am a senior analyst at 4C and I analyse the British Isles to Nordic markets and cost modelling.

 

Chao Guo (01:40)

Good morning, everyone. I'm Chao Guo. I’m doing China and Taiwan market research at TGS | 4C.

 

Rameeza Haq Duggal (01:45)

Hi, I'm Rameeza Haq Duggal. I'm product lead for subsea cables, substations and turbines at TGS | 4C.

 

Jamie Bernthal-Hooker (01:55)

So, Ming Yang issued its press release in October. It said it's ‘delighted to invest in the UK economy and fully supports the government's mission to become a clean energy superpower.’ But it seems to some like after a year of conversations and indecision behind the scenes, Ming Yang has bypassed the government decisions from the UK and Scotland and gone straight to announcing to the supply chain. 

Jordan could you talk us through what's happened now and the context in which to regard it?

 

Jordan May (02:30)

Yes, of course. So the British government has long said that its powers involve the ability to deny or cancel anything which is deemed a security threat. We've seen this in the news recently, there was investigation into people accused of spying, but we couldn't actually do anything about it because China wasn't deemed a security threat. 

So this is sort of where the current policies come into play; where they're stalling to no end because if they don't have to make a decision, they don't have to claim why they didn't make a decision. They just don't have to make it, which is why we're seeing the cans kind of kick down the road at the moment. And also why we haven't seen any approval and probably why Ming Yang's pushed ahead for this. They've said they're looking to finish in 2029 and start producing turbines. And that is roughly when we'd expect projects from Allocation Round seven, which is going to award on the 14th of January next year to start putting turbines in the water or get further on with their project. 

So this is what feels like an announcement to supply chain likely because we would see people who are entering into allocation round seven would likely want to use Ming Yang's turbines. They're looking for a cost advantage. The lowest cost project wins an allocation round. So the lower your cost, the more chance you're ever winning.

 

Jamie Bernthal-Hooker (03:44)

There has been talk of Chinese turbines in the UK before.

 

Jordan May (03:50)

Yes. So, this is part of an ongoing conversation. So Green Vault have been accused of using Ming Yang turbines, although they haven't actually admitted to this at all. It's largely speculation, but there is good basis that Vestas and Siemens may struggle to produce the appropriate size floating turbines. On top of this, Ming Yang has been planning this factory for quite a while. Scotland has a process called SIM2. Essentially, the idea is that they connect the supply chain to developers to try and get things built in the UK and get order books ahead of the demand so that people can make good investment decisions in supply chain in the UK. 

Instead of waiting till people have all got their offtakes, they get a lot of preferred supply agreements to try and get things built in the UK. So it's not the first time we've heard about this. It's not coming out of the blue, but the government is very much kicking the can down the road. They've been asked about this for quite some time now. And all they've said is that they have the power to cancel anything if it's a security threat without saying it's a security threat or actually making a decision.

 

Jamie Bernthal-Hooker (04:50)

The market needs to move sometimes. Rameeza, you've done some research showing a supply shortfall for turbines in Europe.

 

Rameeza Haq Duggal (05:03)

Yes, Jamie. Our analysis indicates a significant turbine shortfall emerging in Europe if Chinese supply chain remains excluded from the global mix. So without that integration, we project a notable gap that could delay project execution with early impacts visible by the late 2020s and more acute shortages from 2030 onwards. 

To be more specific, after updating our models, particularly following Vestas’ plans to postpone their factory in Poland, the data suggests that between 2025 and 2040, the world could face a cumulative shortfall of roughly 4,000 turbines, even assuming Siemens-Gamesa and Vestas’ proceed with its expansion plans in France, UK and South Korea. And without these expansions, that gap could widen to over 7,000 turbines.

 

Jamie Bernthal-Hooker (06:00)

And these are offshore turbines, not including onshore?

 

Rameeza Haq Duggal (06:06)

Yes, these are offshore turbines, actually. So this is between the period of 2025 and 2040. So to meet offshore wind targets and avoid project delays, the industry faces a clear choice, either integrate Chinese turbine capacity into global supply chain or dramatically scale up non-Chinese manufacturing.

 

Jamie Bernthal-Hooker (06:30)

Chao, why are Chinese players interested in coming to Europe or the UK? There's a lot of offshore wind in China.

 

Chao Guo (06:38)

Yeah, I think that's a good point. I think before answering this question, we can first look at the current situation of China's offshore wind. I think they’ve now already installed over 42 gigawatts capacity, already half the capacity of the world. 

I think this is because of China's fundamental energy infrastructure. Offshore wind is very highly dependent on the national five-year supply. I think during the last year's plan, called the 13th five-year plan, offshore wind experienced a very fast growth due to the central government subsidy. I think this accelerated particularly in 2021, when over 16 gigawatts of projects were installed in a rush to meet the subsidy deadline. And it's causing China's offshore wind spline chain to expand very rapidly. 

However, and moving to the current 14th five-year plan, the growth rate of offshore wind has significantly slowed down, average less than 5 GW per year. I think that's due to the cancellation of large scale central subsidies. I think they just have some provincial subsidies, but nothing for offshore wind set up. And on the other hand, because the offshore wind projects developed very fast, the production scale of Chinese manufacturing, especially for turbines, has expanded significantly, leading to a very fierce internal competition. 

China currently has about 11 turbine manufacturers, I guess probably eight or nine manufacturers have already entered the offshore wind sector. This year we can see the new players like Suni, like CRSA, they’re starting to square offshore wind turbines orders already. And furthermore, the Chinese government is encouraging these manufacturers to go abroad. It means they can't get perfect opportunities in China. I think if they go abroad, expand overseas, in Europe or the UK, it's very helpful for this company to improve their profitability.

 

Jamie Bernthal-Hooker (09:35)

That makes sense. There's a lot of supply in China. I was reading in an industry newspaper, actually, you, Chao, talking about recent plans to build a 50 megawatt turbine in China. In Europe, we're not necessarily seeing that kind of massive expansion in size of turbines, which is something we've discussed on the podcast before. And seeing Chinese manufacturers come to Europe, there's a potential for job creation.

 

Chao Guo (10:05)

Yeah, that's true. think, for example, like Min Yang, they announced they will build a manufacturer in Scotland. They will invest £1.5 billion and potentially creating 1,500 jobs in the UK. But it just applies, as Jordan said, it needs to get approved for both sides from the Chinese government and the UK government.

 

Jordan May (10:30)

Yes, so on the Chinese side as well, there's a big political environment around this. So they've actually stopped publishing youth unemployment figures because it reached 21.3% for people aged 16 to 24 compared to 4.1% for the demographic above that age. So in terms of approval from China, the question is very likely going to be where were the jobs created in China as well? This is going to be hard to know because 1,500 jobs is of course a lot, which they're going to create in the UK. 

So we need to figure out where China is going to be able to claim those jobs back locally. One of the worries is that they may claim the jobs back in data centres, which the EU and the UK is very much against because data needs to be managed in Europe following European laws, following European cyber security, which is a particular pain point. So it's where we're to see the UK and the Chinese approval, maybe a little bit at conflict with each other.

 

Jamie Bernthal-Hooker (11:25)

And you mentioned earlier, Jordan, about this announcement fitting quite neatly ahead of the sealed bidding window for allocation round seven in November. Would you like to speak a little more about that?

 

Jordan May (11:40)

Yes. So at the moment we've just gone through the qualification round. So we haven't actually finished it. They've recently changed the timeline for it, but we know that there's been some appeals and some products have been qualified and the sealed bidding window is going to happen quite soon. So in the sealed bidding window, people need to know basically exactly what their costs are going to be. 

Knowing that Ming Yang is committed to going ahead means that they're also committed to providing turbines to the people they have agreements with. So, it's probably one of the main reasons for the announcement now. There's a lot of varied projects and there's about five 100 MW floating projects. And of course, Ming Yang said in their press release, they're targeting the floating turbine market, which in longevity has a large amount, but even in this round, five different 100 MW projects is going to be a sizable introduction and a good way to get the turbine factory off the ground.

 

Jamie Bernthal-Hooker (12:30)

And realistically, do you think we're likely to see bidders going for it?

 

Jordan May (12:38)

For the turbines, I mean, as long as they're not worried the UK government's going to either just keep leaving the approval on the table for however long to make it untenable or they're convinced that the Chinese turbines do exactly what they say they're going to do and they've seen sufficient evidence because one of the main complaints we've seen about Chinese turbines is that they don't show the testing data in the same way that the European standard is. As long as they're convinced it's a bankable technology and that it's actually buildable in the UK, I can't imagine anyone would be against it.

 

Jamie Bernthal-Hooker (13:10)

And we've seen, obviously in Europe recently, a lot of calls for a self-fulfilled European supply chain alongside some suggestions which maybe come more from industry that economically the supply chain needs to be more global. Are we seeing a supply chain shift though? I mean, this is a notable announcement. I guess I'm wondering what the mix will look like in 15 years.

 

Jordan May (13:35)

I think that it would be quite hard to answer exactly what it would look like in 15 years because all these governments are really the decision makers. But for example, the EU's long-term policy, which they've recently put into effect, the Net Zero Industry Act, would limit the amount of technology that can come from one main country. So if about half of Europe's entire supply chain for turbines came from China, then auctions would start making it so that Chinese turbines could only be used in certain amounts and they wouldn't be fully usable. 

The issue is that the legislation mentions a last significant transformation, which is exactly what it sounds like where the project or the product is significantly transformed. So where the nacelle is completely assembled and components are built and turbines are made – if they're made in Scotland, then that means that the location is Scotland and China. So they've got two different points of attack into Europe, which will start invalidating the policy that we've seen at the moment. 

So it's possible that this distributed move is a much more effective way of allowing these Chinese turbines into Europe. And we could see a significantly increased mix from this, but there's a lot of other things in the work at the moment as well. So, the EU has anti-dumping duties on wind turbine towers, which they've been quite keen to enforce. So for example, in China is actually the only place that they have these: I think it's a 19.2 % tariff on any towers coming into the EU-formed China. But it specifically mentions China, not Chinese companies. So again, if they're made in the UK using Chinese steel, it gets around the legislation. 

So this could be a quite effective way to increase the Chinese supply over the next five, 10, and 15 years in Europe by getting around all the Europe's defences.

 

Rameeza Haq Duggal (15:23)

I totally agree with Jordan. I can also talk from supply chain perspective on that. Like seeing much of the offshore wind infrastructure supply chain, we are already witnessing growing concerns about constraints, particularly in turbines and subsea cables. With HVDC converters already identified as a bottleneck, we have seen real-world impacts such as delays in the Princess Elisabeth Island in Belgium due to HVDC component constraints and higher costs. 

Historically, offshore wind supply chains have remained regionally concentrated. But the hidden cost of the regionalism is the number of projects delayed or re-prioritized as a result. Looking ahead, a supply chain transformation is inevitable. So to meet 2030 and 2040 renewable targets, Europe will need a more interconnected and globally optimized model, one that balances cost efficiency, energy security, and industrial competitiveness. So if that doesn't happen, then achieving these targets may look a little bit difficult in future.

 

Chao Guo (16:48)

I think for some Chinese companies, wanting entry to Europe or the UK market, not just Minyang… I saw some big players in China, they already have planned entry here, to the UK or Europe. I think I heard about Goldwind already planning to build a manufacturer in Poland, potentially. It's not just – not only for onshore wind, you know, because Goldwind focused on onshore wind, but also they started to square some offshore wind orders from Europe. So many companies want to come to here. They want to improve their profitability. So let us see what will happen next year.

 

Jamie Bernthal-Hooker (17:42)

Yeah, let's see. And you had some really interesting points, Jordan, on steel.

 

Jordan May (17:50)

Yes. So the EU is changing the way that steel imports are going to work. So the current system is being evolved under the World Trade Organisation rules; safeguarding is an allowed measure. And what happens here is they set a quota for tariff-free imports. Then anything above that quota from a specific country gets tariffed. What they're doing is they're pulling back on the quotas. So there's less that will be imported without tariffs, and then they're upping the tariffs to double. So it's going to be harder to import Chinese steel into the EU. 

And even if they're doing the loophole where they try to import Chinese steel into the UK to manufacture it, to get around the net zero industry act, that's also probably not going to work too well. The UK has been extending its safeguards from I think 2017 when they started, when we were still part of the EU, to 2021, to 2024, to 2026. And now we're looking to extend it beyond that. So again, it's probably going to take a very similar approach, but last time the UK was applauded by Steel UK, I believe, for going beyond what was necessary and beyond what the EU did. 

So if the UK keeps up its protectionist policy, which, given the recent events with the British steel plants, which the government had to step in because the Chinese-owning company was trying to shut it down… if they keep up these levels of safeguards for long-term security, then we may see this is not necessarily an effective way of importing steel from China to create jobs in China into the UK, which then may pose a little bit of risk for Ming Yang and raises the question again: where were the jobs for the Chinese people?

 

Jamie Bernthal-Hooker (19:18)

I’ve really enjoyed this conversation so far. I've just got a couple of minutes now to ask each of you for your key takeaway from the current conversation. So we'll start with Rameeza.

 

Rameeza Haq Duggal (19:30)

To sum up, a turbine shortage is no longer hypothetical. It's expected. So that's why Ming Yang's decision to build a factory in the UK is such an encouraging step, I would say, both in addressing supply chain constraints and driving cost reduction. So Scotland has the right ports, projects and people. Ming Yang brings the scale and investment. So together they could launch the UK's first major turbine manufacturing hub.

Jordan?

 

Jordan May (20:04)

Yeah. So, building off what Rameeza said, this turbine shortage is inevitable. And of course, the thing that we need to be concerned about is the offshore wind maybe becoming more of political endeavour than an industrial one. People have been saying for ages, the offshore wind needs to compete on market conditions. But when the governments of either the UK or the EU change the market conditions very frequently to push out cheaper technology, the question of when it will become an industrial adventure becomes more of a question and more of a theoretical.

 

Jamie Bernthal-Hooker (20:32)

Nice. And Chao?

 

Chao Guo (20:37)

To summarise, think it's time for Chinese companies to go abroad, to expand overseas. Especially, they need to handle some issues in a totally new market like the national security concern, like how to operation and maintenance these turbines in Europe, something like that. But I think it's a good time for them to enter Europe now.

 

Jamie Bernthal-Hooker (21:07)

Thank you. I think this is a really timely conversation and something that's going to continue evolving and progressing over time. I'm sure we'll continue this chat off mic. Thank you very much for spending time with me today, Rameeza, Chao, and Jordan.

 

Chao Guo (21:25)

Thank you, bye everyone.

 

Jordan May (21:26)

Thank you.

 

Rameeza Haq Duggal (21:27)

Goodbye everyone.

 

Jamie Bernthal-Hooker (21:30)

And thank you for joining us today at PowerPod by TGS. Make sure to subscribe to our podcast and join us next time as we continue this conversation around new energy solutions. See you on the next episode. Bye.