Asia's advance into European offshore wind supply chain 'already underway': analyst

Asian supply contracts and east-west alliances are emerging as a response to the growing gap between Europe's expansion plans for offshore wind and its ability to meet that demand from its own supply chain, according to analysts at maritime market intelligence firm Spinergie.

In a webinar posing the question of whether the offshore wind chain is "moving from Europe to Asia", Spinergie traced the start of the shift to the supply and installation of offshore wind export cables.

The firm’s offshore wind analyst Maëlig Gaborieau referred to an expected nine-fold increase in overall demand for cables as part of a bigger picture where European offshore wind capacity is expected to increase tenfold between 2024 and 2030.

Spinergie referred to a number of projects aimed at boosting European capacity for several key components but its analysts made it clear that it already sees the local supply chain as under intense pressure to deliver.

Gaborie noted that the European and Asian – essentially Chinese – offshore wind markets were “clearly distinct before 2020, with almost no porosity between them”.

Growth has remained strong in both markets, but the export market became increasingly attractive to Asian players due to Europe’s ambitious growth targets, Gaborieau said.

Expected demand for more than 3,800km of export cables in Europe by 2030 — as well as significant additional demand for cables from interconnector projects — have made this one of the first sectors to draw in Asian manufacturers.

The first such export contract gave South Korea’s LS Cable & Systems a role on Belgium’s Norther project, Spinergie noted, with cables installed in 2018 and commissioned in 2020.

European cable manufacturing capacity is now expanding, but Gaborieau said local production capacity risks falling short of demand, with 27% of cable supply contracts set to be will be awarded to Asian players in the 2028-30 period, according to the firm.

Alliances being forged

Spinergie suggested that a growing trend toward turnkey EPCI contracts has favoured the formation of new export cable partnerships where export cables are Asian-made and European-installed.

Among the examples of this are LS Cable & System partnering Belgian offshore installation vessel special Jan de Nul and, to a lesser extents, the latter’s Dutch rival Van Oord.

Similar partnerships between Orient Cable and Dutch transport and installation giant Boskalis and another between ZTT and ASSO subsea were also highlighted.

The expected tenfold increase in European offshore wind capacity also encompasses demand for 35 new wind farms, with 2,300 new turbines and foundations.

Spinergie said this “strongly suggests” more demand than European manufacturers can meet.

The firm noted that Asian manufacturers are advancing faster in some sectors, for example where there is a close fit with systems already developed for offshore oil and gas industries, or where the intermittent nature of demand is proving less attractive to European competitors.

In the case of jacket foundations, Spinergie noted that Lamprell's contract for the East Anglia 1 project in the UK was the first example of Asian supply, but suggested that there are already "few European manufacturers remaining" in this sector, with 168 jackets supplied from Asia in the 2022-23 period.

In this case, intermittency was a factor with no jackets installed in Europe 2021 or so far in 2024, with most European suppliers diversifying toward transition pieces and monopiles.

In the case of monopile foundations, Spinergie noted that the European industry is still robust, led by companies such as Sif and EEW, but faces a growing challenge from Asian competitors.

Chinese monopile content was described “an attractive option to save costs”, with Dajin Heavy Industry described as “one of those making strong entry into Europe by building on experience in Chinese offshore wind market producing complex XXL monopiles.”

Spinergie also analysed looming Chinese competition in the wind turbine market, with Mingyang’s landmark European order for Italy’s Taranto project in 2022 seen as a starting point, to be followed initially by orders on Germany’s Wateerkant and Italy’s MedWind for 2027 and 2028 respectively.

In the face of predicted “fierce competition” from China Spinergie also looked at the counterbalancing effect of EU monitoring of unfair trade practices and, in some markets, a shift toward non-price criteria that can raise the weighting of factors such as compliance with labour status, ability to deliver on time, security and cyber security, as well as environmental, sustainability and innovation factors and energy system integration capacity.

Spinergie noted that the mix between European capacity expansion and the growing role of such non-price criteria is spurring European suppliers such as NKT/Nexans (cables), Sif (monopiles and transition pieces) and Vestsas (wind turbines) to expand European manufacturing facilities, but the same factors are also encouraging Asian players to started investing in their own production facilities in Europe.

Examples so far have included decisions by LS Cable & System and Sumitomo Electric to invest in cable factories in UK and Titan Wind Energy's June announcement of a decision to invest in an XXL monopile manufacturing plant in Germany, following in the footsteps of SeAH Wind in the UK.

In the highly sensitive wind turbine segment, European players are watching closely to see if Mingyang will go through with a plan to implement a new turbine plant in Italy

"These are investments that can allow Asian manufacturers to employ a European workforce to meet additional non-price criteria, to manufacture locally and also reduce the greenhouse gas emissions of transporting from Asia, but it remains to be seen if will come up against protectionist policy from the Europeans and whether it will result in the production of the lower cost components that will enable governments to achieve the ambitious targets they have set," said Gaborieau.

Spinergie also referred to a growing "new trend" toward partnerships between European and Asian companies, as already seen with export cables.

Examples were the monopile partnership between Taiwan's Century Wind and Sif and the acquisition by South Korea-based CS Wind of Bladt Industries, followed by another partnership with Century Wind Power to build 62 jacket foundations.

In its conclusions, Spinergie argued that the internationalisation of the European offshore wind supply chain is inevitable due, among other things, to a lack of yard space and manpower to fabricate enough components. Export cables and offshore substations were identified as the two most critical bottlenecks.

"The goal is to maintain balance," the Spinergie analysts concluded, stating that a growing market needs investment in increased supply capacity while maintaining a fair and competitive market. leaving an important role for non-price criteria and tariffs. Strong regulators will provide the answer, Spinergie concluded.