China’s winds of change

The ongoing debate about energy policy often overlooks the reality that in addition to coal and natural gas, U.S. renewable energy resources are world-class. Take wind. The top global wind energy resource resides squarely in the American heartland.

This isn’t lost on global wind companies including Goldwind, China’s top private producer of wind-power technologies. For Goldwind and other global wind-technology leaders, the U.S. is a land of opportunity.

It’s also a source of visible frustration for Wang Haibo, Goldwind Vice President and clearly the expert in the room as we discussed global wind opportunities. We met with Mr. Wang in Beijing.

Wind may be plentiful in the U.S., but for those who would invest in wind-related projects, confidence to do so may be at an all-time low. The industry remains some distance from being able to compete on a cost-per-kilowatt hour with carbon sources. This translates into separate challenges for Mr. Wang in his two largest potential markets.

In China, Goldwind competes with state-owned wind-technology company Huarui. And it’s a semi-rigged game. From what I gather, price-breaks, subsidies and influence give the state-owned business a leg-up in a wind economy in China that benefits from a fixed price for wind-sourced electricity. One gets the impression that Mr. Wang believes Goldwind would win more business in China if the playing field were evened.

Yet price-certainty in China for wind-power is precisely what provides Goldwind time it needs to achieve parity with coal – ‘black energy’ in Chinese vernacular (the Chinese dispense with any political correctness when describing carbon sources). Wind-power is more expensive than coal. But Goldwind and others are able to sell power to China’s users at coal-power rates. The Chinese government subsidizes the difference. Through 2019, Goldwind is assured of price-parity, buying it the time it needs to refine its business, lower its price and compete on even terms with black-energy producers.

It’s the type of price-certainty that’s missing in the U.S. Without it, investors shy from wind development. And the policy climate for future financial support isn’t promising. Facing losses with no clear path to profitability, investment capital will continue to be a barrier to wind-power development. And the world’s best wind-energy will continue to be considerably under-utilized.

Will U.S. sentiment change? Will money be found to fund the price subsidies and other means to establish price-certainty for wind-energy providers? Mr. Wang and his competitors can only hope. But the answer is fairly obvious – at least in the short-term.

Meanwhile, China’s market for wind-energy is strong – if not expensive – and growing. Policy-makers are hyper-aware of the ecological challenge – and the implicaitons for not acting. We experienced a coal-induced haze for 500 miles traveling south from Beijing to Shanghia on China’s superb bullet-train service.

For those with the stomach to compete with at least one government-owned business, there’s opportunity. (Our meeting came to an abrupt end when Wang fielded a call from a potential Chinese customer to finalize a deal.)

Those who find a partner operating in China should prosper.