In 1887 Charles Brush did a revolutionary thing. He generated electricity for the people of Cleveland using the first automatically operated wind turbine – making America the birthplace of the wind power industry.
So what would the father of wind power make of the news that the United States’ latest wind farm will not be built by a fellow American, but instead will be owned and operated by a Chinese firm?
For Goldwind – the company that has won the contract to produce and sell wind power in the US – the moment is ripe with symbolism.
“If this project works well, Goldwind’s wind turbines are likely to squeeze into the mainstream US market,” argues Andrew Chen, boss of wind-energy services company USFOR.
The project will see Goldwind build 71 of its 1.5MW turbines at a site in Illinois later this year. The farm, dubbed Shady Oaks, will have a capacity to generate 106.5MW of power, which Goldwind has agreed to sell to electricity giant Commonwealth Edison for the following two decades.
It’s a major breakthrough for the company established in Urumqi, Xinjiang just 13 years ago. And it follows another coup in October last year, when Goldwind pulled off a $917 million public offering in Hong Kong, giving it the much-needed capital to fund its foreign ambitions. Although it mainly makes turbines to sell to wind farm operators it sometimes builds wind farms which it plans to sell on at a later date. The $200 million Shady Oaks project is likely to be a cross between a wind farm investment and a form of marketing.
So with its Chinese rivals like Sinovel and Dongfang nipping at its heels, why was Goldwind the first to get a significant presence on US soil? According to Goldwind USA it comes down to better technology. “[We] developed ‘Permanent Magnet Direct Drive’ technology earlier than our opponents… [it’s] more reliable, effective and cheaper than turbines with a gearbox.”
The company is already regarded as one of the better-quality Chinese manufacturers, and if it can succeed in the US market that’s likely to improve its image at home.
Success with Shady Oaks could give Goldwind another key advantage over its domestic rivals: once it has an established track record in the US (a combined 100 years of smooth operation over all its turbines), its projects there become eligible for local bank financing.
Will it all go smoothly? Some wonder whether it bodes ill that Goldwind had to buy its erstwhile partner – Mainstream Renewable Power – out of the Shady Oaks project. Does that signal a problem? Li Chunhua, director of Goldwind International, assured the 21CN Business Herald that was not the case and added: “Mainstream still has responsibilities and obligations to help Goldwind in the construction of the project.”
In light of the unfair trading investigation brought against Chinese ‘green tech’ companies last October, wind power generation remains a sensitive topic.
So Goldwind has been keen to stress the contribution of the Shady Oaks project to the US economy (“about 60%” of the project’s cost will be provided in US parts and labour, according to Li. That’s roughly the same proportion Goldwind used in its much smaller 4.5MW project in Minnesota in 2009.)
“The core components of the three units such as generators, control systems are still produced by Goldwind itself, but the towers, blades and infrastructure are handed over to US companies to manufacture,” one Goldwind employee insisted to 21CN.
But that may not be enough to mollify the United Steelworkers Union, one of the leading scrutineers of Chinese companies with ambitions to secure more US business.
“We will pay close attention to the progress of the project,” warns USW spokesperson Wayne Ranick. “They should work to reach the same domestic content level here that they would if they were building in China,” he told Bloomberg.
Keeping Track: Showing better market savvy than its rivals, Sinovel Wind Group waited until last week to go ahead with its $1.4 billion Shanghai IPO. China’s largest wind turbine-maker managed to price its shares near the top of expected range, at Rmb90 (25 times projected earnings). Investors appear to have had second thoughts since then, and shares are already down 17%. Sinovel is known for its low costs and keeping much of its production in house, but rival Goldwind (currently trading at 17 times projected earnings) is thought to offer longer-lasting turbines.(21 January 2011)
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.