How Taiwan could be Asia’s manufacturing hub for wind turbine blades

Webinar summary: Opportunities and Challenges of Offshore Wind Industry

IRENA predicts that Asia Pacific will account for more than 60% of the global offshore wind installations by 2050, making it the largest offshore wind market. The great market opportunity in the wind turbine supply chain has drawn attention. Jay Hsu, general manager of Taiwanese manufacturer Tien Li Offshore Wind Technology, said in the webinar that Taiwan should seize the chance to become the blade manufacturing center in Asia. 

Among more than 9000 turbine components, the wind turbine blade market has the greatest potential. According to Wood Mackenzie, the global wind turbine supply chain is expected to generate US$ 540 billion opportunity through 2027, with the blade market accounting for more than US$100 billion of the cumulative opportunity.

Transportation of a wind turbine blade, which is large in size and weighs more than 50 tons, accounts for 30% of production costs. Therefore, blades are usually manufactured in house and have high level of local content. However, the trend has changed in recent years as the market saw growing number of independent blade manufacturers. A 2019 report from Wood Mackenzie predicts that in-house offshore wind turbine blade production volume will grow 80% by 2022, while that of  independent blade manufacturers will surge by 208%.

In late April, offshore wind turbine manufacturer giant MHI Vestas signed a purchase agreement with Swancor for the supply of turbine blade materials in Taiwan. The contract is expected to add NT$850 million value to the Taiwanese economy. 

This is the second purchase agreements MHI Vestas signed related to blade materials in Taiwan, following the company’s contract signed with Tien Li Offshore Wind Technology Co., Ltd. to manufacture blades locally in Taiwan. As part of the agreement, a new facility will be built in Taichung Harbor. The partnership is expected to create economic value of around NT$4.3 billion.

Favorable conditions, such as on-site manufacturing sites and supportive policies, have made Taiwan ideal for offshore wind. According to Jay Hsu, Taiwan has the capacity to produce 9.5 MW offshore blades, whereas China has about 5 to 6 MW. In addition, the ongoing US-China trade war and the pandemic have also made Taiwan more attractive. He predicted that there will be 1 GW of new capacity being installed every year in Taiwan from 2021 to 2030. 

However, there are several issues beyond Taiwan’s potential to become a leader in offshore wind. For example, whether Taiwan should exclude Chinese products and set up a free economic zone are critical. Also, more government incentives should be provided to help increase competitiveness of local suppliers and developers, as the land leasing rates in Taiwan are significant higher comparing to China.
 

Wind InfoLink opinion:

Since a wind turbine consists of thousands of parts, turbine manufacturing is characterized by a global supply chain to reduce risk. This nature, however, makes the industry vulnerable to a global crisis. For instance, the COVID-19 pandemic disrupted deliveries of wind turbine components produced in India, thereby causing delays in timeline and cost overruns.

Moreover, manufacturing wind turbines is labor intensive, and measures taken to ensure the health and safety of workers during the pandemic lead to increased costs. Therefore, the hedging strategies and supply chain management are critical for international wind turbine manufacturers.

The industry saw in recent years manufacturers moving production from developed European countries and China to India and Latin America.

Wind turbine manufacturers should reassess their strategies of expanding into emerging markets and diverse risk in the post-COVID-19 world. Wind InfoLink believes that Taiwan, which has a head start over South Korea and Japan in the development of offshore wind industry and related policies in Asia-Pacific region, is a good choice for manufacturing.

Taiwan’s quick response to COVID-19 has also showed resilience during the pandemic, with its manufacturing and economic activities having been well maintained. This underlines the importance of a government’s disaster management to the selection of a manufacturing site.

With government’s support and domestic-demand-led growth, Taiwan is believed to have the potential to become the pivot in Asia-Pacific offshore wind market, creating more jobs and economic values in the next decade.