There Can Be No Energy Transition Without China, Says Siemens Energy CEO

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There Can Be No Energy Transition Without China, Says Siemens Energy CEO​

May 18, 2024,01:00pm EDT
Wind turbines manufacturing In China

Employees work on a production line of wind turbines in Lianyungang, Jiangsu Province of China. ... [+]
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The renewable energy sector's supply chain dependency on China is so huge that it makes breaking away from it next to impossible and puts the transition in jeopardy, according to the boss of gas and power outfit Siemens Energy.

At a media and analysts' briefing earlier this week, Christian Bruch, CEO of Siemens Energy, noted: "Trying to build a wind turbine without any Chinese supply will be close to impossible. Energy transition without China doesn't work."

His comments highlight the complexity for firms desperately needing supplies and parts manufactured in China, but not the competition from complete kits made there that undercut Western firms.

Bruch's own wind unit - Siemens Gamesa - relies almost exclusively on permanent magnets and rare earths from China for manufacturing wind turbines, with limited options for a near-term diversification of that supply chain.

The market dynamic continues to cause global trade tensions with China. U.S. President Joe Biden recently raised tariffs on Chinese electric vehicles, while the European Union (E.U.) has launched an investigation into whether Chinese wind turbine makers benefit from subsidies in their efforts to undercut the pricing of Western manufacturers.

Germany - Siemens' home patch - has also seen its government and Chancellor Olaf Scholz calling on manufacturers to reduce their exposure to China; a stance that has not been universally welcomed by the country's industrial majors.

The Siemens Energy CEO said it was critical that China's wind turbine manufacturers be held to the same E.U. standards as his company and its European peers when they sell their turbines in the common market.

The solution for harmonious international trade would be to discover a middle ground between the heavy protectionism that's emerging in the U.S. and a free market, Bruch said further.

"I'm not in favor of blocking the European market. But I think we still need clear rules in terms of how companies are financed, where do they get guarantees from and what do they pay for it. This needs to be somewhat consistent," Bruch added, whilst expressing hope that the E.U. investigation would ultimately achieve such an objective.

"The last thing I would do is advocate something like departing or de-risking. We have a connectivity between the two regions that is fruitful and unavoidable."

However, Bruch's stance does not mask the problems his wind unit is facing. Siemens Gamesa is currently in the process of retreating from several markets in Latin America and Africa where it appears unable to compete with cheap Chinese competitors.

Bruch said Siemens Gamesa would no longer compete in markets where it was up against multiple Chinese players if price was the only differentiator.

He also went so far as to say that the company had contemplated an exit from the onshore wind segment altogether, but decided against it for the moment because an exit would have been costlier from a corporate perspective than staying in.

Instead, the company opted to launch an onshore wind business turnaround plan to target double-digit growth within 4 to 5 years, in the absence of which, it would consider other options for Siemens Gamesa.
 

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