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Chinese eye domination of wind turbine market

HONG KONG/LONDON (Reuters) - After sparking a massive price war and wreaking havoc on earnings at European and U.S. makers of crystalline silicon solar cells and panels, China now has established wind turbine manufacturers in its sights.

While Denmark's Vestas VWS.CO and U.S. conglomerate General Electric GE.N were still the top two wind turbine suppliers in 2009, according to Danish consultancy BTM, Chinese firms are coming up fast.

Sinovel Wind, Xinjiang Goldwind Science and Technology Co, and Dongfang Electric 1072.HK600875.SS all took up top 10 ten places and firms are keen to compete in the export market.

“(Chinese manufacturers) have already established international sales teams and are actively bidding for contracts overseas. The process is underway,” said Robert Todd, Hong Kong-based director of Renewable Energy, Resources and Energy Group at HSBC.

“It’s just a question of how soon they could actually build momentum,” said Todd, who forecasts Chinese wind companies winning more projects outside China over the next 12 months.

Goldwind 002202.SZ on Monday said it established a wholly-owned U.S. unit in Chicago, marking its fresh assault on a market largely served by General Electric. The move follows Goldwind's establishment of a production base in Germany and a subsidiary in Australia late last year.

China's biggest wind turbine maker and the world's No.3, Sinovel, exported 10 wind turbines of 1.5 megawatts each to India last year. The unlisted Chinese company also purchased in March from American Superconductor Corp AMSC.O electrical systems for its high-capacity 5-megawatt wind turbine, a homegrown technology planned for export in the long-term.

As with the solar market, China is able to offer products at much lower prices than European or U.S. counterparts, fanning fears that wind turbine prices could be driven down and creating the oversupply that rocked the solar market last year.

"It's clear that the market prices are lower and you can see that from government contracts," said gearbox maker Hansen Transmissions' HSNT.L CEO Alex De Ryck, referring to wind projects won by local companies in China.

A typical wind turbine consists of a 65 meter-tall tower, a rotor blade the length of a Boeing 737, and a nacelle holding generator components the size of a small motor home.

Turbines account for 70 percent of a wind power project cost and sell at about 5 million yuan a megawatt in China.

Wind turbines sold in Europe and the United States could fetch a price of over $1 million per megawatt.

WIND FOR EXPORT

China is a frequent target for complaints that it blocks access to its markets or unfairly helps its exporters with huge subsidies and cheap state loans.

German solar firms Conergy CGYG.DE and Solarworld SWVG.DE have voiced strong concern about the pricing practices of Chinese panel makers who undercut their German peers' products historically by around 20 percent.

But for now at least, Chinese wind turbine makers are heavily focused domestically, their 2009 exports of under 30 megawatts representing just a sliver of the 24,540 MW in capacity installed outside China.

Their common goal of boosting exports to contribute significantly to sales is still a distant threat for many international turbine players, not least because of the logistics involved in transporting the oversized parts.

“Chinese producers have started to get involved abroad, for example in India or in the Asia-Pacific region. However, Chinese players are mainly operating in their domestic market,” said a spokesman for Europe’s largest engineering conglomerate Siemens.

China is the biggest wind power market in the world, doubling its installed wind capacity in 2009 by adding over 13,000 MW.

Local turbine companies now hold 80 percent of the China market which less than a decade ago was dominated by global wind companies such as Vestas, GE and Spain's Gamesa GAM.MC.

Vestas expects its strategy of bettering turbine technology, rather than competing on price should help fend off mounting competition from Chinese players.

“It is not in our interest to engage in a competition focusing on price alone,” Vestas China president Jens Tommerup told Reuters.

“Our turbines are reliable, productive and efficient - over the long term - which means a low cost of energy. We are also focused on building long-term partnerships with our customers that include all aspects of wind energy.”

Additional reporting by Christoph Steitz in Frankfurt; Editing by Jon Loades-Carter

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