Amid fierce competition, Sinovel Wind Group Co, the Chinese turbine manufacturer, has clinched a deal with Brazilian developer, DesenvixSA, to supply turbines for the Barra dos Coqueiros wind farm in Sergipe State, North East Brazil.
The wind farm is expected to be commissioned in July next year, and Sinovel say they will deliver the turbines by December 2011. Mr Lecheng Li, the Senior Vice President of Sinovel said:
“This deal is a good beginning for both Sinovel and Desenvix. It strengthens the green energy presence of Desenvix and opens the door for Sinovel to the Latin American market. With the successful model of the Barra dos Coqueiros wind farm, the whole market is now aware that the wind farm solution from China is not only attractive but feasible”.
Brazilian developer Desenvix SA will use 23 of Sinovel’s SL 1500/82 turbines to power the 34.5 MW Barra dos Coqueiros wind farm. A total of over 7,000 of these units have been manufactured and installed around the world.
Chinese turbine manufacturers like Sinovel and Goldwing are aggressively pursuing expansion in key growth markets around the world, and have a critical price advantage thanks to China’s low wages and state funding for the sector.
Some BRL30 billion (US$16.8 billion) has been invested in wind energy projects in Brazil since 2009, and 5,785 MW in planned installation have been contracted through five public auctions. The biggest jump in Brazil’s energy contributions over the next decade will come from windpower, which today supplies about 1% of the nation’s electricity, but should supply 7% or more by 2020, according to the Brazilian Wind Energy Association, ABEEolica.
But there’s a snag. The low Chinese wages may not be reflected in the price of these turbines; to truly compete in Brazil Sinovel will need to be based locally, and pay higher wages, for two main reasons. Firstly Brazil has prohibitive import tariffs on manufactured goods. Secondly the nation’s most influential lender, Brazil’s National Development Bank, BNDES, is steering developers towards domestic suppliers. BNDES offers loan rates that are usually half of the best rate a Brazilian private bank can offer, and in turn has been the primary lender for almost of all wind farm projects and related supply plants opened in Brazil recently. With BNDES likely to be holding the purse strings, wind power developers must dance to their tune. And a key chorus of that tune is its loan requirement mandate that at least 60% of equipment and services used to build a wind farm be domestically sourced. Two companies have already danced the dance. German manufacturer Kenersys announced plans in September to set up a Brazil factory later this year and in October, General Electric finalized an agreement with Brazil’s northeastern state of Bahia to build a turbine factory there.
Consequently it has come as no surprise that Sinovel has announced that it will be the latest turbine manufacturer to build a factory in Brazil. Sinovel have not given details but have said this will show their “show its strong commitment to this market”. It’s likely that other Chinese manufacturers will also be beating a path to Brazil’s door and attemting to demonstrate similar strong commitments to this lucrative market.