EU investigating China’s wind turbine subsidies

The European Commission is launching an inquiry into Chinese suppliers of wind turbines for unfair government subsidies, European Commissioner for Competition Margrethe Vestager said. The measure expands the efforts to protect the domestic high-tech market. The European Union intends to include cybersecurity in the criteria.

Right after initiating in-depth investigations against LONGi and Shanghai Electric for alleged unduly advantage in a solar park tender in Romania, the European Commission revealed that it is probing China’s subsidies in the wind turbine realm as well. It was Executive Vice President of the European Commission for A Europe Fit for the Digital Age and European Commissioner for Competition Margrethe Vestager who broke the news.

Speaking in Princeton, New Jersey, she failed to name the Chinese suppliers targeted in the inquiry, disclosing only that the process concerns the conditions for the development of wind parks in Spain, Greece, France, Romania and Bulgaria.

Vestager: Those who lead are those who control the most critical technologies, and their supply chains

“One thing is clear: in a world powered by technology, those who lead are those who control the most critical technologies, and their supply chains. Chips, batteries, electric cars: our competitiveness will necessarily depend on our capacity to produce and deploy them.  Both the Covid pandemic and Russia’s brutal war in Ukraine have shown us our vulnerabilities,” Vestager explained.

Both Europe and the United States depend on third countries for critical technologies and the raw materials needed to produce them, according to the EU’s top regulator. “And in this area, China has built up a strong position, not always playing fair. China is for us simultaneously a partner, an economic competitor, and a systemic rival,” Vestager added.

Foreign Subsidies Regulation is prelude to systemic crackdown

It is worth mentioning that Euractiv recently pointed to upcoming regulations such as the European Wind Power Package and Net Zero Industry Act (NZIA) in a report, concluding that the administration in Brussels is preparing a Huawei-like treatment for Chinese wind turbines. The proposed criteria include cybersecurity, hence the reference to banning the technology giant based in Shenzhen from the development of 5G systems.

The crackdown on suppliers of solar power equipment and wind turbines is based on the new Foreign Subsidies Regulation or FSR

While resisting the calls from European solar manufacturers to impose tariffs on solar panels from China, the commissioners are apparently turning to environmental, social and labor standards and similar tools. The crackdown on suppliers of solar power equipment and wind turbines is based on the new Foreign Subsidies Regulation or FSR.

Huawei and other Chinese companies have been suffering from restrictions on other kinds of equipment as well in the west, mostly consumer electronics.

Turkey, which already had antidumping duties in place for Chinese solar panels for seven years, recently targeted its reexported equipment from five other countries with tariffs.

Play by rules

Vestager noted that the European Commission launched an anti-subsidy investigation into the imports of electric vehicles from China in October. “If we determine that those electric cars have been illegally subsidised, we will impose remedies. Every time we suspect that any foreign company has been unduly advantaged in a public tender, we dig further,” she stressed.

An inquiry into China’s state-owned CRRC’s participation in a public tender for trains in Bulgaria has resulted in its withdrawal. Notably, wind power deals for Chinese companies in Serbia and Bosnia and Herzegovina, which are not part of the EU, are also raising eyebrows in Brussels.

Less than 3% of the solar panels installed in the EU are sourced in Europe.

“Let me be clear: the investments that we put in our supply chains, the investigations that we run, or the new tools we have developed – those are not meant to constrain China’s success. They’re meant to restore fairness in our economic relations. Everyone is welcome to be successful. Everyone is welcome to trade with Europe. But they have to play by the rules,” Vestager stated.

She outlined her interpretation of how China came to dominate the solar power industry, resulting in less than 3% of the solar panels installed in the EU being sourced in Europe.

“First, attracting foreign investment into its large domestic market, usually requiring joint ventures. Second, acquiring the technology, and not always above board. Third, granting massive subsidies for domestic suppliers, while simultaneously and progressively closing the domestic market to foreign businesses. And fourth, exporting excess capacity to the rest of the world at low prices,” Vestager claimed.

She accused the government in Beijing of deploying the same playbook across sectors. “Our economies cannot absorb this. It is not only dangerous for our competitiveness. It also jeopardises our economic security,” Vestager underscored.

Harmful US-EU subsidy race

The Group of Seven (G7) should develop a list of “objective and country-agnostic” trustworthiness criteria for critical clean technologies, she suggested. In Vestager’s view, the US Inflation Reduction Act missed that approach. IRA is a massive incentives package for decarbonization technologies. The EU is yet to respond to it substantially even though some investors are moving across the Atlantic.

“By tying the criteria to local production, instead of trustworthiness, the US limited the potential scale for western producers. And it forced us to react by enabling matching subsidies. Which means that, essentially, each of us is using taxpayers’ money to attract or retain projects from each other,” Vestager pointed out.

WindEurope commends new investigations

Chinese wind turbines are being offered in Europe at up to 50% lower prices than Europe-made turbines, WindEurope said.

“We fully understand the commission’s rationale. Chinese wind turbine manufacturers are offering much lower prices than European manufacturers and incredibly generous financing terms with up to three years deferred payment. You can’t do that without unfair public subsidy,” the industry group’s Chief Executive Officer Giles Dickson said. He stressed that European manufacturers aren’t allowed to offer such deferred payment, due to the rules of the Organisation for Economic Co-operation and Development (OECD).

The deferred payments effectively mean that Chinese manufacturers offer their turbines for free until the wind farm operator has three years of revenues, according to WindEurope.