Siemens has announced that it wants to form a wind turbine joint venture (JV) with an as-yet unknown local wind turbine company. Siemens says the JV will expand sales of its green-focused products.
The JV is more than an additional sales channel, however; it may help to grant Siemens entry into the Chinese wind power market. Some of Siemens’s international competitors, including Denmark’s Vesta Wind Systems, Spain’s Gamesa, GE Energy and India’s Suzlon Energy, were banned from competing to supply China’s state-owned independent power producers with wind turbines, in what many observers saw as protectionist move.
A JV may help Siemens to sidestep barriers to market access, but there are dangers. Eventually one of two things will occur: Beijing will revise the law and allow foreign wind turbine companies equal access to the industry, or the domestic company will end the JV when it feels it has enough knowledge to develop advanced wind turbines on its own.
Selecting the right partner could mitigate these risks. For example, by bringing in Shanghai Electric, in which Siemens holds a 5% stake, Siemens stands to benefit even if Shanghai Electric decides later to go it alone. The companies’ standing relationship should also help them to avoid many of the hiccups endemic to JVs.
This strategy may also allow Siemens to achieve another goal: selling its smart-grid technology in China. This technology, which is designed to distribute electricity more efficiently, and which is able to handle intermittent power sources, would effectively increase the utility of wind as a power source in China.
However, that is a longer-term goal. While Beijing has committed to building a smart grid by 2020, its efforts focus on upgrading the transmission system with a high-voltage transmission network. There has been less emphasis on using technologies such as those provided by Siemens to develop better communication between the supply and demand sides, as in plans for a smart grid in the United States.
Even if that doesn’t change, however, the JV could well be a profitable move. With a strong partner and a clear understanding of potential risks, Siemens could secure market access far beyond that of its international competitors.