Today, the wind turbine market is experiencing significant supply chain issues. This challenge largely comes from China’s overwhelming production for critical materials. China is the production world leader, and it’s not particularly close. The numbers are staggering. It makes an astonishing 60% of the world’s Rare Earth Elements (REE) and dominates about 90% of REE processing. The monopolistic stranglehold not only extends to the advanced manufacturing of wind power components. This creates considerable challenges for the industry’s expansion and long-term sustainability goals.
New developments have raised worries about the need for diversified supply chains to an urgent level. In early December 2023, China carried out a new phase of their export ban on the separation and extraction technologies necessary to produce permanent magnets. In April 2024, China revealed plans for new export controls on seven rare earth elements (REEs). These elements are vital to many industries including wind energy. Such steps underscore the precariousness of wind developers highly dependent on Chinese materials.
China’s firm grip on the supply chain is far from an unexpected development. For decades, China has dominated the ultra-competitive global market. This dependence has resulted in what many industry experts are referring to as “the Chinese overcapacity problem.” China’s cheap and heavily subsidized exports have hampered fair competition, making it challenging for other countries to establish their own manufacturing capabilities.
China’s Control Over Critical Materials
China’s dominance over the production and processing of REEs is especially worrisome for the wind sector. The country is the primary producer of four essential REEs used in wind turbines: neodymium, praseodymium, dysprosium, and terbium. These materials are essential for manufacturing permanent magnets that improve turbine efficiency and performance.
“There is a near total reliance on China for permanent magnets and limited alternative supply routes available.” – Lizet Ramirez
This proposing reliance opens some huge liabilities. New export controls may further increase restrictions on access to these essential materials. Wind developers such as Ørsted have already felt the impact of China’s supply chain bottlenecks, leading them to opt out of Denmark’s offshore wind farm tender due to uncertainties surrounding material availability.
Additionally, the US-China trade war has complicated the wind industry supply chain. As geopolitical tensions mount, companies are experiencing more challenges than ever scenario in place with suppliers,” Brown said.
Supply Chain Diversification Efforts
To answer these challenges, there is increasing momentum for diversifying supply chains. In addition, industry leaders have repeatedly highlighted the need for diversifying suppliers across multiple geographic areas as a way to build resiliency in supply chains.
“Selecting two or three suppliers from different areas can give you resilience in your supply chain through competition.” – Markus Zeitzen
This strategy is an essential first step to reducing the risks of over-relying too heavily on any one source, especially China. Yet, like most good ideas, diversifying supply sources is easier said than done. The scale and marketplace adoption of alternative technologies and materials though are still in need of investment and development.
Lizet Ramirez highlights that the European Union is taking proactive steps towards securing critical raw materials, especially REEs and permanent magnets.
“For example, the EU is investing in innovations to secure critical raw materials. From the recently announced 47 strategic projects, five are dedicated to REEs and permanent magnets. This is good news for the wind industry in making the most of domestic resources and building new partnerships.” – Lizet Ramirez
All these initiatives underscore the need for developing a long-term, independent, and robust supply chain. They’re looking to stay ahead of the growing demands of the wind energy sector.
The Importance of Sustainability and Quality Assurance
Yet as the wind industry continues to develop, sustainability is becoming more and more important. Another important point that experts emphasize is the importance of assessing the sustainability performance of the steel incorporated into wind turbine construction.
“It is increasingly important to look at the sustainability performance of the steel that goes into the turbines.” – Christopher Lilholm
We need to demand transparency beyond just materials. Quality assurance with any recovering and reintroducing material back into production will be needed to ensure long-term viability and sustainability of wind energy production.
“Quality assurance is also essential in recovering and reintroducing materials.” – Lizet Ramirez
Despite advancements, challenges remain in communicating these aspects effectively to clients. The difficulty of accurately labeling products can pose a significant barrier to any company trying to prove their dedication to sustainability.
“Even steelmakers find it hard to label their products correctly.” – Christopher Lilholm
As widely recognized by industry leaders while navigating these complexities, innovation is the goal but not at the cost of supply chain security.
“Over the last few years, turbine components have gotten bigger, but if you innovate constantly, you overburden your supply chain, as well as research and development and asset lifespan.” – Markus Zeitzen