FINAL PROJECT

INTERNATIONAL BUSINESS STRATEGY

WIND POWER
ENERGY MARKET IN CHINA
AND
BUSINESS PLAN FOR REPSOL

Javier Fernandez(19021936)
International Business Strategy – IB Master
Professor: Yin Chen (IB941)
 SUMMARY

1) Introduction

2) Background of REPSOL

2.1 REPSOL and renewable energies

2.2 WindFloat Project

3) Analysis of the Energetic Market in China

3.1 Wind Power Market in China

3.2 SWOT analysis of the Market

4) Analysis of Xinjiang Goldwind Science&Tech Co Ltd

4.1 Background of the company

4.2 Company Market Strategy

5) Business Plan for Repsol in China

5.1 Windfloat Bohai

5.2 Development of the project
 1) Introduction

Energetic market in China is very important, is the largest in the world. Besides, Repsol is the
most important spanish energetic company. For the last years is trying to increase it’s
presence in the chinese market, which is facing important transformations according to the
challenges of the century due to climate change and sustainable energy.

The objective of this report is to give a general view of this market, which is changing
quickly adapting to the new renewable energies. I will focus in Wind Power Energy Market,
which grew importantly in China during the last years and can be an interesting option for
Repsol according to it’s new projects related to this energy. Focusing on the strengths and
weakness of the market and the company, I will try to give some recomendations to find the
best position in this changing market.

2) Background of Repsol

The history of Repsol begins in 1951, when the the company REPESA launched a new brand
of lubricants called Repsol, which soon becomes one of the most popuar brands in Spain.

After the creation of Repsol, as a company focused on the exploration, production,

transportation and refining activities of oil and gas, in 1987 the company decided to create a
clearer identity that can be easily distinguished and remebered. Born in a market enviroment
characterized by the offer of generic products in which quality is not a factor choice, prices
are fixed without differentiation by brand and there is a shortage of points of sale.
The design of the new Repsol brand was carried out by Wolff Olins1, was a comlicated task
because of the different business that made up the same Group. In 1997, the changes in the
markets made them start an evolution. The aim was maintaining the position, representation
and integration of the diversity.
In 1999, the acquisition of the Argentine oil company YPF allows Repsol to achieve a better
positioning and balance as a global brand.

1
Consultancy company founded in 1965 established in London, New York and San Francisco.
2
Data provided by a report of the NEA in 2019
3
95% of those turbines are installed in the domestic market(CNBC, Nov 2019)
 2.1 Repsol and renewable energies

Repsol goal is to advance the energy transition and reduce the company emissions from its
operations and products, this actions against climate change are in accordance with the Paris
Agreements. The company has invested €2.5 billion in 2018-2020 in renewable energy,
combine cycles and other low emission technologies.

In October 2019, Repsol established a renewable energy subsidiary, Repsol Renovables, to

pilot its growth in the green energy business, where is expected to have around 4500 MW in
2025, a target that among its active and ongoing projects already is reaching almost 90%. The
corporate purpose “is the realization of all kind of activities, works and services of their on or
related business project, engineering, development, construction, operation, installation,
maintennace and disposal of production complexes of electrical energy.” (Europa Press, Oct.
7, 2019)

One of the most ambitious projects of the company is related to wind energy. WindFloat
Atlantic, is the world’s first semi-submersible floating wind farm. The Project applies a
disruptive technology that allows the installation of wind platforms in deep water, where
abundant wind resources can be used. WindFloat Atlantic has the largest commercially
available wind turbines in the world, which contributes to increasing energy generation and
foresting a considerable reduction in the costs associated with the life cycle and its ease of
anchoring makes this replicable in other locations and eliminates geographical conditions
when undertaking this type of infraestructure. This Project has been supported by public and
private institutions, which results in the participation of leading companies in their markets
and support of Government, European Comission and European Investment Bank.
Currently the first platform with the turbine is located in Viana, 20 km away from the coast in
Portugal.
 2.2 WindFloat Atlantic Project

The Project belongs to the Windplus consortium, which is formed by EDP Renovaveis
(54.4%), Engine (25%), Repsol (19. 4%) and Principle Power Inc. (1.2%).

The installation has three wind turbines mounted on floating platforms anchored only with
chains to the seabed at a depth of 100 meters. This technology minimizes enviormental
impact and facilitates access to wind resources in deep waters. This technology supposes
great advantages that make it more accessible and economic, also the fact that is carried out
dry, that sepecific transport vessel is not necessary for its tráiler and doesn’t dependo n
complex offshore operations associated with the installation of traditional fixed structures.
This project was developed at first as a prototype between 2011-2016, in this time was able to
generate energy continiusly, overcoming extreme weather conditions (such as waves up to 17
meters high and winds of 60 knots) without suffering damage.
The WindFloat can also support the world’s largest commercially available wind turbines on
a floating structure of almost 9MW each, helping to increase power generation and drive
significant reductions in lifecycle costs.

3) Analysis of the energetic market in China

China is facing a global energy transformation where the renewable energies are leading this
change. The Government and the industry sector are investing and developing clean energy
tehnologies.

According to Reuters, China’s renewable capacity grew around 9.5% in the first six months
of 2019, due to the policies implemented from Beijing to try to push clean energy
consumption. In this period of time, also added more power capacity in sectors like
hydropower(9.09 GW) and wind capacity(11.4 GW)2.

2
Data provided by a report of the NEA in 2019
Seeing this favorable enviroment to the development of the renewable sector, nowdays still
don’t have much foreign investment. The main reason is that the Chinese companies are well
supported by the Government subsidies, so there is a small place for foreign companies

Figure 1: Renewable market 2018

As we can see in Figure 1, the world second biggest manufacturer of wind turbines is
Goldwind, a chinese company with headquarters in Urumqi.

Most of the industry in China is dominated by state-owned companies, this allow them to
have a quick improvement and become harder competitors for the international market. Also
in the Figure 1, we can noticed that two of the five world largest producers or wind turbines
are Chinese, what proves the good development of the sector3.

Nowadays, China is the largest consumer of energy, the largest producer and consumer of
coal and also the largest emitter of carbon dioxide. To change this, China is trying to
decarbonize the energy sector, by introducing 30/40 GW of renewable energy every year.
To get this goal, the Government announced that would invest $360 billion in renewable
energies by 2020. (McKinsey, 2017). Seeing this data, is fair to say that China is in a energy
transformation, which will be driven by technological development and the falling cost of

3
95% of those turbines are installed in the domestic market(CNBC, Nov 2019)
renewables. The big challenge of this process will be how to face the growing share of energy
demand in its economy. While the global growth in energy demand is slowing, in China is
increasing. By 2035 is estimated that China will account the 28% of the world energy
demand. (Figure 2)

Figure 2: Contribution to energy consumption growth (2018)

Source: BP Statistical Review 0f World Energy 2019

The Chinese Government developed and ambitious plan, the 13th Five-Year Plan, where they
aims to reduce energy intensity by a 16% between 2016-2020. According to the World Bank
Database, the energy intensity has been reduced by a 70% per unit of GDP.
One of the reasons of these decrease on the resource intensity is due to the investment,
around $100 billion in domestic renewable every year. Also, China is investing in renewables
overseas, with the chinese companies leading in global renewable energy value chains. An
example, is China’s State Grind Corporation, which is developing an energy grid that draws
on wind turbines and solar panels around the world.
With these trends, China may be the major source of both energy demand, also it’s
experience reducing energy intensity can be an example for developing countries.
 3.1 Wind Power Market in China

During 2016 the cumulative capacity of the Wind Power Energy Industry grew abount 12%
to more than 486.8 GW, according to GWEC. Released on the report published by this
organization, the aim of the Government is situate the capacity around 800GW by the end
2021. Wind Energy becomes an increinsigly important source of energy, with the developing
of this power technology.
During 2018, the wind energy industry fall a 3.6% compared to 2017. Despite this reduction,
the worldwide wind market has been stable since 2014. According to data, China has led
onshore(46.8 GW) and offshore(4.49 GW) growth of new capacity during 2018. Due to the
onshore sector, Latin America, Southeast Asia and Africa were responsible for 10% of the
new installations.

According to the analysis from the GWEC, the wind capacity installed will increase during
2020-2030, by that time is expected that the wind energy will represent the 8.4% of the total
electricity generation and 15% on installed capacity. After years of development, North,
Northwestern areas, where wind resources are abundant but power consumption is relatively
low, wind power is having a good performance. Eastern and Southern regions are increasing
and diversifing their development.

Figure 3: Renewable electricity in GW

Source: IEA

At the beginning of 2019 the Chinese Government launched a series of subsidy-free for wind
and solar projects to take advantage from the rapid fall of the costs since 2012. This new
subsidy-free projects will generate renewable power for sale at the same prices as non-
subisidised coal-fired power plants and won’t have capacity quota restrictions according to
the NDRC. This new projects could help renewable energy to compete with coal-fired power.
Also NDRC said that the costs of wind projects increased around a 20% during the 2012-
2017 period.
One of the aims of China is to bring down renewable power costs down through economies
of scale and technological advances. Under the new policy, grid companies will be
encouraged to guarantee electricity purchases from pilot projects, lower transmissions fees
and support cross-regional deliveries of the subsidy-free power.
The Government has already approved the construction of several subsidy-free wind farms,
and also achieved price parity in some regions.

3.2 SWOT analysis of the market

•
Renewable Energy • Localization
Law • High construction costs
• Market Open Policy • Lack of core technologies
• Tax and Tariff for offshore wind turbines
Reduction • Low Price competition
• Financial Support
• Price Reform

• Increasing worldwide • Dominant position of the

awareness of Climate fossil fuels
Change • Potential ecological
• Large scale development impacts associated with
the wind farms
development
China’s wind power resources are located mainly in Eastern and North of the country. The
wind resource is larger inland than in the coastal areas. The investment in this new type of
energy has increased exponentially during the last years. The Goverment support this
renewable energy, through feed-in-tariffs, made them decrease. China with around 45% of
total capacity is the global leader. Only in 2018, the country installed around 23 GW of
capacity, with this amount the country reach the 212 GW cumulative installations mark.4

4) Xinjiang Goldwind Science&Tech Co Ltd

4.1 Background of the company

Xinjiang Goldwind is a China- based company, principally engaged in the manufacture and
distribution of wind turbine generator sets and spare parts. Founded in 1988, the company has
more than 20 years of wind energy experience. It operates wind turbines in six continents and
17 countries, with over 26.000 turbines. Goldwind has become a world leader with more than
40GW of installed capacity. The company is also engaged in the provision of wind power
services, as well as the investment and development of wind farms. The company distributes
its products withn domestic and overseas markets. Is a world leading wind turbine
techonology and energy solutions provider. Through the implementation and investment in
industry leading turbine technology, water treatment solutions and other green energy sources,
Goldwind has been hailed as one of China’s most innovative companies.
The company history can be divided in four parts:

• 1982-1996: in the Xinjiang Institute of Water Resources, a group of researches took

advantages of China’s reform and opened up with the opportunity of wind power.
• 1997-2006: after years of exploration, China began domestic wind turbine
development. Goldwind undertook the scientific research Project and influenced
China’s energy layout.

4
“Wind Power Market, Update 2019 – Global Market Size, Average Price, Turbine Market Share and Key
Country Analysis to 2030”. GlobalData Energy. Nov,12. 2019
 • 2007-2010: After years of successes in scientific research and international
coopeartion, Goldwind started to help China become an important actor in wind
power manufacturing
• 2011-…: The company ambition is not limited to wind power development, Also
joined different areas like global clean energy, energy efficiency and enviromental
protection, to bring clean and sustainable energy to more coumtries and regions
around the world.

Goldwind is focused on wind power system solutions, renewable energy, incubation

investment in new business like scientific and technological innovation, industrial and
financial services.

4.2 Company Market Strategy

Goldwind can be described as a horizontal integrated business model, the company position
along large utility partnerships to small-scale wind farms, allows them to meet and exceed the
needs and expectations of their customers. They offer different services and farm solutions,
with high quality products.
With their experience in wind power construction management, Goldwind promotes
standarized design, work-day quotas, construction cost index library, construction
informatization, centralized bidding procurement will ensure the company in design, progress
management and cost management. The company provides a precise and centralized
production management for wind farms, based on “EAM + Centralized Control + Regional
Operation and Inspection”. This improves their technical efficiency and enhance operations
management and power marketing. Also they design corporate investments developments
models, strategues and plans to implement corporate operations risk contorl, project financing
and equity management. Capital operations in overseas strategic investment and risk control,
to maximize the earnings of corporate shareholders.
Based on the wind power energy, Goldwind leverage their industry chain advantages to
gather resources from suppliers and partners. The company strategy is globalization through
localization. This helped Goldwind to become a leader in wind turbine technology
development, they established an important global base of supply partners, including
financers and developers. This way the company gained flexibility, rapid response and long-
term benefits.
The company sees the rapid expansion of wind resource control as their breakout point and
the financial investment as an important support. This allow them to consolidate their wind
power investment and opeartion business, making the wind power one the pillar of Goldwind
globally. Also by leveraging their advantages in Asset Management and capital operations,
the company improve the integration of internal and external resources and develop new
profitable channels and business areas, such as energy management and energy services.
Throught this efforts the company aims to become an outstanding investment operator in the
clean energy industry.

Figure 4: Goldwind Installation Globaly

Source: “Innovating for a Brighter Tomorrow”, Goldwind

Goldwind international strategy focus on five key areas: technology, human resources,
market, capital and mangement.
According to Figure 4, Goldwind installations are in 17 countries, 14 are manufacturing
centers(including 2 under construction). Those centers have an output capacity of around
4.000 wind turbines. With 5 foreign subsidiaries, 6 international sales offices and 7 regional
centers, promote a global strategy. Also provide services to more than 25 Fortune 500
companies around the world, this create value in wind power and promote new energy use.
Finally, this presence in 14 countries allow the company to localize management, human
resources and capital.

5) Business Plan for REPSOL in China

Due to the market situation and conditions explained on the parts below, the wind power
energy market in China can be a great opportunity to expand his business and develop new
projects. Repsol, using it’s new corporation Repsol Renovables, can participate in the
development and construction of a WindFloat farm in Bohai Sea, located in the north-east of
China.

5.1 WindFloat Bohai Project

Area requested

Several different factors influence the potential wind resource in an area. The first is the wind
speed. The average hourly wind vector of the area (speed and direction) 10 meters above the
ground. The wind depends mainly on the local topography and other factors; an instantaneous
wind speed and direction vary more widely than hourly averages.

The average wind speed per hour in Bohai has seasonal variations during the year. The
windiest part of the year lasts 7.2 months, from October to May, with average wind speeds of
more than 10.6 kilometers per hour. The calmest time of the year last 4.8 months, from May
to October, with an average wind speed of 7.7 kilometers per hour.
 Figure 5: Wind Speed Bohai Sea

Source: The Weather Channel

High wind speeds generate more power because stronger winds allow the blades to rotate
faster, this faster rotation translates to more mechanical power and more electrical power
from the generator.

A second important factor is the air density, wich is a function of altitude, pressure and
temperature. Dense air exerts more pressure on the rotors, which results in high power output.

Development of the project

The WindFloat Bohai project can be developed by a consortium, owned by Goldwind (55%),
Repsol (25%), Engie (15%) and Principle Power (5%).

Goldwind, is a leading global provider of complete wind power solutions, by contributing

through the implementation and investment in the turbine technology, using their
professional advantages to solve the energy and enviromental problems facing society.
Goldwind become one of China’s most successful companies, with more than 8000
employees in 6 continents and more than 50 GW of installed wind capacity.
Is Hong Kong’s the 4th largest industrial company by market capitalization, traded at it’s 52
day high ok HKD 9.35 a stock price has lifted 23.0c (2.5%) from its rose 353.8 point (1.2%)
in the day, the relative price increase was 1.5%. The rise has been propped up by robust
volume of 1.7 times the average daily volume of 6.4 million shares. There were 10.960.000
shares worth HKD 101.7 (US$ 13.1 million) traded.

Repsol is a global company that is present in the entire energy value chain. The company
employs more than 25.000 people and its products are sold in more than 90 countries,
reaching 10 millions consumers. The company is well positioned for the energy transition
focused on the development of gas transition projects. Also operate slow-emission power
generation assets, including photovoltaic energy projects, and its pioneer in the development
of mobility iniatives to create new solutions and energy sources for transport.

Engie is a world leader in energy and low carbon services. In response to the urgency of
climate change, our ambition is to become the world leader in the transition to zero carbon
emissions. Their key activities are renewable energy, gas, services to complete competitive
solutions.

Principle Power is a global energy company that allows the origination development of
energy and offers solutions of services and technology to obtain the maximun potential of the
world’s energy resources through access to temporary offshore wind farms and deep water
previously inaccesible. Is the market leader in the floating marine wind energy. By
simplifying the way in which marine wind resources are used, this exclusive technology
facilitates the continuous development of the marine wind energy sector, opens new markets
in deep waters and has the potential to reduce the cost and profile of risk offshore wind
projects.

One of the key points of floating offshore wind platforms is that they are cheaper to install,
less disruptive for sea life and have greater output than near-shore alternatives.

The consortium led by the Chinese Goldwind will invest 125 million dollars over 5 years in
the floating offshore wind farm. The project, Asia first floating wind farm, will have three
turbines which are expected to provide enough energy for 100.000 homes a year. This
consortium, which include salso Repsol, Engie and Principle Power invested 30 million
testing the platforms for two years.
The Chinsese Goverment will provide also 80 million for the new farm, this business is
attractive because is an alternative energy source that opens new areas of deep ocean to
harness energy.

6) Conclusion

Seing the global situation related to the climate emergency and all the efforts of the country
to develop and find new energy sources, the sustaible energy market is becoming a very
interesting opportunity for the energy companies.

One of the most important countries in this area is China, the country is doing a great effort to
change its energetical model to one more green and sustainable. For this target, the
Goverment is investing a huge amount of money, mostly in energetic companies, like
Goldwind. Thanks to the company strategy and the support of the goverment they become
one the world leaders in this sector.

For this reason, I think the best way for Repsol to enter this market is doing a partnership
with a local company like Goldwind. They will acquire the knowledge of them about the
market and also improve their technology. Thats why the development of a WindFloat
project in the North-East of China can be a great opportunity for both companies to increase
and improve their positioning in the global market of wind power energy.
 7) Sources

• IEA(International Energy Agency)

• China’s renewable energy revolution. Woetzel, Jonathan. McKinsey Global Institute.
2017
• China’s promised energy revolution. Butler, Nick. Financial Times. 2017
• How China is leading the renewable energy revolution. Kejun, Jiang; Woetzel, Jonathan.
World Economic Forum. 2017
• GlobalData Energy. (2019) Global Wind Power Market Expected by 2030. Available:
https://www.power-technology.com/comment/global-wind-market-expected-to-approach-
125bn-by-2030/
• EP. (2019) Repsol inicia las obras de su primer parque eólico en España. Available:
https://www.expansion.com/empresas/energia/2019/12/08/5decc596468aeb7b338b4637.h
tml.
• Goldwind Global
• Repsol
• Reuters