11 October, 2024
Chinese presence in the Swedish wind energy sector: Vulnerabilities and risks
Magnus Hjalmarson Neideman / SvD / TT
Executive summary
- China’s dominant role and ambitions in green technology have sparked concerns about current and future economic and political vulnerabilities in Europe. This report examines the vulnerabilities and risks associated with China’s presence in Sweden’s wind energy sector by mapping Chinese ownership of wind farms, the use of Chinese-made turbines and dependence on Chinese supply chains. Based on this survey, specific risks are identified and assessed, drawing on previous research and expert interviews.
- The report finds that Chinese state-owned companies control 10.4 percent of Sweden’s installed wind power capacity, which corresponds to 3.4 percent of total electricity production. While Chinese-made turbines contribute less than 1 percent of installed capacity, the dependence of non-Chinese turbine manufacturers on Chinese supply chains is found to be high. China provides 70–80 percent of many key components globally and undertakes nearly 100 percent of the refining of key rare earth elements.
- The report identifies five key specific risks associated with Chinese ownership and supply chain dependence: potential electricity supply cuts and market manipulation, information transfer, export restrictions, IT sabotage and indirect economic and political influence.
- While Chinese ownership has garnered the most attention in Sweden, the risks associated with this are assessed as relatively low at current levels. The risk of electricity supply cuts and price manipulation is deemed low due to the limited market impact and high costs such actions would incur for Chinese interests.
- Instead, the most significant short- and long-term vulnerability is deemed to be dependence on Chinese supply chains. These could be used to limit the availability of spare parts or components for new turbines and could be employed across a continuum, ranging from subtly skewing competition to complete export bans targeted at individual countries or Europe as a whole.
- Supply chain dependence and long-term European wind industry competitiveness are connected to the broader overarching and long-term risk of Chinese economic dominance. Viewed in isolation, Chinese leadership in wind technology, manufacturing and ownership is probably manageable. However, as an additional sector dominated by Chinese companies, it contributes to the overarching strategic threat to Sweden’s and Europe’s long-term economic prosperity and political autonomy.
- Policymakers need to strike a balance between the benefits of China’s role in the wind energy sector and the risks it poses, both in the short and long term. Several initiatives are under way within the European Union to this end, such as the de-risking initiative and economic security strategy, as well as more specific measures like the Net-Zero Industry Act, the Raw Materials Act, and the Foreign Direct Investment Regulation. If implemented well, these will reduce existing wind sector vulnerabilities.
- In addition to EU initiatives, Sweden could independently implement further policy measures to reduce ownership and supply chain vulnerabilities, such as establishing ownership thresholds or even banning ownership by certain countries, as well as limiting or banning the use of certain turbines and components by implementing non-price criteria in auctions and permits, such as IT security and sustainability standards. Policies could also aim to limit the potential impact of specific risks, for instance by ensuring clear legal rights for Svenska Kraftnät, the Transmission System Operator, to intervene in the case of antagonistic electricity supply cuts, or by limiting access to sensitive power system information, setting and enforcing high standards for IT security, and enhancing understanding and awareness of potential indirect political and economic influence.