Ming Yang, Ardesier: Geopolitics turns £1.5bn Scottish turbine factory into a cat’s cradle of complexity

The answer: geopolitics. This week’s publication of witness statements in the prosecution of two parliamentary researchers accused of allegedly spying for China encapsulate the dilemma. They stated that China was a threat to the UK’s “economic security”. But they also repeatedly spoke of Britain’s desire for positive relations.

The fact is that Labour is still, after 15 months in office, struggling to square the circle on China in a way that reconciles – if such a thing is even possible - building a commercial relationship with the world’s second largest economy, while safeguarding British interests in the face of a country that deputy national security adviser Matthew Collins has said presents “the biggest state-based threat to the country’s economic security”.

Beijing’s alignment with Moscow on Putin’s war on Ukraine is another flashpoint. On Wednesday, the UK government sanctioned 11 Chinese entities in a package of measures aimed at choking off the Kremlin’s oil revenues. In response, China’s London embassy said Beijing “has upheld an objective and impartial position” on Ukraine and that it “rejects any attempt at blame-shifting or smearing”.

Now to Chinese wind turbines in Scotland. A week ago, Chinese manufacturer Ming Yang Smart Energy revealed plans to invest up to £1.5 billion in a factory to make turbine components at Ardesier Port, near Inverness.

On the face of it, approving this ought to be a straightforward decision. China is a green tech juggernaut that’s seen by many in renewables as essential to helping the UK achieve energy secretary Ed Miliband’s Clean Power 2030 targets – a big part of which depends on the rollout of offshore wind in the North Sea off Scotland.

Ming Yang’s turbines are cheaper than alternatives from Vestas of Denmark and Germany’s Siemens Gamesa. The Chinese company is also the only one capable of producing at scale the type of turbines suitable for deep-water floating wind, which will make up 60 per cent of the vast ScotWind project, as opposed to the turbines used in fixed-bottom wind farms in shallower waters.

That’s because its European rivals haven’t developed this technology at scale and are too busy fulfilling existing orders for fixed-bottom turbines.

However, geopolitics has turned Ming Yang’s plan into a cat’s cradle of complexity that goes well beyond the commercial and economic considerations that many in the offshore wind business community and the Scottish government would prefer to focus on.

That’s because of perceived threats to the UK’s critical national energy infrastructure, and supply chain dependency. Concerns have been raised by some in the industry and MPs in Westminster that because the operational software embedded in a turbine remains in the control of the manufacturer after installation, there is a risk that a wind farm using Chinese turbines could be manipulated or switched off, causing damage to downstream transmission and grid. Cyber espionage is another worry. Chinese officials dismiss such concerns as a “Cold War mentality”.

For the past two years, the Scottish government and agencies including Highlands and Islands Enterprise have been talking to Ming Yang, leading to the earmarking last year of £30m in Scottish taxpayer support for a potential factory. Westminster has the final say given its responsibility to scrutinise investments for any national security implications.

Ming Yang and the ScotWind developers such as SSE Renewables, Sweden’s Vattenfall, EnBW of Germany and Northland Power, a Canadian group, have been waiting for a decision from Downing Street since the spring.

Yet the summer came and went, with no decision. The reason was Trump. With the US president due to open a golf course in Aberdeenshire and a state visit in September, the risks around Ming Yang were obvious given that “windmills” and China are two of his least favourite things.

Ming Yang’s decision to go public last week now appears designed to pressure Sir Keir Starmer into giving the green light for its factory, which would make turbine blades and nacelles (which house a turbine’s generator and electricals). It would employ 1,500 people, delivering much-needed green jobs. Moreover, the Chinese company could help turn the UK into “the global hub for offshore wind technology”, as Aman Wang, Ming Yang’s UK chief executive, put it.

The timing of the announcement is no coincidence. ScotWind developers have until the end of the month to submit applications for the UK government’s next subsidy auction, which must include a sense of whose turbines they will use.

Developers and consultants say there are technical solutions that could deal with the perceived vulnerability of turbine software to economic coercion or sabotage. However, Michal Meidan, head of China energy research at The Oxford Institute for Energy Studies (OIES), tells me: “The implicit threat that it could happen is seen as problematic enough and governments have to make a decision about whether they are willing to tolerate that risk to advance their decarbonisation plans.”

Germany has already made its decision. In August, German wind farm developer Luxcara dropped Ming Yang as supplier for a North Sea wind farm called Waterkant, contracting with Siemens Gamesa instead. It came after the defence ministry cited public safety issues in relation to Chinese wind turbines. Given that defence and security ties between the UK and Germany have recently been strengthened with the signing in July of the “Kensington Treaty”, it remains to be seen whether London is willing to diverge from Berlin on the question of Chinese participation in offshore wind.

Meanwhile, geopolitics intrudes again when it comes to price. The OIES argues in a research paper to be published on Monday that Chinese turbine manufacturers’ initial price advantage is eroded by the financing costs that lenders and insurers will add to compensate for lack of track record in Europe, “uncertainty about durability of long-term commercial relationships”, supply of spare parts and after-sales support.

Moreover, the OIES says European governments are concerned about rising pressure from the US administration to avoid working with Chinese companies.

“Regardless of the actual security threats that Chinese components or investments may pose, for some European governments, the risk of friction with the US government over Chinese participation is a key factor,” the paper’s co-authors Maidan and Anders Hove write.

“Europe’s offshore wind market faces critical supply chain and deployment challenges,” they add. “While Chinese [companies] could bring cost savings and new capacity, their involvement raises complex economic, political, and security trade-offs. Policymakers and industry views are deeply divided.”