With a brand-new factory and a cluster of specialised firms, the Basque city of Bilbao is the focus of Spain's wind power industry which is fighting to hold its own in the face of fierce competition from China and northern Europe.

Iberdrola and Gamesa, two of the most important players in the sector, have their headquarters in the northern Basque region's biggest city and its verdant surrounding area. Gamesa merged with Germany's Siemens in 2017.

Both companies lead the Spanish wind power sector whose domestic growth stalled after an economic downturn led the central government in 2012 to end incentives for renewable energy.

Despite this Spain remains the fifth country in the world in installed wind power capacity and the outlook for the sector has improved with new tenders launched in 2016.

The wind power sector is expected to invest €5 billion (Dh21.96bn) in Spain by 2020, according to the Spanish Wind Energy Association (AEE).

The new context is fueling the optimism of Basque wind power firms, which drive the sector in Spain.

"We want to be a benchmark in the European Union," Arantxa Tapia, the minister for economic development with the Basque regional government, told AFP during a recent meeting with the press organised by WindEurope, a European wind power association.

Markus Tacke, the chief executive of Siemens Gamesa, said Bilbao is "attractive for our industries" since there is "a very good combination of industrial leadership ... and support from the [regional] government".

The Basque Country barely represents 0.6 per cent of Spain's installed wind power capacity but it is home to 112 firms that cover almost the entire production chain for both land and off-shore wind farms.

Since 2013 they have been clustered in Windbox, a public-private consortium which has a spacious and modern test centre in Eibar, 50 kilometres east of Bilbao.

Spanish wind power is concentrated on land in a country which has vast, sparsely populated regions in the interior such as Castilla-La Mancha, whose wind-swept plain is depicted in Don Quixote, the most famous work by the late novellist Miguel de Cervantes.

It is a segment of the industry known as "onshore" and on which local firm Haizea focuses completely with factories that build giant wind turbine towers that are up to 160 metres high.

They will build them in a recently completed factory in Bilbao's port that is 500 metres long by 130 meters wide.

Haizea faces competition from China given that paradoxically, under current EU anti-dumping measures, Chinese steel cannot be imported but already manufactured wind turbine towers can.

"Clearly it is a threat we are not comfortable with," said Jordi Mas, Haizea's commercial director.

Commercial director of Haizea Wind Group, Jordi Mas. Ander / Gillenea/ AFP

Haizea also wants to be a strong challenger in the "offshore" segment that makes marine wind turbines and the cylindrical foundations needed to anchor them.

Iberdrola and Siemens Gamesa already have a strong presence in offshore wind power outside Spain.

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In fact, in Europe this segment is dominated by five northern countries - Britain, Germany, Denmark, the Netherlands, and Belgium - which account for 98 per cent of the EU's installed capacity.

The future of offshore wind power in Spain is in floating farm technology, in which wind turbines are anchored to the sea floor using chains and anchors instead of a cylindrical foundation, said Juan Virgilio Marques, the head of the Spanish Wind Energy Association.

Hywind located north of Scotland is the only wind farm with these characteristics to date in the entire world.

"The Basque Country and Canary Islands are the two areas in Spain where floating wind farm technology makes sense" since it is designed for deep waters, said Mr Marquez.

But Juan Rivier Abbad, head of regulatory affairs for Iberdrola Renewables, predicted Spanish wind power firms will continue to focus on the "onshore" segment in the near future since there are plenty of suitable land in Spain to install wind turbines.

"Perhaps when 'onshore' is filled to capacity we will move to 'offshore' but for the moment we have much land area which can be developed. And much cheaper," he said.

In France, meanwhile, Reden Solar, a niche solar energy player backed by private equity funds, is looking to buy solar projects to take advantage of a government push to boost renewable energy in the country.

France has been a laggard in renewables as its relies on nuclear for about three quarters of its electricity needs. But this could change now President Emmanuel Macron has made solar energy the focus of French renewable energy policies.

Against this backdrop, Reden hopes to grow quickly rather than risk being swallowed by big companies like Engie or Total.

"With the financial clout of our shareholders we can grow. If a company comes on the market, we could be interested," Reden chief executive Thierry Carcel told Reuters.

An IPO is a possibility, although there are no plans currently.

Based in Agen, southern France, Reden split off fromrenewables group Fonroche last year, when infrastructure fund InfraVia bought a 53 per cent stake alongside listed investment company Eurazeo, which has 47 per cent.

Reden has a 1.7 per cent market share of France's solar market, with 180MW of installed capacity. This puts it in the top ten in a country where market leader EDF Energies Nouvelles' 290MW accounts for only about 4 per cent of total capacity, according to consultancy Finergreen.

France had just 7.7GW of solar capacity installed at the end of 2017 - compared to Germany's 43GW.

But state-owned utility EDF plans to build 30GW by 2035 and the French government has doubled tender volume for solar projects, sparking a race for size among the many small-to medium size companies in the industry.

"There are four to six significant players left in France, including Reden. The small ones will be eaten, maybe by Total, maybe by us," said InfraVia CEO Vincent Levita.

InfraVia - which manages €1.9bn of assets - in 2016 sold stakes in solar firms Soparsol and Soley after holding on to them for about five years.

"We are ready to follow Reden if it makes acquisitions," said Renaud Haberkorn, head of Eurazeo Patrimoine, one of the funds under Eurazeo, which has 15 billion euros under management in total.

Finergreen CEO Damien Ricordeau sees rapid consolidation in the next year, with the top 20 solar firms capturing 50 per cent of installed capacity.

"Things are moving fast, we expect two or three of the top 25 players will disappear by year-end," Mr Ricordeau said.

Since France's energy giants have been slow to invest in solar, about the only way to catch up is through M&A.

Engie in 2015 bought Solairedirect. Total in September bought into renewables firm Eren and last month bought power retailer Direct Energie, which itself had just bought solar and wind firm Quadran.

Funds and foreign groups are also on the acquisition trail. Since October, Denmark's renewable energy investment firm Obton bought Coruscant, Ireland's power firm Amarenco bought Groupe Carré, and French solar firm Tenergie linked up with Credit Agricole.

Reden, which has equity of about €200 million, plans to double its installed capacity and has a pipeline of 350MW solar projects in France and overseas.

Its overseas projects, mostly ground-mounted solar, include 60MW in Mexico, 150MW in Chile, 50MW in Puerto Rico and last week it bought 50 MW in Portugal. In France it mainly puts panels on rooftops.