China’s Wind Power: Going Forward with Lightening Speed

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   The advanced level of on-grid capacity abroad will not exceed 10%; however, in China the figure is up to 30%, affecting the level of efficiency and effectiveness of the wind power.
  N ot long ago, CREIA (Chinese
  Renewable Energy Industries Association) and Greenpeace, one of the international environmental protection organizations, announced that China has become the world’s largest country of wind power capacity.
  According to another report, Chinese wind power companies, such as Goldwind Technology, Dongfang Electric and others are actively “going out” to expand their market territory. From the manufacture of fans to the construction of wind farms, then to the sales of electricity, China’s wind power companies, no matter large, medium or small in size, are beginning to layout their overseas market and trying to expand their strategic advantage.
  At the same time, the new energy industry is always labeled as overcapacity and poor product quality. Insiders said that in the“Eleventh Five-Year Plan” period, China’s centralized development of the wind turbine has created the “scale effect” of this industry in China. Thus, at the early stage of the“Twelfth Five-Year Plan”, the wind power enterprises must focus more on the quality of the industry’s development, not just the
  number of machines installed.
  China is No.1 in installed capacity of wind power and its development
  According to latest statistics, as of the end of 2010, China’s new wind power installed capacity was 16 GW throughout the year, reaching a total of 41.827 GW. For the first time, China has surpassed the United States and ranked first in the world.
  “Under the circumstances of rapid economic growth and increased demand for electricity, the rapid development of wind power in China plays an irreplaceable role in facing challenges such as the diversifying of energy resource structure, environmental protection and energy conservation”, said Li Junfeng, secretary general of CREIA.
  At present, the 41.827 GW of wind power capacity can replace an annual consumption of 31.29 million tons of coal and reduce more than 90 million tons of carbon dioxide emissions. Also, it can reduce nearly 33,000 tons of suspended particulate, 64,000 tons of sulfur dioxide and 60,000 tons of nitrogen oxide.
  Insiders said that in 2010, China’s wind power industry continues the momentum of rapid development, with an increased installed capacity of about 62% over the previous year. Because the climate legislation in the US is still not shaping, investors’ confidence in the renewable energy industry in the United States would definitely be affected. Thus, only 5 GW of capacity was added in the US in 2010.
  Shi Lishan, Deputy Director of the New Energy &Renewable Energy Department in the National Energy Administration said that after the Renewable Energy Law was announced, the state had introduced a number of support policies to help the fast development of wind power. He said that in the “Twelfth Five-Year Plan”, the renewable energy, including wind power, would hold a more important strategic position.
  According to general understanding, the wind power industry has become a hot investment destination in new energy sources. 24 provinces and cities in China have built their own wind farms; state-level wind power bases in Hebei, Inner Mongolia, Gansu and other places have entered the fast growing stage. Shanghai Donghai Bridge Offshore Wind Farm has been put into operation in 2010, becoming the largest offshore wind farm in the world except the one in Europe.
  In the fan production in 2010, four of the related Chinese companies has entered the world’s top 10 in wind power equipment manufacturing industry, and started to export overseas.
  According to the forecast of the“China Wind Power Report 2010”, in 2020, China’s total installed capacity of wind power will reach 230 million kilowatts, the equivalent of 13 Three Gorges Power Station. The total capacity generated could reach 464.9 billion kWh, the equivalent of 200 thermal power plants.
  However, the report also pointed out that the grid has become the biggest problem and bottleneck of the wind power development. To solve this problem, China needs to adopt a series of measures as soon as possible, including specifying the grid enterprises’ consumptive responsibility of wind power and the mechanism of reward and punishment, planning the development rationally, combing the on-grid cost allocation, and maneuvering price leverage, etc. Meanwhile, it has to overcome technical barriers such as wind power output prediction, on-grid, scheduling, energy storage, power grid construction and other problems as soon as possible.
  Price, technology, quality: not one less
  With the development and growth of China’s wind power industry, “going out” has become the development strategy of the Chinese wind power companies.
  It is found on the SFC website that on December 21, 2010, Dongfang Electric announced that the company recently signed contracts of three major orders, with a total amount of RMB 20.4 billion. Among them, the contract signed with KSK Energy Limited in India involved supplies of 166 units of 1.5MW direct drive wind power equipment.
  On the same day, Goldwind Technology also announced that the company’s wholly owned subsidiary Tian Run Shady Oaks, LLC in the United States won the bid price in the US market and signed a long-term electricity purchase agreement. The tender side of the bid was Illinois power company Commonwealth Edison Company. In accordance with the long-term electricity purchase agreement, the Shady Oaks Wind Farm in Illinois, US would supply a 20-year electricity since 2012.
  In this regard, Wu Gang, chairman of Goldwind Technology, told the reporter that their bidding in the United States took the form of BOT, i.e., through the wind farm development to drive the fan sales in a certain period of time, and with the establishment of the image of the company to improve the performance of the Goldwind fans, thus to try to meet the US market requirements. But in the long run, the future development in the overseas market will be based on direct sales of wind turbines and not just simply export of wind turbines.
  It is reported that shortly before the United States has submitted the investigation of illegal subsidies for Chinese wind power machine to the WTO. In this regard, Wu Gang said that as companies registered in the US, the employee in Goldwind were all local people in the United States. That is just because Goldwind want to become an integration of the local enterprises. In addition, Goldwind has a more balanced international strategy: it has layouts in Asia, Africa, Australia, Europe, and the United States is only one part of the global project.
  Denmark, a country accounting for 70% of the global wind power market, also has a strong interest in China’s wind power enterprises.
  Recently, during a visit to the production line of Chongqing Haizhuang Windpower, the Danish Ambassador Pei Desheng sent an invitation to the local businesses, “Please come and settle in Denmark, and together we can be bigger and stronger in the European market. Chongqing and Denmark should cooperate more in wind power industry and hope more Danish company can share the fruits of economic
   development in Chongqing.”
  In this regard, Ouyang Haili, assistant general manager of CSIC, commented, “Not only Denmark, the whole Europe is keen on developing clean energy, and wind power is one of the best choices.”
  It is understood that with the high performance price ratio of China’s wind power products, Chinese wind power companies have been having a big advantage to winning in the past and in the future for a long time. Foreign companies generally offer prices 20% to 30% higher of the same fans produced by domestic enterprises. However, this price advantage has already shown signs of weakening. For example, the mainstream 1.5 MW fans in the domestic market are quoted at RMB 700 million, while foreign companies such as GE, Vestas and other companies have dropped their price to around 7.8 million.
  Meanwhile, there are a lot of quality problems lying behind the miraculous expansion of wind power equipment manufacturers in China. For instance, China and Asia’s first offshore wind farm – only one unit out of three can work properly in the first batch of the Donghai Bridge Wind Farm.
  Insiders said that in the context of weakening price advantage and quality improvement requirement, emerging wind power markets such as Southeast Asia, South Africa, and Eastern Europe, etc. should be the ideal place for investment of Chinese products. It is reported that Chinese small and medium wind turbine manufacturers has begun cultivating the Vietnamese market. At the end of 2009, the Galaxy Electric of Guizhou Changzheng Electric has got the order of 80 2.5 MW wind turbines in Vietnam’s Mau Son Wind Farm, a total amount of RMB 1.8 billion.
  Excessive capacity, low efficiency: the industry’s integration is in progress
  Insider told the reporter that while China’s wind power capacity has surpassed the United States, its generating capacity is only 50 billion kWh, which is still lower than the US. In addition, generally, the advanced level of on-grid capacity abroad will not exceed 10%; while in China, the figure is up to 30%, affecting the level of efficiency and effectiveness of the wind power.”
  With the industry’s overall decline in profitability, how to reduce and control costs has become a top priority in wind power companies, which also accelerated the integration within wind power industry. Goldwind Technology, the country’s second largest wind power company, has taken its action.
  At the end of 2010, Goldwind Technology and Infineon, the world’s leading supplier of semiconductor, signed a transfer agreement on the core module technology of wind converter. Subsequently, the wholly owned subsidiary of Goldwind Technology, Goldwind Investment made an acquisition of Xiexin Jiangsu’s 100% interest and Xiexin Xinlin’s 100% interest by agreement, with no more than RMB 200 million. This means that, Goldwind Technology has effectively integrated the manufacturing enterprises in the industrial chain, thus reducing production costs.
  The insider said that at present, China’s wind power market has got the conditions for integration. First, the growth rate of the industry has slowed down. After nearly 5 years of rapid expansion, the wind power market has embraced a clear turning point. According to the latest estimate of CICC, in the year 2011 to 2012, the growth rate of the wind power industry will slow to 30%.
  Second, product prices have reached the bottom. Data show that in 2009, the price of the 1.5MW wind turbines was RMB 5,300 / kW; in 2010, it has dropped to RMB 4,300 / kW. There is no more room for price declining, and this price region can be viewed as the bottom area of the industry.
  Third, the industry concentration has been further improved. At present, the top three wind turbine manufacturers are Huarui, accounting for 27% of the total market share, Goldwind, 21%, and Dongfang Electric, 16%. Only the three have taken 64% of the market share. Such a high degree of industry concentration is very rare in other industries.
  From 2010 onwards, the once hottest Chinese wind power equipment manufacturing industry is also “cooling”down.
  In 2010, including the State Development and Reform Commission, ten ministries jointly issued the notice of “Inhibition of the Overcapacity in Wind Power Industry”. More than 80 wind power equipment manufacturing enterprises have productivity more than their total installed capacity; the wind power equipment manufacturing industry has revealed problems such as overheated investment, excessive capacity, etc.
  According to the prediction of Bao Yunqiao, vice chairman and secretary general of China Energy Research Society, in the next three years, China’s wind power industry will undergo a reshuffle. Large wind power companies will enter a stage of rapid development, and the concentration of the entire wind power industry will gradually increase. Some small wind power enterprises will be eliminated.
  It is undeniable that “in this round of global green racing, China has gained the upper hand, which proves that China has the potential to become the world’s superpower in renewable energy”, said Ellen Young, project manager of Greenpeace climate and energy.“However, in the transformation from a country with a big installed capacity of wind power to a country which utilizes the wind power the most and becomes on top in the global clean energy revolution, China still needs to work even harder.”Ellen Young added.
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