China Policies to Boost Sagging Wind Power Industry

Blowing Future: China's new wind power push is re-energizing an industry suffering plunging profits from a global glut.

China’s new wind power development program is expected to give a shot-in-the-arm to the nation’s wind-power industry as it suffers plunging profits from global oversupply.

A new wind power energy development program released by the Ministry of Science and Technology, to be implemented over several years, seeks to transform China from its status as a leading equipment exporter to a global leader in harnessing wind energy domestically.

The plans call for six large-scale wind power plants to be built on land and two to be built offshore. That construction push will be accompanied by a mandatory quota system for renewable energy sources by 2015 which will provide strong incentives for utilities to install more wind power equipment around the country.

The new energy plan, to be released by the end of this year, will provide for regular inspections to force provincial and municipal governments to give priority to wind power when expanding electricity generation capacities.

The measures are welcome news for an industry that has been in the doldroms as China’s capacity to manufacture wind-power equipment has rapidly overtaken the financial ability of European nations and the US to buy and install renewable energy sources.

The glut has placed price pressures on manufacturers. Industry leader Sinovel Wind posted an 87% profit slide to only 56.8 million yuan ($9 million) for the first quarter of 2012. By contrast, in the first half of 2010, when it was contemplating an IPO which was subsequently blocked by the government, Sinovel posted profits of $320 million.

Goldwind Science & Technology posted a 97% plunge to 6 million yuan ($950,000). Virtually all of China’s top 100 wind power equipment suppliers have been suffering dwindling profits in the wake of rapid expansion during the previous several years. About 30%-50% of manufacturing capacities is now idle, and some firms are experiencing difficulties making payments on loans taken out to finance plant construction.

But the new government policy to promote wind-power use has prompted leading equipment manufacturers to renew R&D efforts on producing turbines with greater generation capacities for better cost-efficiency in major installations.

With an eye toward becoming a global leader by offering integrated wind power solutions, Goldwind will roll out 6-Megawatt turbines for offshore wind power stations this year. It is focusing research on producing 10-MW turbines.

Shanghai Electric plans to form a strategic partnership with Germany’s Siemens in the offshore wind power sector. It has also opened a branch this year in India.

Sinovel Wind and Goldwind have also shown interest in a joint bid on the struggling Danish Vestas Wind System A/S.