China joins wind turbine business-Hummer wind turbine

Home > > Wind turbine news > > China joins wind turbine business

China joins wind turbine business

BEIJING: Chinese firms are joining the technically complex industry of wind turbine manufacturing, creating a supply glut and causing quality problems that may temporarily complicate a push by Beijing toward cleaner energy, industry executives have said.

More than 30 Chinese firms now offer wind-power generating equipment, creating competition that should eventually push down global prices and turn Chinese firms into export powerhouses to match national solar and electronics champions.

But few of the new contenders have experience in the high-tech engineering of modern windmills, which have blades and a vast gear box that have to endure decades of shaking and extreme temperatures perched on top of a tower.

Instead, enticed by the lucrative success of other renewable energy pioneers like Suntech Power of the United States, they are adapting other types of turbines or buying licenses from overseas firms that have decided not to venture into the market themselves, and they are cranking up production.

¡°There is no need now for foreign suppliers in China, because the local companies are building up capacity which can take care of growth in the market on their own,¡± said Paulo Fernando Soares, head of the China office of Suzlon Energy, an Indian company.

¡°Either we will have a price war,¡± Soares said at a Renewable Energy Finance Forum in Beijing, ¡°or companies will become insolvent or foreigners will just use China as a basis for export for their international business, or maybe all three at the same time.¡±

But turbines require precision production and a specialist knowledge that firms cannot buy at the same time as their blueprints.

In China, ¡°the industry bottleneck right now is the supply chain, as well as experienced wind engineers,¡± said Weiping Pan, head of the China office of Garrad Hassa, a leading industry consultant.

Although current market leaders, including Vestas Wind Systems, Gamesa and Suzlon, spent years building up from small 100 kilowatt machines to the giants they produce now, many Chinese firms ratcheted up the pressure on their engineers by jumping straight to making 1.5 megawatt machines.

The ambitious production plans seek in part to meet a leap in demand. More than 1.3 gigawatts of new turbines went up in 2006 and Beijing plans by 2020 to reach 30 gigawatts, over a third of the total generating capacity in Britain.

In China, local firms are gaining ground over foreign competitors, taking 40 percent of orders last year compared with just 20 percent in 2004, and some plan to increase production up to tenfold in the next couple of years, according to Soares of Suzlon.

Those companies are receiving a boost from government policies that require at least 70 percent of new machines to be made at home, and a power pricing system that trims margins to razor-thin levels.

But quality remains a challenge. Although Suzlon machines cost up to 15 percent more than those of Chinese competitors, repairs and time lost to breakdowns narrow the price difference for foreign developers calculating their long-term prospects.

¡°There is no way that we would consider Chinese turbines unless foreign ones get 30 to 40 percent more expensive,¡± said one buyer who asked not to be identified.

¡°If we did, we would only go for the oldest ones with proven track records because you are already hearing about so many quality problems. They just aren¡¯t working,¡± he said.

Consolidation which should resolve quality challenges is still someway off, although there is an established leader already some way ahead of more recent contenders.

Goldwind Science and Technology, which hopes to bring in 4 billion yuan, or $517.5 million, in revenue next year and is hoping to list on a US exchange, accounts for around 35 percent of the market, said Pan of Garrad Hassan.

¡°We may see consolidation down the road, but at the moment there are all kinds of incentives to support the industry,¡± Pan said. ¡°We will see several years of a chaos situation in China.¡± reuters