The Chinese wind power market has run into various problems and the environment now is more competitive – with no space for mistakes or compromises.
7 November 2011
How will Chinese wind power develop?
Over the past 12 months, the Chinese wind power
market has run into various problems: rising rare-
earth material costs, connectivity due to lack of
fault ride-through capability and a new
governmental financial policy. The changes are not
the end of the business, but the environment now is
more competitive ? with no space for mistakes or
The wind power market in China has been growing extremely fast especially during the past four
years, with new players and new suppliers coming from every corner. The overseas ambition of
Chinese companies had also eroded due to a lack of quality, mentality and national image. The
approach of Chinese players was based on low price per kWh alone, not on reliability and quality.
In 2011, the total amount of installed wind power in China actually dropped for the first time, for a
-20 percent compared with 2010. How will the market develop in the next 12 months?
A leading supplier of megawatt-class permanent magnet generator and full-power converter
packages for wind power - The Switch - gives its perspective on whether the Chinese market can
recover by solving its current challenges and moving forward.
In the past two years, the Chinese wind power market was
oversaturated by many newcomers and by an overcapacity that led to
a crazy price war. ?This has only resulted in poor quality,? Carlo
Cecchi, Director, Business Development at The Switch, says in the
company's website. ?Both in terms of product and in terms of
All the major Chinese wind turbine manufacturers have been left with
large inventories and significant cash flow issues in 2011 as a result
of the excess inventories and long payment terms from Independent
Power Producers (IPP), consisting of non-utility entities that generate
electric power to sell to utilities and end users.
Turbine prices also decreased by 43 percent from 2007 to 2010 and by another 18 percent in the last
quarter of 2010, which represented increasing costs for wind turbine OEMs (original equipment
Slowing down 8-10 percent yearly by 2016
When looking ahead, the growth in the overheated market is estimated to slow down to only an
average of 8 ? 10 percent year on year from 2012 to 2016.
?In general, the wind power market will continue to be the darling of the Chinese government, but
we as suppliers need to assist wind turbine OEMs to make a natural selection of the key
components and solutions that will have a sustainable future in the wind power industry. Also, IPPs
will increasingly have more bargaining power,? Cecchi explains.
He estimates that the ?Go West? approach will most likely be more systematic and driven by the
government or via a local developer. Another way is for the Chinese manufacturers to establish
local presence in target markets, such as Vietnam, the US, South America or Africa ? with product
and power quality as the new drivers.
IPPs, now focused only on the domestic Chinese market, will progressively expand their presence
in the US and Australia through mergers and acquisitions with the use of capital available from their
New regulations eliminate unqualified developers
China started running into difficulties when wind turbines were installed but not in operation due to
a weak grid. By the end of 2010, up to 30 percent of the 44.7 gigawatts of wind power was not
connected. Therefore, China?s National Energy Bureau (NEB) issued a series of new regulations at
the start of 2011, including a mandatory low-voltage ride-through (LVRT).
?Such regulations will be good for China in the long run,? Cecchi says. ?Although this will add
costs to project development at the start, it will eventually help to eliminate all unqualified
developers. The goal of the shift will be very simple: more turbines connected to the grid, better
power quality and more wind farm installations closer to end users.?
?These tough regulations will obviously get rid of any small company that does not have the
financial funding needed or the R&D resources to comply with the new standards,? he continues.
This, in turn, will reward those large- and middle-sized turbine manufacturers and eliminate the
weaker players. ?Or some of the strong smaller players will be acquired by the larger ones,? Cecchi
The Switch is headquartered in Finland.
The Switch full article
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