How will Chinese wind power develop?

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Posted on: 7 Nov 2011

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 compromises. © Zmscr 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 electricity.? 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 manufacturers). 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 trade surplus. 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 says. The Switch is headquartered in Finland. Sources: The Switch full article Related: New power train provides offshore wind output in onshore size
Posted: 07 November 2011

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