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China Wind Power 2010 Conference Report - Chinese wind sector takes on the world

CHINA: If an economic sector's growth can be likened to that of a human being, then China's wind industry is coming of age. With it rapid growth spurt of recent years appearing to have eased, bold young wind companies are now searching for opportunities abroad - away from the safety of home.

The opening ceremony for China Wind Power 2010 echoed China's thirst for growth
The opening ceremony for China Wind Power 2010 echoed China's thirst for growth

Wind firms participating in the October 13-15 China Wind Power 2010 conference in Beijing boasted that they are up to the challenge. "I can solemnly tell you that the quality of Chinese turbines is very good. The quality of Chinese turbines can rival that of international players," declared Han Junliang, CEO of top Chinese wind turbine supplier Sinovel. He repeated his recent vow that exports will represent as much as half of Sinovel's sales. The company aims to establish branches in Europe, the US, South America, Australia and Canada.

Zhang Dingjin is president of wind turbine blade maker China Composite Group. He said Chinese wind equipment suppliers want to take on their rivals in foreign markets. "The components sector in China is very competitive," he said.

Others are champing at the bit, too. "The Chinese state-owned banks and wind farm developers have aggressive plans to invest in wind power assets outside China, and other people are looking for that investment," said Hubert Beaumont, wind engineering manager at Beijing-based consultancy Azure International, whose activities include helping Chinese developers identify wind pipeline abroad. Domestic investors are seeking ways to inject entire sections of the domestic wind industry into overseas markets. "The Chinese want to develop projects overseas, using Chinese turbines, maintained by Chinese workers, financed by Chinese equity and debt - all China," said Beaumont. Chinese lenders are expected to bankroll domestic turbine suppliers only until they prove their mettle overseas. "The aim is to have Chinese wind turbines competitive and recognised by all international banks," added Beaumont.

Beyond the roost

Among those ambitious developers at the conference was China Windpower. Listed in Hong Kong, it has more than 500MW of wind capacity operating in China and more under construction. Luo Maofeng, head of overseas business, said his firm plans to apply its experience in wind design, development, investment and plant operation around the world, starting off in emerging markets in Organisation for Economic Co-operation and Development (OECD) countries and elsewhere.

Justin Wilkes, policy director at the European Wind Energy Association, has heard Chinese firms describe similar strategies. "If any Chinese players come to Europe, they are more likely to look at the emerging markets and they will be looking offshore in the most established, mature markets - particularly the UK," he said, adding: "I don't think they will try to get into the more established onshore markets."

China has so far exported a combined 28.75MW of wind turbine capacity to the US, India, UK and Thailand, according to the 2010 China Windpower Outlook by the Chinese Renewable Energy Industries Association, the Global Wind Energy Council (GWEC) and Greenpeace.

Selling in saturated markets is one thing, but building factories and other operations is another, and many countries are welcoming Chinese investment. Panellists from Denmark, the UK and even the US, despite its recent protectionism slant, held presentations aimed at luring the Chinese to their shores.

Ian Ross, senior international business executive at Scottish Development International, which facilitates Scottish overseas investment, commented that Chinese turbines will help Scotland meet its lofty green-energy ambitions. "Encouraging Chinese companies to come to the Scottish market brings prices down. It brings down operating expenditures," he said.

Among the Asian turbine suppliers to already show interest in Scotland are China's Sinovel and Sany, as well as South Korea's Samsung, Hyundai and Hyosung.

"There is room in the market for everybody," Ross added, noting that Scottish policy demands that 80% of all energy come from renewables by 2020. It will require between 7,000-8,000 wind turbines installed offshore between now and the target year. "That will only happen through economies of scale. Even if European manufacturers operate their plants at full capacity, they cannot supply our needs. So we need new players," said Ross, adding that he is counting on greater competition, sparked by Asian newcomers, to reduce installed costs to £2 million/MW from the current £3 million/MW.

Financing Chinese forays abroad remains tricky but not impossible. Developer Datang, for its part, is planning to float shares of its clean-energy branch in Hong Kong, but the going may be rough. Debt-burdened wind turbine manufacturer Sinovel's plan to launch an initial public offering (IPO) in Shanghai were suspended in October (windpowermonthly.com, October 28). And shares in fellow supplier Mingyang floundered after it launched on the New York Stock Exchange that month.

Nonetheless, panellist Wang Haibo, general manager at Tianrun New Energy Investment, was positive. "There is not really a shortage of funds," he told delegates. "If a project can bring (good) returns for shareholders, it is easier to get funds." He said his company - a Goldwind subsidiary whose US unit has a stake in Minnesota's Uilk wind farm where three Goldwind turbines are spinning - hopes to apply models learned abroad to attract low-cost capital. And when the best candidates seek to float shares, investors may just be willing to bite. Charles Yonts, head of clean-energy research at Hong Kong-based CLSA Research, called the Hong Kong IPO market "hot".

"Equity is cheap right now," he said. "Doing an IPO in Hong Kong is almost guaranteed to get a good price-to-earnings valuation. There is a lot of money floating around and all this liquidity has to get soaked up." Still, he cautioned: "Who knows how long it will last?"

Size and scope

An expected easing in the growth of Chinese wind has not tempered long-term optimism for the home market. Experts say installation of wind capacity may slow this year, in part because tighter scrutiny by the executive board overseeing the UN's Clean Development Mechanism has resulted in fewer Chinese projects securing carbon financing (Windpower Monthly, November 2010). Chinese officials forecast that installed wind capacity will rise by about 10GW to 35GW by end-2010, compared with the 13.8GW added in 2009.

But that is only part of the story. Steve Sawyer, GWEC secretary general, said China may overtake the US with the world's largest cumulative installed wind capacity by year end and, as 2020 approaches, it will represent an ever greater portion of new global power generation. GWEC's most optimistic outlook forecasts 250GW of cumulative installed wind in 2020 in China (see box, page 50) and many Chinese panellists spoke of as much as 300GW - many multiples of the government's now-farcical official target of 30GW.

Conference data reflected the great expectations: more than 27,000 people, 5% above last year, visited an exhibition space almost double the size of last year. Of the 512 exhibitors, 26% were from outside China.

Developing turbines

Also growing at breakneck speed are the nameplate capacities of Chinese wind turbines. The day before the conference kicked off, Sinovel rolled China's first doubly fed 5MW turbine off its assembly line. Company vice-president Tao Gang said the machine was developed independently. Sinovel hopes to produce its first 6MW turbine in the first half of 2011, in time for what the company expects to be an explosion in the European offshore market within six years.

CEO Han revealed: "We are going to redouble our efforts to develop a share in the European offshore market, to strengthen our service capacity to our European customers." He added: "Our goal is 50-100% growth in terms of the supply of offshore wind turbines."

XEMC, for its part, soon afterward unveiled the country's first direct-drive permanent-magnet 5MW turbine specifically designed for offshore use. By year-end, it will install one unit in China and another in Europe (windpowermonthly.com, October 25, 2010). Goldwind also plans 6MW turbines. The trend of producing ever-larger wind turbines, particularly for offshore, has received the enthusiastic blessing of the Chinese science and technology ministry.

There was the routine hand-wringing about Chinese quality, but with some surprises. Goldwind CEO Wu Gang said: "The Chinese wind turbine manufacturing industry still lags far behind world class in terms of research and development, management and internationalisation. We will very humbly learn from Vestas, Repower, GE - as well as other international leading companies - to grow even faster."

Qin Haiyan, secretary general of the Chinese Wind Energy Association, said recent surveys suggest that some of the biggest problems stem from manufacturers' poor quality control rather than from turbine design. Lax maintenance at wind farms is also a factor, he said.

Some improvements are in the works. The China Electricity Council has submitted new national standards to the National Energy Bureau. If approved, these will make testing and certification of turbines and their components compulsory for wind farms - a requirement aimed at improving the integration of wind power to the grid, with improved quality a side benefit. Accreditation of wind technology is voluntary for now.

More surprising was the vote of confidence, albeit qualified, in one Chinese supplier from Sebastian Meyer, director of research at Azure. "For those who say there is no data - (that) nobody knows how any leading China original equipment manufacturer turbine is performing - and therefore it must be awful, is somehow also completely missing the message," said Meyer. "There is a real delivery of kilowatt hours going on."

Meyer cited Azure's one-year comparison of output from two projects separated by 17 kilometres in a region of north China. Under the same conditions and grid constraints, one used Sinovel 1.5MW turbines and the other 850kW units from Gamesa. Both models were designed for Class II wind conditions.

"It turns out that the pricing for these turbines in 2007 was quite similar. There was less than a 1% difference in price. But the output difference was more like 4% (in favour of the Chinese supplier)", Meyer said. "So if we base a judgement only on this one-year example, you did get more bang for your buck with Sinovel."

This case did not answer long-term questions on part-replacement maintenance and various other things, Meyer stressed, concluding: "The jury is out there. The race is on."

Tougher standards

Goldwind chose the conference to show off its stride. On day one, it announced the successful test in August of low-voltage ride-through technology (LVRT) in the company's flagship 1.5MW direct-drive turbine. LVRT allows turbines to maintain operation without disturbance during sudden dips in voltage on the grid. The test, conducted by the China Electric Power Research Institute in Hebei province, followed an earlier successful test result of the technology in Germany in June. Goldwind's Wu added that Goldwind will now proceed to develop LVRT for 2.5MW and 3MW machines, as well as for the 6MW model it has in the pipeline.

National standards soon to be promulgated by State Grid will require that wind turbines be equipped with LVRT to ensure steady operation of the grid. Chinese rivals have largely put off development of the technology on the grounds that grid operators antagonistic to wind will find excuses to turn away output from wind farms whether or not LVRT is installed.

Offshore under scrutiny

The race is on land and at sea. Wu told listeners that Goldwind "cannot wait any longer to develop offshore wind power", lest China lag behind in offshore turbine design and wind farm construction technology.

Every top Chinese wind turbine supplier has offshore turbines in the works. Sinovel has already installed 34 3MW turbines at China's first offshore wind farm, off Shanghai, and Goldwind plans to install a 6MW prototype offshore unit by June 2012. Smaller manufacturer Shanghai Electric earlier this year unveiled a 3.6MW offshore model (windpowermonthly.com, July 6, 2010).

Meanwhile, developers bidding for offshore projects have professed willingness to endure losses due to low tariff prices just to grab a share of the domestic offshore market.

But some top wind officials urge patience. Shi Pengfei, vice-president of the China Wind Energy Association, earlier this year suggested postponing offshore development after a study found that China's offshore wind resources may, in fact, be smaller than its terrestrial resources (windpowermonthly.com, July 8, 2010). And Li Junfeng, deputy director of the energy research institute at the National Development and Reform Commission, said at the conference: "Chinese wind power enterprises know little about offshore wind farms, as was the case with onshore wind farms six years ago."

Chinese wind industry officials estimate that costs at the country's offshore wind farm are three times those of onshore sites. Meantime, Wu Jincheng, Longyuan deputy director of renewable energy research, is worried that dismantling offshore wind turbines is too costly.

Xie Changjun, general manager at Longyuan, China's oldest and largest wind farm developer, was confident offshore would succeed but concerned that Chinese offshore technology remains immature. Equally important, offshore wind farm construction methods need to improve, he said. And because grid operators can earn better margins on cheaper thermal power, he said they are likely to shun wind.

Joining the chorus, Lu Yin, director of the Rudong Energy Bureau in east China's Jiangsu province, remarked: "Denmark spent eight years to test, and is still testing, anti-erosion of wind turbines from sea water and the impact of turbine noise on marine creatures. What about us?"

Eyes forward

GWEC's Sawyer echoed a view widely held by his colleagues across the Chinese industry: focus on the grid. "There are two main issues that need to be addressed in China," he said. "One is an increased emphasis on working with the state grid, and the other is transmission and distribution operation for an effective integration of Chinese wind power into the national grid. This way Chinese consumers and the economy can begin to reap a greater share of the benefits from the massive development that has happened here."

More broadly, he called for greater focus on efficiency of production resulting in "a shift from focus on megawatts to megawatt hours"

- just the kind of improvements that Azure's Meyer hinted were already taking place. "Because, at the end of the day, our overall goal in the industry is to deliver the largest number of kilowatt hours of renewable electricity at the lowest possible cost," Sawyer concluded.

CHINA CENTRE STAGE - THE GLOBAL WIND ENERGY COUNCIL'S OUTLOOK REMAINS STRONG

The Global Wind Energy Council (GWEC) chose the October 13-15 China Wind Power 2010 conference in Beijing to release its official prognosis for the industry.

It was an apt choice of scene, considering Chinese wind dramatically outpaced GWEC's projections in its 2008 Global Wind Energy Outlook. That year, GWEC expected the country's total installed capacity in 2010 to reach 19.6GW in its most ambitious scenario, which assumed all available policy options "along the lines of the industry's recommendations" were adopted. But last year, the actual figure was already 25.8GW; GWEC's advanced scenario for China in 2010 is 41GW.

GWEC's latest outlook, coauthored by Greenpeace, blames China's low official target of 30GW total installed wind in 2020 - a level that may have been reached in mid-2010 - for delays in new electricity transmission unanimously deemed critical for additional wind capacity growth. These transmission problems, in turn, provide political cover for grid operators seeking to flout their obligations to buy power generated from renewables, says GWEC. Still, it expects the emphasis on infrastructure projects in China's 2008 economic recovery plan to produce much new transmission.

Globally, GWEC forecasts that total installed capacity will reach 185GW this year under its most conservative "reference" scenario or 198GW in its "moderate" scenario. The reference, moderate and advanced scenarios for 2020 are 415GW, 832GW and 1.071TW, respectively.

GWEC apparently sees little chance of the conservative projections coming to pass: They are based on the International Energy Agency's World Energy Outlook 2009 reference scenario, which GWEC openly questions.

"For this to happen, annual additions would need to decline substantially, especially in China, although there is no indication of this happening at present," states Global Wind Energy Outlook 2010. "Overall, the reference scenario seems disconnected from current developments, and curiously pessimistic," it adds.

Drivers

GWEC 2010 includes among its underlying assumptions that wind turbine nameplate capacity - the maximum electricity output achievable when operating at full power - will continue to rise in coming decades. There will also be improvements in turbine capacity factors, the percentage of nameplate capacity that the machine delivers over the course of a year.

GWEC estimates that the current average capacity factor is 25%, but "improvements in both wind turbine technology and the siting of wind farms will result in a steady increase", it says. A sharp rise in wind power generation offshore, where winds are stronger and more constant and capacity factors much higher, will also help. As a result, GWEC expects that, across all three scenarios, the average global capacity factor will increase to 28% by 2015 and 30% by 2036.

GWEC also foresees a decline in the cost of producing wind turbines. The average capital cost per kilowatt of installed wind power capacity was EUR1,350 globally in 2009, unchanged from the previous year. GWEC sees that as a peak. Under its advanced scenario, it expects that figure to drop to EUR1,328/kW this year and to EUR1,093/kW in 2030. That will be due to increased deployment of wind, which in turn will accelerate technological inroads, economies of scale and lower equipment costs.

Global investment in wind will rise to EUR202.6 billion in 2030, from EUR57.5 billion this year, in the advanced scenario. The number of wind-related jobs will grow from about 670,000 in 2010 to more than 1.9 million in 2020 - and top 3 million in 2030.

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