The failure to pay throughout the Chinese supply chain is being blamed as one of the key reasons why the country's leading manufactures such as Sinovel and Goldwind have reported record profit fallsi n recent months, by as much as 163% in Sinovel's case.
The root cause of the problem seems to be wind farms failing to earn sufficient profits due to a combination of curtailment of output and an underfunded government subsidy.
In 2012, Chinese wind farms lost the opportunity to generate 20 billion kilowatt hours of electricity because of curtailment. The economic loss was worth about CNY 10 billion ($1.6 billion), or about one half of the earnings of wind farms nationwide.
"Curtailment has raised the unit costs of wind power generation and eaten up almost all the gains from technical innovations in wind farms," said Yang Xiaosheng, chief engineer at China's largest wind farm developer, Longyuan Power. "Wind farm developers earn smaller profit margins, and this contributed to the chain debts in the Chinese wind power industry."
The curtailment is largely due to a lack of sufficient grid infrastructure. This year, State Grid will construct seven ultra-high-voltage transmission lines, four of which will mainly be used for wind power.
Jiang Liping, vice president of the State Grid Energy Research Institute, said that in addition to constructing more transmission lines, China must optimise measures to dispatch electric power in order to make wind power transmission more flexible and meet the diversified demands of power users.
However, there is also the issue of insufficient subsidies. "State Grid pays us only the part of feed-in tariffs equivalent to those of thermal power plants," said Hu Guodong, deputy general manager of wind farm developer Datang Renewables. "The remaining parts, as wind power sells higher,is supposed to come from the Renewable Energy Fund, in the form of subsidies. But we have not received subsidies from the fund for three years."
Industry insiders say the subsidies amount to nearly one half of earnings in wind farms. Without them, wind farm developers meet heavy pressures, considering high operation and maintenance costs that are increasing year by year.