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China showing all signs of major market status -- Capacity doubles to 2600 MW

With China's renewable energy law in full swing for a whole year, 2006 represented a milestone for the country's wind power industry. A total of 1328 MW of new plant went into operation, reports China Hydropower Engineering Consulting Group. It was a 160% increase on the 500 MW installed the previous year, making China the fifth biggest wind market in 2006 and more than doubling its cumulative installed capacity to 2600 MW.

All indications are that China will displace Denmark in fourth place in the global wind power league well before the year is out. The aim is for 10% of its electricity to come from renewable energy by 2010 and 15% by 2020. The rapid build-up of wind capacity represents just 1.3% of the massive 105 GW of new generating capacity the country brought online last year, reports the China Electricity Council. Nearly half of that came from coal and the country is bent on "aggressively" expanding nuclear generation too.

China's wind market is partly based on competitive bidding for concession contracts offered by central government and partly on working with regional governments to fulfil their goals. The downward pressure on prices paid for wind power induced by the highly competitive market structure has come in for fierce industry criticism, with claims that prices are being pushed too low and projects will fail as a result, particularly with relevance to central government concessions (Windpower Monthly, November 2006). By the end of 2006, the government had granted building concessions to 14 projects of 100-300 MW, with a combined total of 2500 MW (table). All concessions have been allocated to state-owned enterprises, which put in the lowest bids.

Last year, however, most wind development was achieved in the regional markets. All but 200 MW of last year's 1330 MW of new wind power was developed outside the central government program. With projects of less than 50 MW only requiring approval from provincial government, typical project size is 49.5 MW or less. Larger projects also need central government approval, slowing the permitting process. For non-Chinese developers, the regional route has proved the easier one, with companies often teaming up with local Chinese partners to undertake projects.

This pattern of development is set to continue as China powers up to become one of the wind industry's biggest markets. Thousands of megawatts are already firmly in the pipeline. By end 2007, cumulative capacity is likely to surpass 4000 MW, says Shi Pengfei of the China Wind Energy Association, provided by 550 MW of central government concession projects and up to around 1000 MW of regional projects due online this year. By 2010, China's wind total is forecast to exceed 8000 MW and could rise to 10,000 MW, double the government's current 5000 MW target for that year, says Shi. Already, China's 30,000 MW target for 2020 is also looking conservative.

Inner Mongolia, with 343 MW installed across nine projects to bring its cumulative total to 509 MW, was the 2006 hotspot for development (table/map). As the new top region in the country, it accounts for 19.62% of China's cumulative capacity and looks set to maintain that position, with up to 4000 MW of new projects reportedly in planning. Xinjiang, previously the top region, has slipped down the rankings to sixth, with less than 30 MW added to take its total capacity to 207 MW, less than 8% of China's total. Meanwhile, with five projects totalling 218 MW in new wind plant, cumulative capacity in north China's Hebei province surged to 326 MW, pushing it up the regional rankings from seventh in 2005 to second last year.

Flocking to China

With regional governments enthusiastically supporting wind power development, often seeing wind stations as solid tax revenue sources, international wind project developers are flocking to China. Australia's Roaring 40s and Canada's Vitasti are just two examples of overseas developers forming Chinese joint ventures in the past year. Roaring 40s now has three projects in China totalling around 150 MW, two in Jilin province with China Datang Jilin Power Generation Company and a 48.75 MW project in Rongcheng, Shandong, one of up to three possible projects being developed in partnership with Guohua Energy Investment Company. Both Chinese companies are state-owned enterprises, with China Datang Jilin being China's largest power generator, controlling over 55 GW of capacity.

For wind power, the Chinese energy major has an aggressive strategy, targeting 2000 MW by 2010. Roaring 40s second project with the company, effectively the second phase of a wind farm with a generation potential of 200 MW, was agreed last month and is expected to start generating by the end of the year. In addition, the companies say they have plans to jointly develop the nearby Xiangyang wind project, which has potential for up to 1000 MW.

Similarly, Vitasti is targeting a total of at least 1000 MW, having already secured a land lease for a 600 MW wind farm in Zhanjiang, Guangdong, in South China, with construction on the first 50 MW now underway.

China's leading domestic wind developer, Longyuan Electric Power Group, has no intention of being outdone. It has firm plans for 1600 MW of wind power at Weichang in Hebei province, with 50 MW of that due in 2007, 100 MW in each of the following three years, 150 MW in 2011, and the remaining 1100 MW to come later. In addition, it plans five further 1000 MW plus wind power bases, in Xinjiang, Gansu, Inner Mongolia, and the north-east and south-east of China, with deals with 11 further local governments in Gansu, Xinjiang, Inner Mongolia and Hebei for a total of 3000 MW already secured. By 2010, it expects to have an installed capacity of 3000 MW and is targeting 7000 MW by 2020.

Turbine supply

With all this planned capacity, turbine manufacturers and component suppliers in China -- foreign and domestic alike -- are at full capacity, with multi-megawatt machines increasingly in demand. With the market spurred by the government's requirement for wind farms to contain 70% locally made content, the number of domestic manufacturers has ballooned to more than 30, while most of the wind industry's leading global turbine suppliers, including Vestas, Gamesa, GE Energy, Acciona, Nordex and Suzlon, have been busy opening or expanding manufacturing facilities in the country, again often forming joint venture agreements with local firms. While these joint-ventures usually fall under Chinese control, Germany's Repower, through its agreements with North Heavy Industries Group, a large equipment manufacturer in China, and the UK's Honiton Energy, became the first foreign wind firm to have a controlling interest in a joint venture involving a Chinese company (Windpower Monthly, October 2006).

In a bid to go toe-to-toe with foreign competitors, several Chinese firms now have 1.5 MW machines at the prototype stage or ready for market, including Goldwind, Dalian Heavy Industry, Shanghai Electric, Dongfang and Shenyang Huachuang. Xiangdian Wind Power, an aggressive latecomer which says it wants to secure a 30-40% share of its home market in three to five years, is also developing three units, a 2 MW direct-drive turbine, a 2.5 MW unit with a permanent magnet synchronous-generator, and a 1.5 MW unit with an asynchronous generator and gearbox.

Domestic lead

Just under 50% of the new capacity last year comprised machines in the 1 MW to 1.5 MW range. As yet, foreign firms still dominate the supply market, together accounting for over 55% of 2006's new capacity, but that could change fast. The leading domestic manufacturer is Goldwind and it far outgunned its foreign rivals to take pole position as the top supplier in China last year for the first time (chart). The company supplied 442 MW of the new capacity, increasing its share of the market to 33.37% in 2006 from 27% in 2005, and pushing Spanish Gamesa down the league table to below Denmark's Vestas in second place.

Goldwind may hold its top position. It has orders for some CNY 9 billion and has just signed a long term strategic agreement with the Chinese division of blade manufacturer LM Glasfiber for supply of blades for its two 1.5 MW models for a minimum six year period. The agreement includes an additional contract to develop blades for Goldwind's next generation of turbines of 2 MW and above for onshore and offshore applications.

Gamesa -- top of the table for the last few years -- lost significant market share, taking just 11.6% in 2006 compared to the 36% in both 2005 and 2004. It supplied 212.5 MW of the new capacity last year, behind Vestas' 311.55 MW. The Danish company increased its market share from 14.7% in 2005 to 23.44% in 2006. GE Energy's share of the Chinese wind turbine market dropped from 18.7% in 2005 to 12.75% last year, leaving it in fourth place with 169.5 MW, while Chinese firm Haurui concluded the top five with 75 MW installed to give it 5.64% of the 2006 market.

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