Chinese wind turbine suppliers sweep the board -- Foreign companies miss out on 1000 MW of contracts

The global wind industry's leading turbine manufacturers have once again missed out on big contracts in China. Upstart domestic companies have been selected to supply 1000 MW of wind capacity across four wind farms, offered up for tender in the north of the country under the central government's concession program for wind project development.

The winning bids all offered electricity production at relatively low prices, a pattern set in the three previous tenders. Some are again arguing that the prices are too low for financial viability. The turbines will be supplied by China's four leading domestic wind turbine makes, Goldwind Science & Technology, Windey Wind Generating Engineering, Dalian Heavy Industry-Sinovel Windtec, and Dongfang Steam Turbine Works.

Although tender documents were bought by more than 40 prospective bidders, both foreign and domestic, final bids amounted to 26 submitted by 17 companies, all owned by the Chinese state. Some of the bids were made in conjunction with overseas companies. One unidentified foreign company was said to have been ready to tender but pulled out at the last minute. Some 12 turbine manufacturers, including Gamesa, Nordex (Yinchuan) and CASC Acciona, were featured in the 26 bids, which offered up more than 20 different turbine models ranging from 750 kW to 2 MW. It was the first concession tender issued by the Chinese government requiring that equipment suppliers be named.

Just three projects were originally offered up for tender: the 300 MW Huitengliang wind farm and the 200 MW Bayin wind farm, both in Inner Mongolia, and the 200 MW Danjinghe wind farm in Hebei province. Once bids were in, however, the government found itself equally impressed by two for the Huitengliang 300 MW, one from North United Power, in which China's leading energy developer, Huaneng Group, has a majority stake, and the other from China Guangdong Nuclear Energy Development. The puzzle was solved by doubling the size of the Huitengliang tender and selecting both bids, with North United to build one 300 MW project and Guangdong Nuclear another, with both companies using 1.5 MW machines. Huitengliang boasts the best wind resources in Inner Mongolia.

Selected suppliers

For North United, which is targeting 1200 MW of wind capacity by 2010, the 300 MW development brings its portfolio of projects operating or under development to 500 MW. The turbines for Huitengliang are being supplied by Dalian-Sinovel Windtec. The Windtec part of the name refers to a small Austrian company owned by wind industry veteran Gerald Hehenberger, who has been involved in advanced turbine design since the 1980s. Hehenberger's machines operate in a variety of diverse locations, from the deserts of California to Israel's Golan Heights.

Although Windtec has no legal connection with Dalian-Sinovel, it supplies support, engineering and electronic control units for the 1.5 MW machine, which it originally developed. This year Windtec has ordered power modules for 900 MW of the 1.5 MW turbine from American Superconductor, which it packages into control systems for Dalian. While some units have already been delivered, control systems for 675 MW will go to Dalian in 2007 and 2008.

Windtec installed the first prototype of the 1.5 MW machine in Austria in 1998 before selling it on. Dalian Heavy Industry acquired a production licence for the machine in 2004 from small German wind turbine maker Fuhrländer. It had acquired the rights to the turbine from large German company Pfleiderer, which shed its wind energy activities earlier in the same year. Together with Windtec, Pfleiderer had further developed the 1.5 MW, installing four prototypes in Austria and Germany between 2001 and 2003.

For the second 300 MW project, Guangdong Nuclear has picked the huge Dongfang Steam Turbine Works as technology supplier. Dongfang is one of no less than three Chinese companies to have struck deals to with Germany's Repower to build Repower wind turbines under licence, though it is the only one of the three with a licence for megawatt scale wind technology. As a leading manufacturer of steam and gas turbines, Dongfang is the largest Chinese company involved in wind turbine manufacture. Guangdong Nuclear says it is investing CNY 2.4 billion ($303.66 million) in the development. The company operates 1000 MW of conventional power generating facilities and reportedly plans to increase this to 5000 MW by 2010 and 10,000 MW by 2020.

German influence

China's biggest wind energy developer, Longyuan Electric Power, which bid on all projects, secured the 200 MW Bayin development using 1.5 MW units from Goldwind. It is Longyuan's third concession project to date. The company secured the 150 MW Rudong Phase-2 wind farm in East China's Jiangsu Province and the 200 MW Tongyu wind farm in Northeast China's Jilin Province in previous concession tenders. Goldwind makes 600 kW and 750 kW turbines under a licence bought from Repower in 1998.

China Energy Conservation Investment Corporation will develop Danjinghe in Hebei, also a 200 MW project, using a combination of 750 kW, 800 kW and 1.5 MW turbines supplied by Windey, the third Chinese company with a Repower licence, also for 600 kW and 750 kW turbines. Windey is investing CNY 1.6 billion ($202.4 million) in the project. The company is already operating or constructing a total of 300 MW of wind plant in Hebei and in north-west China's Xinjiang Uygur region and hopes to have 1000 MW under its belt by the end of 2012.

In terms of meeting concession requirements for a minimum 70% of local content in wind power stations, Goldwind is pledging the highest rate at 94.46%, while Dongfang has the lowest at 70%. Dalian-Sinovel Windtec is promising 79% local content and Windey 78.5%. All projects are scheduled for completion within four years.

The prices

The sales prices for wind generated electricity bid into the tender by the four winners range from $0.053/kWh to $0.063/kWh. While in the mid-range for onshore projects on good sites built in 2005 (Windpower Monthly, January 2006), those prices may prove to be at the cheap end of the scale for 2006, given that increases in wind technology costs have been hitting home.

The winning price for Danjinghe was the highest of the four selected bids at CNY 0.50/kWh ($0.063/kWh), but the lowest of all bids cast for that project. For the remaining three projects, the second lowest prices bid were selected "upon a comprehensive consideration of all factors," according to government sources. For Bayin, the winning price was CNY 0.46/kWh ($0.058/kWh), while both the two Huitengliang projects came in at CNY 0.42/kWh ($0.053/kWh).

Professor Shi Pengfei of the China Wind Energy Association says all of the prices are slightly below the reference prices established in a feasibility study of the proposed projects and recommended to government. For Danjinghe, the price accepted was CNY 0.0355/kWh below the reference price, while for Bayin and Huitengliang the winning prices were CNY 0.0487/kWh and CNY 0.0603/kWh less than the study recommended.

Among the unsuccessful turbine manufacturers are Spanish wind power companies Gamesa and Acciona, both of which have established wind turbine factories in China as wholly owned subsidiaries. Both companies were selected by three bidders, each of which tendered for all three concession contracts originally on offer. Gamesa makes its 850 kW turbine in China and Acciona its 1.5 MW.

The losers

Acciona says the bids using its turbine were between CNY 0.03/kWh and CNY 0.10/kWh higher than winning bids. "We understand that the government wishes to speed development of the domestic industry. With such low electricity prices, developers cannot afford to buy our products," say Acciona sources in China. "But the government's good intentions may not bring about good results." Acciona will now focus on fulfilling two major orders it has already received in China.

Gamesa argues that its 850 kW turbine is of a size particularly suited to Chinese infrastructure. It says its current 710 MW annual production capacity in China for the 850 kW may not be enough to satisfy demand outside the state controlled concession process.

The Chinese government's three previous wind concessions since 2003 awarded nine wind projects totalling 1350 MW. China appears to be on track to reach at least 2000 MW by the end of this year. If the more than 500 MW a year pace continues, it will exceed its 5000 MW target by 2010.