China Special - Key Suppliers: Domestic supply base consolidates lead

The rapid expansion of China's installed wind power capacity has fostered a massive growth in domestic wind turbine manufacturing.

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Suppliers are also investing in research and development of key technologies to create a truly home-grown industry.

When China introduced its renewable energy law in 2006, sceptics expected little. But over these last three years, a combination of regulatory backing and generous fiscal support has spawned about 80 manufacturers in the domestic wind industry, up from a mere six in 2004. Today's line-up of wind suppliers - including 27 state-run enterprises, 23 private firms and about 20 Sino-foreign joint ventures or solely foreign businesses - span the supply chain, and industry players say that core components are crafted with ever-greater quality.

China's wind sector still imports the most important technological know-how, but it is working hard to shift from adaptation to innovation, subsidising its wind turbine manufacturers to encourage research and development (R&D). Large wind power technology labs are cropping up. Zhang Xiangmu of the Ministry of Industry and Information Technology says that China's wind industry is overtaking the hydropower sector in technological prowess, adding that it can now independently produce 1.5 MW wind turbines and is experimenting with 2 MW wholly indigenous machines.

Market shift

The rise of Chinese manufacturers has meant a fall in foreign suppliers' market share. Last year, Spain's Gamesa fell from third to fifth place in annual sales after installing 508.3 MW in China. Vestas scrambled to fourth place with 599.7 MW installation, but its market share of 9.6% was well below the 16.9% of Chinese rival Dongfang Electric Corporation. GE was the only other fully foreign firm to feature in the top ten, as India's Suzlon and Germany's Nordex fell from the rankings (page 12).

Yet after such robust expansion by Chinese companies, growing pains are inevitable. With too much eagerness to invest, there is serious overlap in product offerings, Zhang says. Only about 20 of the 70 component factories are truly competitive, he adds, and crunch times are ahead. By next year, the combined production capacity at Chinese turbine plants is forecast at between 35 and 40 GW, which is well in excess of the forecast average installation of 10 to 15 GW of annual wind generation capacity nationwide.

Rising star Sinovel has no plans to cut production. Last year it became the celebrity of the Chinese wind sector by overtaking Goldwind as the country's largest turbine manufacturer and was producing almost a quarter of all Chinese annual installed capacity. Goldwind took 18% market share and Dongfang 17%.

Aiming higher

Sinovel plans to outdo its 1.4 GW wind turbine capacity produced last year. "In 2009, we will surpass the line of 3.3 GW in turbine output," declares chairman Han Junliang. "We will produce more than two thousand sets of 1.5 MW wind turbines and one hundred sets of 3 MW turbines. We will exert all efforts to produce 3 MW turbines with domestically manufactured parts and actively participate in constructing ten gigawatt-scale wind farm bases." Ninety per cent of its 1.5 MW turbine components are procured in China.

With China unofficially more than tripling its 2020 installed wind capacity goal to 100 GW, Sinovel is building a CNY 1 billion ($147 million) factory to produce 1000, 1.5 MW turbines annually and more than 200, 3 MW machines. It has 4.5 GW in turbine orders through 2010 and, to meet its 1.5 MW targets, it has amended its agreement with American Superconductor Corporation, taking delivery of power converters in 28 months instead of the previously agreed 36 months. It is also developing 5 MW offshore wind turbines.

As domestic manufacturing grows, China's investment in R&D is slowly freeing it from reliance on foreign technology. Early this year, China Northern Locomotive and Rolling Stock Industry Group (CNR), a state-owned rail equipment manufacturer, agreed with Xi'an City, central China, to invest CNY 6 billion ($880 million) to build China's largest wind power equipment research, development and manufacturing base, to develop wind power drive systems, components and logistics businesses that will put Chinese wind on a global scale.

In phase one, the company will build six wind turbine factories by 2011 for a broad array of wind power equipment. Phase two will cover wind power system integration and other electricity-related projects (Windpower Monthly, March 2009).

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