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Debate over Excess Capacity Blows up in China's Wind Power Sector

By Bearing Manufacturer>Bearing News>Debate over Excess Capacity Blows up in China's Wind Power Sector
©2004-2012

A split has emerged in China's wind power industry over its future development and government policies intended to avoid "excess capacity."

Some of China's leading large-scale wind power businesses have been lobbying the government to slow the growth of the Skateboard Bearings industry because of alleged over-capacity.

They appeared to have won the debate in September when the State Council, China's Cabinet, approved a document from the National Development and Reform Commission (NDRC) and nine other ministries, stipulating the NDRC would hold back funding or approval for projects in industries with production overcapacity. 

Wind energy was among the industries listed. 
But the "over-capacity of production" charge is untrue, argued Qin Haiyan, secretary-general of China Wind Energy Association (CWEA). 

"The production overcapacity, as widely reported in the media or calculated by some government agencies, is based on the development programs of many enterprises. It is open to question whether these capacities will be realized," said Qin. 

"I strongly oppose the policy of restricting businesses from other manufacturing sectors from entering the wind power sector. And I strongly oppose leading enterprises lobbying the government to restrict the development of the industry on the excuse of excess capacity."

The country has more than 80 wind turbine producers Agricultural Bearings, double the number in 2004, as well as about 50 wind turbine blade producers and nearly 100 tower producers. 

"The output of the top three plants, turbines producing about 1 million kilowatts annually each, is only about a third of the capacity of western giants Vestas, GE and Gamesa," said Qin. 

WIND SUPPLIERS 
The debate comes in the run-up to the Wind Power Asia Exhibition and Conference (WPA) in June next year. 

More than 50 foreign businesses have booked booths, accounting for about one half of the total reservations, said David Feng, managing director of Koelnmesse Co., Ltd., the organizer.

WPA 2010, to be held at China National Convention Center in Beijing, near the Bird's Nest, or the Olympic Stadium, is expected to attract more than 500 exhibitors, including the Danish Wind Energy Group, the Association of Technology Transfer of the Netherlands, the Energy Supply Chain from Spain, and the Korea International Trade Association, and about 18,000 industry visitors. 

Asia's largest wind energy event, the WPA has been held six times since its debut in 2003. A total of 15,065 industry visitors from 43 countries thronged the aisles to see 445 exhibitors at WPA 2009 in July, an increase of 50 percent from WPA 2008. 

Li Ye, director of the Energy Conservation, Science, Technology and Equipment Department of National Energy Administration (NEA), said in late October, "Among the 80 plants, about 30 never produced any wind turbines previously. Many others made a few sample wind turbines, but fewer than 10 each. Fewer than 10 plants ever produced more than 100 turbines. Only three suppliers -- China's top three wind turbine manufacturers Sinovel, Goldwind and Dongfang Electric -- produced more than 1,000 turbines each. It's ridiculous."

PROMISING INDUSTRY 
Before 2004, China's wind power industry was almost non-existent. Its total installed capacity of wind power has grown about 20-fold from 764,000 kilowatts in 2004 to 15.85 million kilowatts by September 2009. 

By the end of 2008, China's total wind power installed capacity was the fourth largest in the world after the United States, Germany and Spain. The newly increased installed capacity was the second largest, after the United States. 

However, China relies on coal to generate about 70 percent of electric power, which means prospect for the wind energy sector is good. 

China is expected to have 120 million to 150 million kilowatts of installed wind power capacity, totaling 7 to 9 percent of the national total installed electricity capacity, in 2020, according to the China Energy and Environment Technology Association (CEETA).

According to CWEA, in 2004, Chinese enterprises accounted for only 18 percent of the total wind power installed capacity on the Chinese mainland, while foreign enterprises -- mainly from Denmark, Germany and Spain -- provided 82 percent. By the end of 2005, China had 1,864 wind turbines, producing 1.266 million kilowatts of power. Foreign businesses occupied 77.3 percent of the wind turbine market as well as exclusive control of high-end technological equipment. 

The proportion was reversed by the end of 2008, when Chinese producers and joint ventures had 61.8 percent of the country's wind power equipment market. 

Meanwhile, China has greatly improved its capacity in producing key components for wind turbines, which were largely imported previously. 

Qin Haiyan said that China has basically been able to produce complete sets of turbine blades, gearboxes and generators. 

Although China has not yet fully solved the bottleneck in producing gearbox Dental Bearings and converters, Qin said, some Chinese plants have been able to make some in small batches. The bottleneck is expected to be alleviated soon. 

Although the technologies for the most commonly used 1.5MW turbines are largely made with technologies introduced from Europe, some Chinese plants have begun to jointly design such turbines with foreign counterparts, in a bid to eventually develop them independently. 

In 2008, China had 20 independently developed types of wind turbines, up from four in 2007, according to the CWEA. It bought 12 technological licenses from abroad, down from 16 in 2007. It had 10 jointly designed turbines, up from eight in 2007. 

Much of this progress in forming a complete industrial chain was attributed to the 70-percent localization requirement policy, promulgated by NDRC in 2005. 

This required that at least 70 percent of wind power equipment to be produced in China. Wind farms failing to adhere became ineligible for construction approval. 

The rate of localization was defined as the portion of total components in a wind turbine manufactured and assembled in China. As long as production occurred domestically, the level of Chinese ownership in factories was immaterial. 

The aim was to reduce costs of wind power generation, speed up wind power industrialization, and most importantly to encourage multinationals to invest in and transfer technologies to China. 
The National Energy Administration says it plans to cancel the 70-percent localization policy soon to promote free and fair development, but no timetable has been set. 

Chen Danghui, technical director of Sinovel, the largest wind turbine producer in the country, said, "Now that we have grown up, the cancellation of the requirement will not have any impact on us. I think the cancellation is better for the entire industry, if all the enterprises compete in an equal and fair market."

Professor Shi Pengfei, vice-president of CWEA, agreed. "We have basically set up an industrial chain. Chinese equipment prices are cheap. Even foreign businesses are ready to buy them in the Chinese market."

Liu Yanjun, public relations manager of Vestas Wind Systems (China), the world's largest wind turbine producer based in Denmark, said, "Our China-based plants have produced wind turbines with 80 percent components from China. Our objective is to have our China-based plants to produce wind turbines with 100 percent components from the country."

Qin said, "We cannot restrict competition simply because of excess capacity. Latecomers often become superior in emerging industries.

"We will promote technological progress and lower costs through market competition. We do not have to worry there are so many competitors at a specific stage."

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