ANALYSIS - Scramble for China's Wind Power Market Heats Up
Date: 28-Jun-06
Country: CHINA
Author: Nao Nakanishi
The speed with which China Aerospace Science and Technology Group Co. and road-to-property group Acciona SA assembled their first turbine reflects a wind energy fever in China.
The lure of China's huge but underexploited market, Beijing's drive for renewable energy and low production costs for exports to fast-growing bigger markets in the United States and Europe have foreign and domestic firms rushing to set up wind farms or build production plants across the country.
"The cake is so big that I could afford an office made out of gold," said a senior official from one of the world's top turbine makers, based in China, who declined to be named. "There will be orders for everyone."
To tackle worsening air pollution, Beijing recently raised its wind power target for the year 2020 to 30 gigawatts from 20 gigawatts, compared with its plan to achieve 40 gigawatts of nuclear power capacity by 2015.
More importantly, government officials have said major power firms must generate at least 5 percent of their electricity from renewable sources by 2010 and 10 percent by 2020, a mandate that should fuel investment despite the prevalence of cheap coal.
China's vast and accessible interior and coasts make wind power a favourite, generating business for the top equipment makers, Vestas Wind Systems A/S, Spain's Gamesa and US General Electric Co.
"There's a big pull in the industry," said Javier Ojeda, general manager of the Chinese-Spanish venture Nantong CASC Wanyuan Acciona Wind Turbine Manufacture Co. Ltd., as he checked a newly erected logo at the factory on the Yangtze River's banks.
It can now assemble 400 of the 1.5-megawatt turbines equipped with 40-metre (130-ft) blades every year, twice as large as the turbines common in China in the past. The company has decided to double its capacity in a second phase.
GROWTH POTENTIAL, EXPORTS EYED
China lags other countries, both developed and emerging, in developing its wind power potential.
Last year its wind generation capacity came to 1.3 gigawatts (GW), a two-thirds increase on the year before but still only 0.2 percent of the world's second-biggest market, data compiled by the China Wind Energy Association showed.
Denmark gets one-fifth of its electricity from the wind, the highest ratio in the world, while top generator Germany holds nearly 15 times as much capacity as China. Even India has three times more than its larger Asian rival.
While developers agree the domestic potential is vast, they are also racing into China to reduce costs on export sales, improving the economic viability of the ultra-clean energy.
An estimated 11.8 GW of wind power capacity was installed worldwide last year, 43 percent more than in 2004, as soaring oil and natural gas prices plus environmental imperatives such as the UN's Kyoto protocol fuel a boom in demand for wind turbines.
Gamesa, which opened its first non-European plant recently, hopes to cut costs by about a quarter in the coming years by focusing on China for component production.
Other global leaders, including India's Suzlon Energy Ltd., are also building factories here, in part driven by Beijing's rule requiring 70 percent of turbine parts to be locally manufactured since mid-2005.
Vestas, an industry pioneer with experience of building the world's first offshore wind farm in Europe, is doubling capacity at its blade factory, which opened this month to make 600 units annually in the northern city of Tianjin. Additional facilities to make components will start operation early next year.
"The plant will not only supply the market in China. It is part of our global supply chain," said Srikanth Pasupuleti, chief representative of Vestas in Shanghai.
LOCALS JOIN THE RACE
So far the market has been dominated by the top three foreign wind-turbine firms, who grabbed 77 percent of the new projects in China last year, a study by Wind Power Monthly
