China’s Wind Industry
China’s Wind Industry

Members of Group * ASSIM A IREH Roméo * DJOUBI TEMCHE Gilles Adam * DYER Claude
Members of Group * ASSIM A IREH Roméo * DJOUBI TEMCHE Gilles Adam * DYER Claude

* * * INTRODUCTION * * * Fully aware of the environmental issues coming with a rapid and intensive economic growth, the Chinese government has made of green energy a top priority. The latest Chinese five year plan sets strong goals in that regard. And wind energy plays a key role in the promotion of green energies. Harvard researchers have put forward that wind power could account for the totality of energy use in China within two decades (Michael B. McElroy). Wind energy could even provide 24 700 TWh of electricity annually which is seven times the current Chinese consumption. China has become the leading power in the field of wind energy. Once leader in that field with a production of 40 GW, the US have been surpassed by China with a production of 42,3 GW in 2010. As the growth in certain countries has considerably slowed down due to the global financial crisis (minus 50% in the US), China’s wind energy market has continued to soar. According to Li Junfeng, secretary general of China Renewable Energy Industry Association (CREIA), China could reach a production of 200 GW by 2020. Even though China’s market is developing incredibly quickly and that the Chinese market offers huge opportunities for Chinese and international companies there still remain important challenges which have to be met. * * *

I- Market development: the'' boom'' of the Chinese wind * a) The Players in China China has become the world's largest producer of wind power and of wind power equipment, now surpassing worldwide leaders in the field such as the Danish Vestas, the American GE or the German Enercon and Siemens in the Chinese market. Vestas remains the world leader. But China has now some of the strongest players in the world with very well nationally implanted companies such as Sinovel, Goldwind, Dongfang Electric or United Power. Sinovel, second biggest company in the world, and Goldwind, number three, are expanding their activity both domestically and worldwide very rapidly. Very young, most of these Chinese companies have experienced booming growth rates such as Goldwind (number 2 in China), founded in 1986 in Xinjiang province, whose market share had doubled every year since 2005. These companies are mainly wind turbine manufacturers and thus have very strong R&D centres and insist on strong innovation efforts. Goldwind is for instance responsible for China's first marine wind power generator unit and first marine wind power project.The Chinese leader Sinovel, second biggest company in the world, aims on becoming the first manufacturer of wind turbines in the world around 2015 and selling half of its products abroad. Here are the different market shares of the companies in the Chinese market.

Top 10 of Manufacturers, Source CREIA, China Renewable Energy Industry Association 2010
Top 10 of Manufacturers, Source CREIA, China Renewable Energy Industry Association 2010

In total there are currently more than 40 wind turbine generator manufacturers in China, including 4 foreign invested enterprises, 7 joint-venture companies and over 20 domestic manufacturers. There are already well established companies (both international and domestic) which know the Chinese market very well. Thinking big is what, according to many specialists, will undoubtedly have Chinese players become the most competitive companies in the world. b) The regions and “wind reserves”. The region with the most wind in China and therefore which has the biggest potential is the North West (Xinjiang and Gansu). Many companies are present there. Goldwind has its headquarters in Xinjiang. As we will see in the second part, the potential for development of wind energy infrastructure in these regions is massive. As the biggest consumption areas (the most populated areas) are along the Chinese East coast these companies are thinking of ways to have the 5000km separating the production and consumption areas be less of a burden. Even though all institutes do not agree on the potential and resources of wind power in China, they all agree that the wind resource in China is abundant, as we can see on the chart here-under.

c) Chinese wind energy companies seek growth and market shares outside the homeland. Already very strong leaders in China, Sinovel and Goldwind have made it their top priority to expand their activity and sell at least half of their manufactured goods abroad and as soon as possible. * II- Business Opportunities *
The sector of the wind industry in China has many opportunities related to both facilities put in place by china government for investors and a favorable environment for development in this sector.

a) The government has introduce several incentives for development of wind energy * VAT deduction of equipment cost (usually it is 17% of total investment * Income tax for 2 year free and 4 years half (normally it is 25% of net income) * Moreover, even though there are many big players already well established there are opportunities for new entrants. These three recent years, more than 30 new companies have obtained license agreements for the production of wind energy.

b) There is Lot of wind in China and the possibility of installing off-shore wind turbines. Concerning onshore resource, there is theoretical reserves of more than 4,000GW above 10m. The practical development area is approximate 200,000 km2 with a win capacity can reach 600~1,000 GW. Offshore resource is smaller and can reach 100~200GW.

c) International cooperation were done in order to * Learn from Norway and EU countries * Planning of gird connection * Installation of off-shore wind farms * Develop new technologies for * Turbines and installation systems * Maintenance system * Gird connection & power distribution issues * Facilitate policy dialogue * Climate change & renewable energy * R & D for better future III- Challenges for multinational companies *
China is still far from the objectives set in terms of green energy (over 10% of green energy projected in 2010). So there is still room for transnational companies and the market to grow. The PRC plans on 15% of green energy by 2020 with wind power amounting to 2% of the global production. As the industry has matured, however, China's wind power sector faces big challenges. a) Building capacity in the domestic wind energy Insurance market
China has the fastest growing wind energy market in the world however, the industry has grown so rapidly that domestic insurers have not been able to keep up with the pace of development and provide specialist insurance products that cover the complex risks involved. Wind energy companies need to develop a better understanding of risk management and the positive contribution that insurance can make to the industry. Building awareness of how effective quality assurance can contribute to reducing risks for all parties in the construction, operation, maintenance and repair stages is also important.

b) Losses of energy
The wind energy industry is one of China’s most developed sources of low carbon energy with great potential to grow and contribute to the country’s energy conservation and carbon reduction goals. But more than half of the electricity generated by the turbines is lost because of insufficient transmission capacities. According to several experts the electricity grid is a major bump along the road for wind energy companies and for the growth of the wind power grid.
The problem has made wind-power operators such as Sinovel and China Wind Power Corp switch to other regions in China that have a better electricity network though inferior wind power resources. Even though the PRC has planned to invest over 500 billion yuans in the electricity grid, some Chinese companies have decided to concentrate their activity in regions with better electricity grids but often with less wind. There is huge waste in that regard. The China Wind Power Corp has done so. c) Quality product of wind energy industries
In order for the Chinese companies to expand their market overseas we believe that quality control and the quality of products can be an issue. The greatest challenge for ambitious industry players who hope to spread their wings overseas may be quality. According to the China Daily, reports about equipment reliability issues broke out when Sinovel, China's largest wind turbine maker, was preparing for its listing, raising public concerns over the manufacturer's quality control. * * * * * * * * *