Attractive prospective and uncertainties of China wind power market

Summary

 China wind power market is more and more attracting international and China domestic manufacturers and investors interests. This article provides very detailed information for one national wind farm biddings.
August 16, 2006, the 4^th wind farm concession bid opening was held in Beijing, China.
Three wind farms were requesting for proposal. They are:
1)Bayin 200MW wind farm in Baotou, Inner Mongolia Autonomous Region
2)Danjinghe 200MW wind farm in Zhangbei, Hebei province
3)Huitengliang 300MW wind farm, in Zhangjiahou, Hebei Province

17 bidders (Includes joint bidder) participated the bidding, which bundling with 12 wind turbine manufacturers. 20 different machines are proposed to be used, with single unit capacity ranged from 750KW to 2MW.

The proposed bidding price for kWh is ranged from RMB 0.4058 Yuan ~ 0.5651 Yuan/Kwh (US$ 0.05243~0.07330/Kwh[1])

The wind turbines manufacturers information are provided

The statistics data of feasibility studies on these wind farms, which includes detailed information for wind farms, tender-manufacturer-type of machine-project, mean value of feasibility study data, proposed machines information and specs for the machines, are available from the tables listed in the article and attachments.

Analysis

China wind power market is becoming hot and hotter. Many international financial investors and manufacturers are acting in China or going to develop their business there. The significance of fully understanding the current and near future market potential, government policy and competitors will never be overestimated. The recommended article provides very detailed information to show what is going on there. From above article and other information, we shall be aware of both opportunity and challenge to do wind power business in China are existing.

1.Great prospective of wind power market in China

China is rapidly developing its wind industry. The goal of China wind power generation is planned as following[1]:

Target ByYear	Installed capacity （Mw）	Annual production（TkWh）
2004	764	1.76
2005	1,055
2006	2,589
Plan[2]2010	4,000	9.2
2015	10,000	23.0
2020	20,000	46.0
Wind 12[3]2020	170,000	416.9
Suggestion[4]：Goal 12020	120,000	276.0
Goal 22020	160,000	368.0

The goals were set by different agents. It still could be changed. But no matter what is exact quantity of wind farms will be developed each year, the fact is that considerable wind farms will be developed in China. There was 1,840 wind turbines with 1,265,910KW installed capacity by the end of 2005, but it has been increased to 3,297 units with 2,589,410 kW by the end of 2006.

2.Good potential for international wind industry

Due to wind farm quick development, significant high quality wind turbines will be needed. It is attracting international wind turbine manufacturing industry developing their business in China and driving Chinese domestic wind turbine manufacturing industry expending incredibly. But so far, Chinese wind turbine manufacturing industry is still under developing. The single machine capacity made by Chinese manufacturer is <= 750kW, while most international manufacturers are making machines between 1MW ~2MW. The Four major giants of international wind turbine manufacturers, Gamesa, Suzlon, Vestas and GE, are all developing their assembly factories in China. International manufacturers may benefit from China wind power market.

3.Unclear policy from China government and risks in investment

The goal of wind power industry to approach in China is uncertain. The policy from central government is unclear. Recently Chinese government requires all wind machines to be used in China shall be 70% localized. It is not realistic for current Chinese manufacturers. Also, high percentage of localized parts may hurt the quality and reliability of turbines. This drives international manufacturers developing their factory in China. But to do business in China, shall award both opportunity and risk are existing simultaneously.

Another issue is that market driven mechanism. Currently Chinese government favors concession model in develop wind farms. To win the bid, tenders cut their price of electricity (KWh) generated by wind farms down and down. From above summary, we can found that the price of kWh is very low due to runaway competition. Most domestic and international experts think the price is unreasonable to make profit. Such price of electricity was too low to attract investors, lots of international finance investors quit from current China market. Chinese wind industry is calling on government to change the policy. But no new one be issued yet.

4.Low profit rate and long payback term

The average international wind farm profit rate is >=20%. Most Chinese tenders set up their return rate is 8% for concession, this will result in a long payback term. Most businesses in China who have been awarded the concession projects are national utility companies. They are large state owned corporation. Wind industry will be a very small portion compared their overall power generation business. They are affordable losses. But it is not affordable for private companies. So it should be careful to develop wind industry in China as private business.