Growth among China’s wind turbine manufacturers has slowed since the beginning of 2011 due to several factors, including more stringent regulatory approval for wind power programs and reduced quality control. Most manufacturers recorded significant declines in their financial results for the first half.
The Chinese government released a series of new regulations and rules during the first six months of this year in a bid to enhance its oversight over the entire wind power sector. In addition, the government issued a series of technical standards in response to a number of incidents of wind turbines being disconnected from the country’s power grid.
The price war among China’s manufacturers of complete wind turbines remains fierce. Prices of complete wind turbines have steadily declined in recent years under increasing pressure to reduce their overall manufacturing costs, and as a result, wind turbine parts makers have found themselves the most hurt among those affected by the cut-throat price war.
The year 2008 was the most profitable for Chinese wind turbine parts makers, as fast growth in installed capacity across the country led to short supplies of wind turbine parts. However, a growing number of new players, sensing the fast profits, entered the sector, resulting in excessive supply. Prices of wind turbine components have been decreasing ever since. As an example, the price of a wind turbine blade declined to RMB 3,500/kW (approx. $550/kW) in May 2011 from RMB 6,500/kW (approx. $1,000/kW) in May 2008, a decline of 46.7 percent. For survival, some wind turbine blade providers have lowered manufacturing costs at the expense of product quality by using low quality raw materials during their manufacturing process. If the price war continues, China’s wind turbine sector could well collapse, according to an industry insider.
Shi Pengfei, Vice President of the Wind Energy Professional Committee of the Chinese Renewable Energy Society, said recently that following the significant growth of installed capacity between 2006 and 2010, China’s wind power sector has entered an accident-prone period due to insufficient quality control and poor management in construction of wind farms. According to preliminary statistics, 16 wind turbine generator sets caught on fire or collapsed between the beginning of 2009 and April 2011. The development of supporting facilities including equipment for access to the power grid, technology and industry standards has lagged far behind the construction of the wind farms themselves.
Last but not the least, according to U.S. Trade Representative Ron Kirk, the Chinese government has decided to stop subsidizing wind power companies that use domestically made components rather than imports.