Overcapacity in China's wind power equipment market may have bid farewell to high growth

Recently, the US energy equipment manufacturer Superconductor Corporation announced that its largest customer, Sinovel, rejected the company's cargo. These 1.5 MW and 3 MW wind turbine core electronic control components were originally scheduled for delivery in March. At the same time, Sinovel will also postpone payments for some of the contracts, which are worth approximately US$56 million. From a superficial point of view, although Sinovel Wind had delayed the payment to its suppliers in 2010, the operating cash flow was still RMB 1 billion, which was the worst in four years, but the fundamental reason is probably that the growth of the wind power market is slowing down.

According to statistics from the China Wind Energy Association, China added 12,904 new wind turbines in 2010, with an installed capacity of 18,927.99 MW, an increase of 37.1% year-on-year, which is significantly lower than the high growth rate for which the Chinese fan market has doubled for four consecutive years. After several years of development, the production capacity of the fan industry has far exceeded the actual installed capacity of the current year. The problem of overcapacity in the wind power industry has become increasingly prominent. On the one hand, the trend of reshuffle in the wind turbine industry is beginning to appear. On the other hand, the bottleneck of wind power online is difficult to break.

The off-grid fan accident in Jiuquan, Gansu, on February 24 this year caused the Electricity Regulatory Commission to attach great importance to it. The SERC believes that large-scale wind power is difficult to eliminate in some areas of China, and grid construction cannot keep up with the speed of wind farm construction. Credit tightening also added a curse to wind farm developers. In the past, Huaneng’s wind power project was able to obtain a long-term loan at a 10% discount on the benchmark interest rate. Now Huaneng’s wind power projects have to add a 0.05 basis interest rate or a benchmark interest rate to get a bank loan. Wind power projects with an installed capacity of less than 50,000 kilowatts were previously approved by the local government. The administrative measures currently under development re-establish that the local government must obtain a reply from the National Energy Administration before approving wind power projects with an installed capacity of less than 50,000 kilowatts. Judging from the current situation, in the short term, the wind power industry may have to bid farewell to high growth, and the attractiveness of wind power in the eyes of investors will also be greatly reduced.

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