Industry White PaperGIA Industry White Paper 3 / 2009: The Chinese wind energy market 50% 7% 11% 107% 22% 37% 39% 38% 1% 34% At the end of 2008, China overtook India with the highest

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Industry White Paper

The Chinese wind energy market

September 2009

Global Intelligence Alliance ©2009. All rights reserved.

Contact: Kim Khoo, Manager, Intelligence Services [email protected],

Saraswati Diah, Analyst [email protected]

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GIA Industry White Paper 3 / 2009: The Chinese wind energy market www.globalintelligence.com

Market overview

Market drivers & restraints

Key manufacturers

Future trends

About Global Intelligence Alliance

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4

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17

26

33

Content

This Industry Briefing report provides an overview of the wind energy market in China.

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www.globalintelligence.comGIA Industry White Paper 3 / 2009: The Chinese wind energy market 3

Abbreviations and acronyms

AMSC American Superconductor

A&R Abeking & Rasmussen Rotec

BERR-UK (previously DTI-UK) Department for Business, Enterprise & Regulatory Reform – United Kingdom

CASC China Aerospace Corporation

CHEC China Huadian Engineering Co., Ltd.

CHSTE China High Speed Transmission Equipment

CWEA China Wind Energy Association

CREIA China Renewable Energy Industry Association

DEC Dalian Electric

DHI Dalian Heavy Industries

DTI-UK (now BERR-UK) Department of Trade and Industry – United Kingdom

EREC European Renewable Energy Council

GE The General Electric Company

GW Giga Watt

MW Mega Watt

R&D Research & Development

SAM Stahlturm- & Apparatebau Magdeburg

SHFRP Shanghai FRP Research Institute

SIAG Schaaf Industrie AG.

VAT Value Added Tax

WWEA World Wind Energy Association

XEMC Xiangtan Electric Manufacturing Corporation

YoY Year on Year

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Market overview


Wind energy installations worldwide is expected to grow, with government policy being a key driver

5

Market overview

Source: World Wind Energy Association, 2008

Worldwide wind turbine total installed capacity forecast (MW)

• With increasing wind turbine

capacity, the unit cost of power

generated by wind energy is

expected to decrease¹.

• WWEA forecasts that by

2020, wind turbine total

installed capacity will reach an

estimate 1,500,000MW

worldwide accounting for 20%

of global electricity

consumption. At the end of

2008, wind energy accounted

for 1.5% of global electricity

consumption.

¹ Unit cost for wind energy is dependent on many factors besides turbine capacity. There are many variables that may influence the unit cost of

wind energy, for example the site of the wind farm, operation and maintenance costs over the life of the facility, backup unit or units of generation

costs, extra costs imposed on transmission and grid management cost may also vary widely depending on the control area involved, the output

and variability of output from the generator, load on the grid, etc.


50%7% 11%

107%

22% 37% 39% 38%1%

34%

At the end of 2008, China overtook India with the highest total installed capacity of wind energy in Asia

6

Market overview

Top ten countries with the highest total installed capacity of wind energy worldwide (GW) and

total installed capacity YoY growth between 2007-2008 (%)

9.1

18.4

10.0

1.3 4

.4

1.7

0.8 1.4 3

.1

1.0

11.6

20.6

11.6

2.6

6.3

2.1

1.6 2.0 3.1

1.7

16.8

22.2

15.1

5.9 7

.9

2.7

2.5

2.4 3.1

2.1

25.2

23.9

16.7

12.2

9.6

3.7

3.4

3.3

3.2

2.9

US Germany Spain China India Italy France UK Denmark Portugal

2005 2006 2007 2008

Note: The installed capacity is rounded to the nearest decimal place; growth YoY is generated from the original installed capacity, rounded to the nearest whole number.

Source: World Wind Energy Association, 2008


2.6 5.9

12.2 15.0 20.0

32.0

51.2

2.1 3.7 5.7 6.4 7.1 7.4 7.6 0.1 0.3 0.8 1.0 1.3 1.4 1.5 0.4 1.7 5.2 7.0

9.3 10.8 12.3

0.1 0.2 0.5 0.6

2.3

12.4

29.7

2006 2007 2008e 2009f 2010f 2011f 2012f

<1000kW 1000-1300kW 1500-1650kW ≥2000kW

China’s total capacity is expected to increase rapidly with more units of higher capacity turbines installed

7

Market overview

China installed capacity (GW) and YoY growth (%)

Note: The installed capacity are rounded to the nearest tenth; the YoY are generated from the original installed capacity, rounded to the nearest whole number.

Source: China Wind Energy Association, 2009, China Renewable Energy Industry Association 2009, GIA estimates 2009

Breakdown of

installed capacity

(GW) and YoY

growth (%)

127%107%

23%33%

60%

60%

Total installed

capacity (GW) and

YoY growth (%)

293%

309%

308%

78%

146%

198%

161%

55%

12%

35%

28%

14%

297%

34%

24%

10%

433%

17%

9%

4% 4%

7%

14%

140%

Affected by global economic downturn

Produced by wind turbines of the following capacities:


Market overview

Note: For reference only; this is not an exhaustive list.

China wind energy activities

Global players have seized opportunities in China, rapid advancement also made by local companies

Jan 2009Construction of an industrial

park for wind power

equipment production is to

start in Jilin Province with

capital from Sany Group

and Tongyu Asset

Management.

Jan 2009

American

Superconductor (AMSC)

receives an order for wind

turbine core electrical

components from China's

CSR Zhuzhou Electric

Locomotive Research

Institute, that will be used

for wind turbines designed

by AMSC's subsidiary.

Feb 2009China Wind Systems starts

gearbox production in Wuxi.

Supply agreements signed with

Wuxi Lida Gear

Manufacturing, Gansu Keyao

Electrical Power and

Hangzhou Advanced

Gearbox.

Feb 2009

GE plans to increase wind

turbine deliveries to Chinese

customers from 159 units in

2008 to 320 units by 2009, and

600 units by 2010.

Mar 2009

CLP Group announces it will

acquire 50% equity interest in a

wholly owned subsidiary of

China Wind Power Group Ltd

for HK$101.3 million.

Mar 2009GE Drivetrain Technologies

signs an agreement with A-

Power to supply gearboxes and

to establish a JV partnership for

gearbox manufacturing.

Mar 2009

Suzlon Energy signed an

agreement to supply wind

turbines to Inner Mongolia

North Longyuan Wind Power

Corporation.

Mar 2009

Hansen Transmission delivers

its first gearbox from its new

facility at the Beichen Hi-tech

Industrial Park, Tianjin. The

gearbox will be deployed in

2.1MW Suzlon turbine.

Mar 2009Sinovel installs a 3MW wind

turbine in the Shanghai East

Sea Bridge’s 100MW offshore

wind farm – the Chinese first

pilot offshore wind project.

Apr 2009

Vestas introduces the new

V60-850kW wind turbine.

Manufactured in Vestas’ new

facility in Inner Mongolia, over

90% of its components are

Chinese made. The turbine

design includes innovation in

blade design and temperature

control system which addresses

Inner Mongolia’s harsh climate.


Market overview


China wind energy activities

Repeat orders, second orders or an increase in current contract sizes seen amongst the existing players

Jul 2009Suzlon China receives

repeat orders of 40 units

of 1.25MW wind turbines

from Honiton Energy

Group, who has secured

development in Inner

Mongolia.

Jul 2009

Gamesa and Huadian

have reached an

agreement for the supply

of wind turbines totaling

capacity of 300MW. It

includes 200MW to be

installed at a jointly

developed wind farm in

Inner Mongolia, and

100MW for another

Huadian project.

Jul 2009Suzlon China receives repeat

orders of 39 units of 1.25MW wind

turbines from Datang Power

Generation.

Jul 2009

Vestas has received an order for

17 units of 2.0MW wind turbines

from China Fujian Wind Energy

Company. The contract includes

supply and commissioning of the

wind turbines, a VestasOnline®

Business SCADA system and a two

year service and maintenance

agreement.

Aug 2009

AMSC has amended its contract

with Sinovel, to increase its core

electrical components to meet

Sinovel’s demand.

Aug 2009AMSC has received the 2nd

order for its D-VAR system for

a Chinese smart grid from

China National Machinery

Industry Complete

Engineering.

Aug 2009Construction has started at

China’s first 10million kW wind

power station in Gansu

province. With 120 billion Yuan

investment, the station was

designed to have an installed

capacity of 5.16million kW by

the end of 2010 and 12.71

million kW by the end of 2015.

It will be China’s largest wind

power facility upon completion.

May 2009Siemens is building a new

rotor blade and nacelle

plant in Shanghai. The new

facility is scheduled to take

up operation in the second

half of 2010, initially with

400 employees. The wind

turbine plants produced in

Shanghai will be for the

Chinese market and for

export.

Siemens is investing more

than EUR60 million in

setting up this new location.

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Market drivers and restraints



Source: GIA 2009

Chinese government firm

commitment towards wind

energyChinese abundant

resources

Relative immaturity

of China’s wind

energy market

Global economic

downturnChinese under-developed

infrastructure in some

areas

DR

IVE

RS

RE

ST

RA

INT

S

“Buy Chinese

Policy” hinders

growth

Chinese low

labour costs

Component

supply shortage

China wind energy market drivers and restraints

Improvement in Chinese

component manufacturing

technology

China has a unique position combining low labour costs, abundant wind resources and favourable policies



Government regulations on renewable energy targets and subsidies drive Chinese wind energy growth

Low labour costs

• China’s comparatively lower labour cost compared to North America and Europe’s, offers opportunities for

cheaper manufacturing cost.

• China’s minimum wages are set locally according standards laid out by the central government. For example in

April 2008, monthly minimum wages in the Tianjin municipality was 820 RMB, whilst the hourly minimum for

non-full-time workers was 7.8 RMB.

Chinese abundant resources

• China has untapped wind resources. Exploitable wind resources are estimated to represent a potential power

generation capacity at ten metres above the ground of 253GW, whilst ocean-based wind resources represents an

exploitable potential of about 750GW.

Chinese government firm commitment towards wind energy

Improvement in Chinese component manufacturing technology

• Partnerships or acquisitions between Chinese players and their foreign counterparts speed up technology transfer,

e.g. Goldwind acquired Vensys to facilitate concentration on the development of direct drive wind turbines.

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Relative immaturity of Chinese wind energy market

• As a relatively new industry in China, there is a shortage of skilled human resources particularly for the

higher-wattage wind turbines.

Component supply shortage

• High demand of wind turbines especially in 2007-2008 caused a supply shortage of wind turbine parts,

particularly for gearboxes and bearings, which was a market restraint in China.

Chinese under-developed infrastructure in some areas

• Some areas, notably in the Northern part of China where abundant wind resources are available,

infrastructure is not yet fully developed, hindering the development of full facilities.

• A lack of existing infrastructure also means a lack of grid availability and problems on grid connections.

13


Protectionist policies towards Chinese made components in tenders is a market restraint

“Buy Chinese Policy” hinders growth

• As Chinese government regulation rules that at least 70% of wind turbine components in China must be locally

made, foreign players face further difficulties to grow in the Chinese market unless they set up manufacturing

facilities.

• In addition, a recently released edict states that “government investment projects should buy domestically

made products unless (they) cannot be obtained in reasonable commercial conditions in China.



Chinese government major regulations on wind energy

Regulation on renewable energy target and subsidies drive Chinese wind energy growth

Note: For reference only; this is not a complete list of energy regulations.

• Notice on Wind Power Generation Facility Construction and Management Requirement – July 2005

Specifying the domestic content of 70% or more as one of standards for approval of wind power generation plants and

subjecting imported facilities to tariffs.

• Renewable Energy Industry Development Instruction List – November 2005

List of 88 projects (23 of them for wind power) for utilization of renewable energy and types of relevant equipment in a

bid to promote relevant government at laboratories and enterprises, and instructions on investment and constructions.

• Renewable Energy Law – implemented since January 2006.

The law prioritized energy policy in terms of its development. This included the utilization of renewable energy and

required power utilities to purchase electricity generated with renewable energy.

• Administrative Provisions for Renewable Energy Power Generation – implemented since January 2006

The provisions specify the standards for administration of renewable energy power generation and the roles of power

generation and grid enterprise in the development and utilisation of renewable energy.

• Provisional Administrative Measures on Pricing and Cost Sharing for Renewable Energy Power Generation –

implemented since January 2006.

The provision provides guidance on how to calculate prices and share costs for renewable energy power generation as

approved by the government in and after January 2006




Policies and regulations built to increase renewable energy’s share of total energy consumption in China

• Tentative Management Method for Renewable Energy Development Special Fund – implemented since May 2006

The guide offers additional measures to enhance support for renewable energy development. It allows the central

government to provide financial assistance for the development of renewable energy for oil substitution and construction

areas; and of wind power, solar and other renewable energy sources for power generation.

• Medium to Long-term Renewable Energy Development Plan – August 2007

Aims to increase renewable energy’s share of total energy consumption.

• Management Method for Power Grid Enterprises’ Purchasing of Renewable Energy Electricity – implemented

since September 2007.

The method provides the regulatory commission’s supervision and management duties, measures and legal

responsibilities regarding power grid enterprises’ purchasing of renewable energy electricity.

• Energy-Saving Power Generation and Power Dispatch Method (pilot program) – Aug 2007

Gives priority to renewable energy power generations, sets a priority order for power generation methods in accordance

with energy consumption and pollutant emissions. This also places power dispatch priority on methods in the order of

lower energy consumption and pollutant emission.




In 2009, the Chinese government revised its 2020 target for wind power generation from 30 GW to 100GW

• 11th Five-Year Renewable Energy Development Plan – March 2008

The plan though is basically in line with the medium to long-term plan, remarkably revised the wind power generation

goal for 2010 onward from 5 GW in the medium to long-term plan to 10GW, and specified sites for and sizes of, wind

power plants for development and other relevant numerical goals. Also, it calls for achieving domestic production of

1,500kW or larger onshore generation units and 3,000kW offshore units by 2010.

• Notice on Adjustment Regarding Import Tariffs for Large-Output Wind Power Generation Units, Their Main

Components and Raw Materials – implemented from January 2008

To refund import tariffs and phase out import value-added-taxes for main components and raw materials for Chinese

firms’ development and production of larger-output (1,200kW or more) wind power generation units and repeal tax

incentives for purchases of certain wind power generation units.

• Note released by Chinese Finance Ministry, Sept 2008

Chinese wind turbine makers can get a payout of 600 yuan ($87.79) per kilowatt for the first 50 units they produce of any

new turbine with capacity of 1 megawatt or more. The subsidy should be shared equally between manufacturers of key

parts and the companies that assemble the finished product.

• Note release by National Development and Reform Commission, May 2009

The National Development and Reform Commission revised the wind power generation goal for 2020 from 30GW to

100GW.



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Key manufacturers


Wind turbine cost is indicated as absorbing more than half of the total capital cost of a wind farm

18

Key manufacturers

Note: Based on typical wind farm in 2001, and typical wind turbine 1-2MW. For reference only; the percentage shown are indicative and not the fixed figures.

Source: DTI UK (now BERR-UK) 2001, Garrard Hassan and Partners Ltd.

Indicative capital cost breakdown for a typical wind farm (%) and indicative cost breakdown for a

typical wind turbine (%)

Slewing ring43%

Yaw motor33%

Yaw brake7%

Misc17%

Gearbox &

bearings84%

Brakes8%Couplings

5%

Guards3%

Switch gear & control55%

Generator30%

Cabling12%

Misc3%

Wind turbines64%

Civil works13%

Electrical inf rastructure

8%

Grid connection

6%

Legal cost2%

Interest during construction

2%

Others5%

Blades77%

Hub13%

Bearings10%

Rotor27%

Yaw system3%

Drive train21%

Electronic & control

20%

Tower21%

Nacelle8%


Key manufacturers


Source: WindPower 2009, company websites 2009, GIA secondary research 2009

Major wind turbine suppliers worldwide

Pro

du

ce w

ind

turb

ine

s

<300kW

Pro

du

ce w

ind

turb

ine

s 3

00kW

–

1500kW

Pro

du

ce w

ind

turb

ine

s

>1500kW Acquired by Siemens

Acquired by Gamesa

Merged with Vestas

Acquired by Suzlon

More investment in companies producing higher capacity wind turbines by established market players

Acquired by Goldwind

Acquired by Alstom

Power

Acquired by CTC Group


Shaft

Transformer

Hub

A numbers of major wind turbine manufacturers have in-house component suppliers

20

Key manufacturers

Note: For reference only; this is not an exhaustive list. The wind turbine graphic is for illustration purpose only

Source: Emerging Energy Research 2008, BTM Consult 2006, company websites 2009

Major wind turbine component suppliers worldwide

Tower

• Coiper (Comonor)

• DMI Industries

• Hendricks Industries

• Tower Tech Systems

• Trinity Structural Towers

• Vestas

• Omnical

• SIAG

• Gamesa

• KGW

• SAM

• Suzlon

• Nordex

Note: towers are often

produced locally to where

projects are built.

Generators

• Weier

• Elin

• ABB

• LeroySomer

• Flender Loher

Bearing

• Kaydon

• NTN Corporation

• SKF Group

• The Timken Company

• GE

• Cantarey

(Gamesa)

• Suzlon

• Siemens

Blade

• A&R Rotec (SGL

Group)

• Euros

• LM Glasfiber

• Sinoi

• Tecsis

• TPI Composites

• Vestas

• Gamesa

• Enercon

• Siemens

• Suzlon

• Nordex

Controllers

• Cotas (Vestas)

• GE

• Ingeteam

• Enercon

• Siemens

• K.K. Electronics

• Suzlon

• Mita Teknik

• Nordex

Gearbox

• Bosch Rexroth

• Brad Foote Gear Works

• Echesa (Gamesa)

• Eickhoff

• Hansen

• Ishibashi Manufacturing

• Jahnel-Kestermann

Getriebewerke (JaKe)

• Moventas

• GE

• Pujol Muntalá

• Renk

• Winergy

• Maag

• CHSTE


Shaft

Transformer

Hub

Weakness in proprietary technology seen for local Chinese wind turbine component suppliers

21

Key manufacturers

Note: For reference only; this is not an exhaustive list. The wind turbine graphic is for illustration purpose only.

Source: Investigation Report on China Wind Turbine Component Manufacturers 2009, company websites 2009

Blade

• Huiteng

• Zhongfu

• SHFRP

• LM Fiberglass

• Gamesa

• Vestas

• Suzlon

• Sinomatech

Wind Power

Blade

Wind turbine

• CASC Acciona

• DEC

• Gamesa

• GE

• Goldwind

• Nordex

• Sinovel Windtech

• Suzlon

Gearbox

• CHSTE

• Gamesa

• DHI

• Chongqing Gearbox

• Winergy/Flender

• Sichuan Erzhong

• Hangzhou Advance

Tower

• Taisheng Power Engineering Machinery

• Qingdao Wuxiao

• China Petroleum 7th Construction

• Shengli Oildfield Shengli Petroleum Chemical Construction

• Jiangsu Baolong Electromechanical

• CHEC

• Baotou Beifang Chuangye Steel Structure

Note: towers are often produced locally to where projects are built.

Bearings

• SKF Bearing and Precision

Technologies

• Xuzhou Rothe Erde

Major wind turbine components suppliers in China

• Vestas

• Windey

• Baoding Huide

• Shanghai Electric

• Guangdong Mingyang

• Hunan Hara XEMC

• Repower North

Generator

• Zhuzhou Electric

• Lanzhou Electric

• DEC

• Zibo Pulling Motor

• Beiche Group

• Winergy/Flender

• Suzlon

• Shanghai Electric

Machinery

Control System

• Windtec

• Mita Teknik

• Siemens

• Beijing Corona

• Goldwind

• Shanghai

Jiaotong

University

Automation

Institution

• Ingeteam

• Shanghai Via

Systems

• Gamesa

• Vestas

• Suzlon

Casting

• Jiangsu Jixin

• Hangzhou Sound Foundry

• Ningbo Yeong-Shang Casting Iron

• DHI

• Faw Foundry

• Shaanxi Diesel Engine Heavy Industry


LM Fiberglas is building its third blade manufacturing facility in China to supply the booming demand

22

Key manufacturers


Source: China Wind Power Report 2008

Major blade suppliers’ relationship for wind turbine companies in China (2007)

600kW 750kW 850kW 1MW 1.25MW 1.5MW 2MW

Huiteng SHFRPZhongfu LM

FiberglasGamesaHuiteng Vestas Suzlon

Goldwind Sinovel Gamesa Vestas DEC Windey

Huayi

Electric

Apparatus

Group

Shenyang

Huachuang

Shanghai

Electric

CASC-

Acciona GE Suzlon

Type

Blade

manufacturer

Turbine

manufacturer


Amongst wind turbine manufacturers in China, only Gamesa produce its gearboxes in-house in 2007

23

Key manufacturers

600kW 750kW 850kW 1MW 1.25MW 1.5MW 2MW

Winergy/

FlenderGamesa

Sichuan

ErzhongCHSTEChongqing

Gearbox

Hangzhou

AdvanceDHI

Goldwind Sinovel Gamesa DEC WindeyShenyang

Huachuang

Shanghai

Electric

CASC-

Acciona GE Suzlon

Type

Gearbox

manufacturer

Turbine

manufacturer

Major gearbox suppliers’ relationship for wind turbine companies in China (2007)



Vestas

Huayi

Electric

Apparatus

Group


Zibo Pulling Motor is the sole supplier of Gamesa’s generators in China in 2007

24

Key manufacturers

600kW 750kW 850kW 1MW 1.25MW 1.5MW 2MW

Huiteng Winergy/

Flender

Beiche

Group

Zibo

Pulling

Motor

SuzlonLanzhou

Electric

Shanghai

Electric

Machinery

Zhuzhou

Electric

Goldwind Sinovel Gamesa DEC WindeyShenyang

Huachuang

Shanghai

Electric

CASC-

Acciona GE Suzlon

Type

Generator

manufacturer

Turbine

manufacturer

Major generator suppliers’ relationship for wind turbine companies in China (2007)



Vestas

Huayi

Electric

Apparatus

Group


In 2007, Goldwind, Gamesa and Vestas manufacture their control systems in-house

25

Key manufacturers

600kW 750kW 850kW 1MW 1.25MW 1.5MW 2MW

Goldwind Sinovel Gamesa Vestas DEC WindeyShenyang

Huachuang

Shanghai

Electric

CASC-

Acciona GE Suzlon

Type

Control

systems

manufacturer

Turbine

manufacturer

Mita

TeknikSiemens Beijing

Corona Goldwind

Shanghai

Jiaotong

University

Automation

Institution

IngeteamShanghai

Via

Systems

Gamesa Vestas SuzlonWindtec

Major control systems suppliers’ relationship for wind turbine companies in China (2007)



Huayi

Electric

Apparatus

Group


Future trends


China expects to become a wind energy market supply chain hotspot globally

27

Future trends

Source: GIA 2009

China wind energy industry future trends time line

2009 2010 2011 2012

Supply shortage for wind turbines and associated components in China

Local technological advancement amongst wind turbine manufacturers and component suppliers in China

China as a major supply chain centre in the wind energy industry

Trends to fade away Trends to reach its peakNote:

1

2

3

4

Partnerships across wind turbine industry players in China


Component supply shortage is seen in China compared to its government’s wind energy ambitions

28

Future trends

1

• Demand for wind turbines and related components in some countries is increasing:

• US is targeting to reach total installed capacity of about 150GW by 20201 from 25.5GW in 20082

• China is targeting 100GW by 20203 from 12.2GW in 20084

• EU 15 is targeting 180GW by 20205 from 64.2GW in 20086

• Only a number of specialised suppliers are able to produce key parts for higher capacity wind turbines. As higher

capacity wind turbine demand increases, a handful of specialised suppliers are overloaded with orders. This has been

seen especially for gearbox and bearing supplies.

• In addition to this, a number of wind turbine components are used in other industries. Parts such as bearing and

gearboxes are also used in other industries’ equipment and machinery, putting higher pressure on already

overloaded supplier capacities.

• As an emerging technology, wind turbine designs are still evolving; hence parts made are mostly customised and

non-interchangeable which makes it more challenging to find replacement suppliers.

Supply shortage for wind turbines and associated components in China

Note: 1 U.S. Department of Energy, 20082,4,6 WWEA, 20083 Xinhua, 20095 EREC


New entrants in the industry face the risk of evolving technology, with a high technology entry barrier

29

Future trends

Continued from the previous page

• The advanced technology requirement to enter the wind turbine industry is a barrier for new entrants. Currently, most

Chinese wind turbines and components for higher-MW products are licensed or jointly developed with overseas

players, whilst local manufacturers still lack the independent capacity to build higher wattage turbines. With less players

supplying the higher-MW products, there are bottlenecks affecting the supply shortage for wind turbine related

equipment, particularly with government emphasis on higher wattage turbines.

• Volatility on raw material prices does affect the wind turbine manufacturing process. Some raw materials, notably

steel, copper and carbon, are critical in some of the wind turbine parts. Steel is used in towers, gearboxes and rotors;

copper used in generators and carbon in rotor blades. Any price volatility such as the one seen recently in early 2008

will affect their availability creating bottlenecks in the supply chain.


Partnerships reduce uncertainty, with the local aim of technology transfer to Chinese companies

30

Future trends

• Partnerships in various forms such as mutual agreements, joint ventures and acquisition, are seen amongst wind

turbine industry players in China, including wind farm developers / operators, wind turbine manufacturers, and wind

turbine component manufacturers. The objective of this is either to secure consistent supplies and services, to ease

market entry for foreign players hoping to enter China, or to secure proprietary technology that is most suited to a

company’s strategy.

• Some examples of this include a Shanghai Electric’s joint effort with German Aerodyn, where Shanghai Electric is

working on a 2MW double feedback, shift control and constant frequency wind turbine system.

• Technically supported by the UK’s Garrad Hassan and Partners Ltd (GH), Zhejiang Windey plans to manufacture a 1.5MW double feedback, shift variable and constant frequency wind turbine model.

Partnerships across wind turbine industry players in China2


Joint foreign partnerships in China will drive local technological advancement

31

Future trends

3

• Currently still at an infant stage, technology such as direct drive and off-shore wind turbines are expected to gain

more traction in China if the adoption of these are undertaken by major global wind energy players for future wind

farms. Due to market regulation in China that give advantage to locally made products, foreign players wanting to

enter China need to work with local Chinese companies which in turn promote technology transfer amongst

Chinese companies as well as build local expertise.

• An example of this is Sinovel’s joint program with Austria Windtec, whereby Sinovel is developing a 3MW double

feedback, variable shift and constant frequency wind turbine system, the first Chinese offshore wind turbine system of

high-tech model. This is to be installed in the first offshore wind farm, the Shanghai Donghai Bridge Wind Farm.

Local technological advancement amongst wind turbine manufacturers and

component suppliers in China


China will be a major supply chain centre within the wind energy industry if expected trends prevail

32

Future trends

• If the expected trends persist, China is expected to become an important global supplier of key wind turbine

components and services. High local demand, China’s strategic location to supply Asian markets with parts and

equipments, coupled with development of local R&D skills may encourage a future role as a regional (or global)

wind energy hotspot for services and equipment.

• China’s interest in European companies may be of strategic geographical importance long term, such as that seen

with Chinese market leader Goldwind and the German Vensys, whereby Goldwind acquired majority share of

Vensys in order concentrate on the development of its direct drive wind turbine technology. After the acquisition of

Vensys, Goldwind also bought the subsidiary companies that produced converters and variable propeller

systems for Vensys through Vensys in Germany. This ensures a local foothold in Europe with spin off benefits both

in Germany as well as China, for Goldwind. Goldwind has also absorbed a number of cross-border human

resources with management experience in the domestic and international markets from companies such as Shenzen

Huawei, Motorola, General Electric, the bearings industry SKF, Siemens and ABB.

4 China as a major supply chain centre within wind energy industry





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Documents

Industry White PaperGIA Industry White Paper 3 / 2009: The Chinese wind energy market 50% 7% 11% 107% 22% 37% 39% 38% 1% 34% At the end of 2008, China overtook India with the highest