Frost & Sullivan sees the global wind power industry demonstrates a sustained and rapid growth trend in general, with the fast-growing area moving from Europe to Asia and North America in recent years. In 2008, an approximately 27,260 MW of installed capacity was added to the world’s wind power, which was 29% larger than that of the previous year. This brought an increase of 42% to the cumulative installed capacity, which reached 121 million kW at the end of the year. The wind generators around the world produced 260 billion kWh of power in 2008, which was 1.5% of the total global electricity generation. In comparison, the percentage was only 0.25% in 2000. And it is worth noting that in 2008, the top 10 countries with the largest cumulative installed capacity accounted for 86% of the world’s total capacity.
China wind power industry is still promising in the long run, though the growth rate will inevitably slow down compared to that of previous years. The installed capacity of China wind power increased from 402MW in 2001 to 12,150 MW in 2008, with a growth rate higher than the world average since 2004. Frost & Sullivan estimates the cumulative installed capacity of China wind power to exceed 100 million kW in 2020, which indicates a compound growth rate between 20% and 30% from 2009 to 2020, far below the previous rate of nearly 100%.
Frost & Sullivan sees great investment opportunities in wind farm construction, wind power equipment manufacturing, and related industries.
Wind Farm Construction
The forthcoming revitalization plan of the Chinese government for the new energy industry will increase the installed capacity of wind power substantially.
By the year 2020, the total capacity is expected to exceed 100 million kW, and the following six wind power bases with over 10 million kW capacities are the national key projects. Jiuquan, Gansu 10-million-class wind power base has a planned total installed capacity of 35,650MW, and has completed the tendering of the wind turbines for the first-stage construction. Hami, Xinjiang planned 20 million kW base, Inner Mongolia planned 50 million kW base (20 million in West Inner Mongolia and 30 million in East Inner Mongolia), Hebei planned 10 million kW base in coastal and northern area and Jiangsu planned 10 million kW base (7 million KW offshore).
The current investors of China wind power farms are mainly central or local state-owned electric power and energy enterprises, with few private or foreign enterprises. In the installed capacity added in 2008, the five major power generation and energy groups accounted for approximately 76%. This indicates the increasing concentration of wind power operators.
Wind Power Equipment Manufacturing
At present, the domestic wind power equipment manufacturing industry has formed a production system covering blades, gear boxes, generators, towers and other main parts. Among which the blade and the turbine are experiencing over-capacity, while there is still a short in production for the bearer.
Considering the supply and demand of wind power equipments, the amount of blades and turbine currently under construction exceeds the estimated market demand of the next 2 years, which leads to overcapacity.
According to the wind power development plan of Chinese government, an additional 10 million and 12 million kW capacity will be introduced in 2009 and 2010. However, the major domestic turbine producers plan to expand their effective capacity to around 11 million and 19 million kW in 2009 and 2010 respectively. Sinovel, Goldwind Tech and Dongfang Elec, the top 3 enterprises in wind power, are estimated to own a combined capacity of 7.6, 11 and 15 million kW in 2009, 2010 and 2011 accordingly. Besides the 3 giants, there are about 60 to 70 medium-sized wind power turbine manufacturers which started their R&D around 2006 and 2007 and will proceed to the stage of small-batch production in 2009 and 2010. These manufacturers will have to face the fierce competition of market share in the next few years when the overcapacity brings down the price and profit margin. However, the current gross profit margin is barely satisfactory. Goldwind Tech possesses a gross margin of 18% to 28% in 2008, while the number for Dongfang Elec is just around 11%.
The number of blade manufacturers increases rapidly in recent years. At the meantime, the wind turbine producers tend to produce their own blades because it accounts for a large portion of the whole value of a machine. These lead to a fast growth in capacity, which exceeds the future market demand.
However, there are investment opportunities lying in the manufacturing of bearings, where the gap between supply and demand still exists. There are limited companies that are capable of producing yaw bearings and pitch system bearings, while the main bearing of wind power generators almost rely entirely on imports. Judging from the present situation, the market of bearings will not reach balance in a short time. As a result, the high profit margin of bearings is estimated to maintain for a relatively long time.
Wind Power Related Industries
According to Frost & Sullivan analysis, tremendous investment opportunities exist in the energy storage battery market, among other related markets. Energy storage batteries can smooth the impact on the grid caused by the intermittence of wind power, to ensure the continuity and stability of power transmission.
When the installed capacity of large grid-connected wind power farms exceeds 10% of the total capacity of the grid system, energy storage batteries will be needed to stabilize the voltage. The local absorptive capacity of wind power is affected by the local power structure. Wind power penetration limit (WPPL), the main indicator of local wind power absorptive capacity, stands for the percentage of wind power in the total installed capability of the local grid system. Only if the peak load regulation margin of the local grid exceeds WPPL will the power generated by wind be fully absorbed. As a result, the absorptive capacity of wind power differs in different areas with different power structures. According to the construction plan of wind power farms, Inner Mongolia, Gansu province and Northeast China will have a WPPL of over 10% in 2010, which exceeds the largest capacity that can be absorbed by the local grids. Besides, harmonic pollution and a decline in power quality will be the byproducts of the grid-connection of wind power. Especially when a large wind power farm is connected to the existing grid, there will be a consequent disorder in voltage and frequency. As a result, in order to guarantee the safe and stable operation of the grid, matched energy storage batteries are essential to the grid.
The capacities of some large-scale wind power storage batteries are above 1 MW. Accordingly, these batteries can be used in the grids to take advantage of the peak-valley price gap, to improve the efficiency of the transmission and distribution of electricity, to solve the problem of local voltage control and to improve the reliability and quality of the electricity. With the fast development of wind power, energy storage batteries will become important corollary equipment for the safe, stable and efficient operation of the grid.
Lead-acid battery, nickel-hydrogen battery, lithium battery, sodium-sulfur battery and super capacitor can be used as wind power energy storage batteries. Nowadays the technology for lead-acid battery and sodium-sulfur battery has matured, while the other three kinds of prospective batteries are still in R&D stage. And lead-acid battery, due to its outstanding cost performance, will be an appropriate investment in the wind power battery market with a high rate of return.
About Frost & Sullivan
Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best in class positions in growth, innovation and leadership. The company’s Growth Partnership Service provides the CEO and the CEO’s Growth Team with disciplined research and best practice models to drive the generation, evaluation and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 35 offices on six continents.
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