China Wind Power Firms Eyeing Overseas Markets

In order to help domestic aerogenerator manufacturers export their products to Africa and undertake the local wind power projects, The Export-Import Bank of China (China Eximbank) is actively preparing loans for the wind farm projects in Africa. Meanwhile, some companies quicken their steps toward the overseas M&As (mergers and acquisitions).

For instance, Xinjiang Goldwind Science & Technology Co., Ltd. (SZSE: 002202) and Xiangtan Electric Manufacturing Co., Ltd. (SHSE: 600416) separately acquired a counterpart in Europe, taking the lead in internationalization.

Goldwind plans to build wind farms and sell aerogenerators in the US from now on, but its eyes will be still focused on the product manufacturing. As for Xiangtan Electric Manufacturing, it is expected to cut in the European offshore wind power sector, by virtue of the purchase of a Dutch peer.

Vestas’ World’s Largest Integrated Wind Power Production Base Built in TEDA

On Oct. 15, Vestas, the global wind power leader, unveiled its world’s largest integrated wind power production base that has been built in the Tianjin Economic-Technological Development Area (TEDA).

Since its first blade factory was set up in 2006, Vestas’ production facility in TEDA has been expanding. Recently, after completing the construction of the control system factory and the machining factory, as well as the expansion of the generator and blade factories, the production base has become Vestas’ largest integrated wind power production base, integrating the production of turbine engine rooms, blades, generators, control systems and mechanical parts. Meanwhile, the newly built supply and logistics center for the internal components of wind turbine towers will also be put into operation.

The completion of the production base will not only increase Vestas’ production capacity in China, and further accelerate its localized production, but also introduce state of the art wind power equipment manufacturing technology to China in a bid to continuously supply high-tech, high-quality wind turbines to China and the international market.

As part of the company’s long-term investment, Vestas’ investment in the construction of new factories and expansion of factory buildings exceeds RMB1.8 billion (about USD220 million). Vestas’ total investment in TEDA has exceeded RMB2.5 billion (about USD380 million), accounting for over 70% of Vestas’ total investment in China. By the end of 2009, Vestas’ total investment in China will have exceeded RMB3 billion.

At present, Vestas’ integrated wind power production base in Tianjin has become one of Vestas’ major wind power equipment production centers worldwide. The completion of the base will also help TEDA to become an important technology and manufacturing base of wind power and clean energy in China and across the world.

Lars Andre Andersen, President of Vestas China, extended his hearty thanks to all the guests present during the unveiling. He said that with the completion of the integrated wind power production base, the new production capacity will increase Vestas’ local content, create opportunities for employment and employee training, enhance partnership with suppliers of components and parts, and enable Vestas to keep abreast with the rapid growth of China’s wind energy industry. Andersen sincerely expressed his appreciation for the service that had been provided to Vestas by the government of TEDA, which has created a good development environment for the growth of the enterprise. He also promised to take the opportunity of the opening-up of the Binhai New Area for continuous development so as to contribute to the economic development of TEDA.

As Vestas’ world largest integrated wind power production base, the integrated factory with area of over 230,000 square meters will provide Vestas’ clients with technically matured wind energy solutions.

Mr. Ni Xiangyu, Vice Director of the Administrative Commission of TEDA, noted that since Vestas landed in TEDA in 2005, it has been actively involved in the exchange and cooperation with TEDA in areas of new energy development, technical innovation and project promotion. He said that over the past four years, Vestas has been increasing its input in capital, technology and human resources, and has become an important part of TEDA’s industrial chain of new materials, new energy, energy conservation and environmental protection. Today, when the completion of the integrated wind power production base marks a new phase of the cooperation between the two parties, he hopes that Vestas will continue to introduce new research results, and he also expressed his strong belief that Vestas will become the "new energy and new power" for the growth of TEDA.

Tower of Power By Austin Ramzy

In China, one doesn’t have to look far to see the country’s commitment to renewable energy. In cities such as Beijing and Shanghai, rooftops are now covered with solar water heaters. On the grasslands of Inner Mongolia, towering white wind turbines are popping up where only cattle, sheep and herders on horseback once roamed. While coal consumption is expected to climb more than 3% annually for the next two decades, the government has also required that electrical companies add a significant amount of alternative energy to their portfolios. With the global economy languishing, China — which is not only the world’s most populous country, but also the most polluted — offers the promise that its green-energy drive can become a major source of demand for international wind and solar companies.

That expectation was given a boost in September when First Solar, the Arizona-based solar-module manufacturing giant, announced that it had landed a deal to build a solar field bigger than Manhattan near the city of Ordos, Inner Mongolia. The project will dwarf the largest solar plants to date, and eventually generate enough electricity to power the equivalent of 3 million Chinese homes. To fulfill the huge demands, First Solar says it’s considering building a solar-module manufacturing facility in the city to support the project. While financial details were not released, news of the deal caused First Solar’s stock to jump 11% on the day of the announcement. "This major commitment to solar power is a direct result of the progressive energy policies being adopted in China to create a sustainable, long-term market for solar and a low-carbon future for China," First Solar CEO Mike Ahearn said in a statement. 

China, the world’s leading producer of greenhouse gases, is taking an aggressive path to develop alternative sources of energy. Already the world’s leading generator of hydropower — a renewable but sometimes controversial power source because of the impact on river ecosystems — China now aims to be the front runner in wind- and solar-power generation. In 2007 the government directed that by next year at least 3% of large power companies’ generating capacity should come from renewable sources (excluding hydropower); this target jumps to 8% in 2020. That may not sound like much, but according to a recent study by the China Greentech Initiative, a coalition of Chinese and foreign businesses, NGOs and government organizations, environmental technologies including renewable energy could become a $1 trillion market in China by 2013. In a recent commentary, Pulitzer Prize – winning journalist and author Thomas Friedman wrote that China’s decision to go green "is the 21st-century equivalent of the Soviet Union’s 1957 launch of Sputnik."

The fast-growing country’s huge appetite for electricity is behind the push. While China’s total power capacity will nearly double by 2020, the amount that could come from wind and solar is expected to jump more than fivefold, aided by significant government assistance. Beijing announced in March it will subsidize 50% of costs for certain solar-panel projects, and 70% in remote regions. 

But as often happens in China, this potential bonanza could prove to be a mirage for foreign companies. The country’s policymakers are nurturing a domestic alternative-energy industry on a massive scale. China is home to more than 100 wind-turbine manufacturers and some 400 solar-panel companies. The country has quickly grown into the world’s largest maker of photovoltaic cells. Yet more than 95% of PV cells produced by China in 2008 were exported, indicating the country’s output far exceeds domestic demand. Not surprisingly, foreign companies think they are being blocked from the mainland market. The European Union Chamber of Commerce in China has complained China has erected alternative-energy trade barriers, focusing specifically on the treatment of wind-turbine makers. In a position paper released in September the group said, "The use of bidding requirements to bar international [wind-turbine] companies from competing is a cause for grave concern for these players who have all invested heavily in the market to live up to stringent local content requirements."

Paulo Fernando Soares, China chief executive for Indian wind-turbine maker Suzlon Energy, says his company has successfully bid for provincial-level projects, but Suzlon and all other foreign firms have been shut out of national-level wind-base projects in Gansu, Hebei and Inner Mongolia. While the Chinese manufacturers are able to sell turbines cheaper than foreign firms, Soares argues they can’t match foreign-made equipment in terms of reliability and overall track record. "The Chinese government has decided that they want to develop wind bases, that they want to promote a local industry and that they want to have local suppliers working in those big wind bases," he says. "Then the Chinese government says the foreign companies are so much more expensive than the local companies. If the turbine price is the only selection criteria, then fine. If you take into account risks and performance and tariffs and everything, I can tell you in most of the cases, if not all of the cases, the international suppliers are more competitive than the local suppliers." 

China’s Ministry of Commerce rejected the European chamber’s complaints of protectionism, saying the country tries to offer a level playing field for all foreign and domestic businesses. But because China has not signed the World Trade Organization agreement that limits protectionism for government procurement, foreign governments have little recourse. China’s National Development and Reform Commission said in June that except in cases where the necessary technology is unavailable domestically, funds from the country’s $586 billion stimulus package should buy Chinese-made equipment.

Soares points out that Suzlon has built a factory in Tianjin with more than 900 employees to satisfy Chinese requirements for 70% local parts content in turbines. "They want to promote local industry. But then the question is, What is local?" says Soares. "More than 95% of my employees are Chinese. I’m an investor here, a producer here and pay taxes here. So why is there this difference?" Adding insult to injury, Chinese firms are proving to be tough competitors in markets outside China’s borders. In Germany, where government subsidies helped stimulate global solar-panel production, an industry association is investigating claims that Chinese panelmakers are dumping their products. Non-Chinese solar firms complain they are undercut in European and American markets by Chinese companies selling similar products for 30% less than rivals. The dispute has the potential to increase trade frictions between China and the West. Earlier this year, U.S. customs officials ruled that imported solar panels were subject to a duty of 2.5% (panel imports were previously duty-free).

Shi Zhengrong, founder and CEO of Suntech Power, China’s biggest solar-panel maker, says his company doesn’t sell panels below cost anywhere in the world. And he points to First Solar’s Ordos deal as evidence that foreign firms can succeed on the mainland. "As long as companies have a competitive renewable-energy technology and product offering," he says, "there will definitely be opportunities in the Chinese market."

Some overseas firms insist that China is simply repeating an economic development strategy that has propelled the country’s rapid progress in many other manufacturing sectors. The country has been able to use the lure of huge potential markets to entice foreign companies to hand over technology and know-how in exchange for lucrative deals, later using that knowledge to produce competitive products cheaper than those of overseas originators. Foreign companies built the generators for the first stage of the massive Three Gorges hydroelectric dam, but the generator contracts required the foreign makers to transfer technology to Chinese partners, who took the lead in later phases of construction. A similar pattern appears to be playing out in alternative energy. Foreign wind-turbine manufacturers held nearly 60% of the Chinese market in 2006. By last year that position was reversed, with Chinese firms taking 74% of new installations, says Jun Ying, chief China representative for the consulting firm New Energy Finance. In fact, the number of Chinese turbine manufacturers has expanded so rapidly that the government, fearing a glut, warned in October that applications for new factories might not be approved.

Given the number of foreign companies that have set up their own facilities in China, the government is unlikely to let them fail completely, says New Energy Finance’s Ying. "If they have manufacturing capacity in China, they generate GDP, generate tax revenue, generate employment, I do not see a reason why the Chinese government would let them die," he says. "A parent may like one child more than the other, but at the end of the day I think they will continue to do well and continue to do business in China." With the rest of the global economy still stagnating, life as China’s stepchild may be the best some international firms can hope for.