China fine-tunes wind energy industry with new guidelines

China’s wind power industry, which has developed by leaps and bounds over the past five years, will have to follow a new series of guidelines and restrictions, according to the 2011 edition of the Guideline Catalogue for Industrial Restructuring, a set of policy guidelines recently released by the National Development and Reform Commission (NDRC).

The new guidelines state that "new energy" sources, including wind energy, shall be considered as a separate category for "encouraged development". The 2005 edition of the guidelines stated that wind farm energy and other sources of clean energy would be grouped in with traditional sources.

Industry officials say that once an investment project is listed in the "encouraged development" category, the company or companies behind the project can enjoy preferential treatments such as floating shares in the stock market, lighter requirements for new bank loans and tax breaks.

However, under the new guidelines, China will not extend these preferential policies to companies that produce wind turbines with 2.5-megawatt-capacity or lower. Instead, the policies will encourage the development of larger-capacity turbines, as well as components for control systems and converters for these larger turbines.

"There is an overabundance of investment in emerging energy sectors, such as the wind power sector. This is the result of an influx of capital into China’s equipment manufacturing industry, which is operating under the idea that China has strictly controlled fixed investments in sectors that consume more energy and resources," said the NDRC in its interpretation of the new guidelines.

"If we don’t regulate these sectors, companies will encounter problems in production and management. This will hinder independent innovation and restructuring," the NDRC said.

In March 2010, the Ministry of Industry and Information Technology (MIIT) issued a circular in which it asked for public opinions on the management of the country’s wind power industry. In this document, the MIIT stated that new wind turbine manufacturers must have the ability to produce wind turbines with 2.5 megawatts of power generating capacity or higher.

Industry officials said that with the new guidelines, China has finished fine-tuning its wind turbine manufacturing industry’s policies, and that the production of outdated wind turbines will be eliminated.

"The MIIT access standard is fairly high. No more than 10 of China’ s 80-some wind turbine manufacturers can meet the standard," said Ma Xuelu, vice president of the China Wind Energy Association (CWEA).

"So far, the top 10 wind turbine makers account for about 80 percent of the Chinese market, and the top 15 have claimed about 95 percent of the market share. The remaining turbine makers must share the other five percent. How much can they earn?" said Shen Dechang, deputy secretary-general of the wind power equipment branch of the China Association of Agricultural Machinery Manufacturers (CAAMM)

"In the next three to five years, about 80 percent of China’s wind turbine makers will disappear through mergers and acquisitions," Shen said.

Wind turbine manufacturers that can’t meet the new regulations still have the option of "going global" by selling their outdated wind turbines to other countries. However, industry officials have said that the overseas market is out of reach for most Chinese wind turbines manufacturers, who are largely unfamiliar with international market rules and legal environments.

According to the CWEA, China exported just 13 wind turbines in 2010. This accounted for less than 0.5 percent of the export figure originally predicted by Chinese wind turbine manufacturers for that year. Shanghai Daily reported that Xinjiang Goldwind Science and Technology Co has won two orders in the United States to supply five 1.5 MW turbines to wind farms in Ohio and Rhode Island. Urumqi based Goldwind, China’s No 2 wind turbine maker after Sinovel Wind Group Co, first entered the US last year by supplying turbines to a project in Minnesota.

China CNR Corporation (601299) began construction on its Songyuan Wind Farm yesterday, reports China Securities Journal, citing a corporation filing.

The wind farm belongs to subsidiary CNR Wind Power and cost CNR 3.5 billion yuan. Its annual capacity totaled 1000 units of 1.5-3MW wind turbines through the end of 2010. It will manufacture 2MW and 3MW wind turbines this year and 5 MW wind turbines next year. The corporation has built production facilities for wind power equipment in Xinjiang, Inner Mongolia, and Shandong provinces, which are the windiest in China.