Sinovel Wind Group Co Ltd, China’s second largest wind turbine maker by sales, has put 350 of its workers on paid leave until further notice as a drop in new orders takes its toll on the company’s balance sheet, the company said in a statement Saturday.
The company’s revenue fell to a record low of 548 million yuan ($87.85 million) during the third quarter, down 82.12 percent year-on-year, according to the interim report released by Sinovel on October 29. Meanwhile, its total deficit climbed to 280 million yuan over the same period.
Sinovel is not the only local wind energy firm which posted soft third-quarter results. Homegrown rival Xinjiang Goldwind Science & Technology Co Ltd, the country’s leading turbine manufacturer, recorded a 32.44 million yuan loss between July and September, the first quarterly loss for the company since 2008, according to its interim data.
The earnings woes now facing China’s turbine makers underscore both the domestic wind power industry’s problems with overcapacity as well as the under-incentivized demand for wind equipment from power transmission enterprises, according to experts.
China’s indigenous turbine makers have developed quickly in recent years thanks to Beijing’s efforts to cut the country’s greenhouse gas emissions.
In 2009, the National Energy Administration (NEA) announced plans to bring China’s wind power capacity up to 100 gigawatts by the end of 2020, up from the roughly 12 gigawatts of on-grid capacity the country had at the time. Last July, the NEA revised this goal forward to the end of 2015.
“The cheap credit and subsidies the government handed out to firms in the wind industry in order to meet national energy targets also pushed turbine makers to produce more products than the market needed,” Lin Boqiang, director of the Center for Energy Economic Research at Xiamen University, told the Global Times.
As Lin explained, the situation quickly became unsustainable for the country’s turbine makers, more than half of which have had to scale back their manufacturing operations.
While some wind equipment makers have lowered their prices in a bid to reduce inventory and keep their operations running, many power transmission companies in the downstream market are now reluctant to invest heavily in expensive upgrades to support greater flows of wind energy, Wang Haisheng, a renewable energy analyst with Huatai United Securities, told the Global Times.
Making matters worse for companies like Sinovel, many of the country’s cash-strapped local governments cannot afford to keep doling out hefty subsidies to wind turbine manufacturers, a development which could soon lead to tougher times for the industry, Wang said.