The Chinese government is set to remove the subsidies to small wind turbine companies in China under a new rule which will be implemented from June 1 .Note the authorities have been concerned about the over investment in the green energy industry boosted by the strong domestic market.The government has already cracked down on small polysilicon producers which were producing polysilicon at uneconomic costs and causing environmental hazards as well.The Chinese government controls most of the funding through its massive state owned banks and gives a number of incentives to industry as well.With the removal of tax breaks,cheap land and easy loans,it will be difficult for even the bigger wind turbine companies to survive leave alone the small ones.
Chinese companies have become the low cost leaders in the Wind Equipment Industry and sell much below Western competitors.Leading WTG companies from the West like Vestas and Gamesa are reeling from Chinese competition and slowdown in Western markets.Suzlon too has been affected as Korean shipbuilders and Chinese wind producers have become major players.
Chinese Wind Industry facing huge Overcapacity
The Chinese Wind Industry has around 80 wind turbine companies many of which are quite small and dont’ have the money and expertise to compete in the international markets.Though the Chinese dominate the top global wind turbine companies list with 7 of the top 15 WTG companies Chinese,many are not competitive.Sinovel which has become the largest wind turbine company has recently canceled order for Electrical Control Systems from American Superconductor citing high inventory.Other Wind Turbine companies are in even more trouble as the industry suffers from huge overcapacity.The Chinese Wind Capacity has grown at 100% CAGR to reach 18 GW in 2010.However this strong growth has led to saturation of the wind market and price wars are being seen in China.Exports to other countries have been difficult as the cost of transportation of Wind Turbines is high.Besides Chinese Wind Companies don’t possess strong technology and quality unlike established ones like Vestas,Gamesa,GE and Siemens.Though Dongfang and Shanghai Electric have managed to win some Turbine Orders in India,the export percentage is negligible.Wind Power in India too has reached a stable growth level and a number of wind companies in India are fighting for marketshare as well.
Smaller Chinese Wind Companies to be Wiped Out
It is likely that the smaller Chinese Wind Companies will go bankrupt as the Wind Industry reeling under overcapacity will unlikely see acquisitions of these smaller companies by bigger players like Goldwind,Ming Yang and others.The government wants these smaller wind companies to sell their older smaller turbines to outside markets,however that too seemly improbable given that the largest wind turbine companies have failed to export any turbines in a major way till now
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).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.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.