New Entry Standards are Going to Clean Up Wind’s Low End
Source:Chief Editor, CCEN   Date:2010-05-07   Author:Tom Pellman

Last week at the 4th China International Wind Energy Exhibition in Shanghai, hundreds of companies set up their booths and started swapping business cards. There were turbine touts, gearbox girls and pitch-and-yaw pitchmen. Crowds ambled through the rows of displays, collecting brochures and touching model turbine blades. There was little indication that, for some of the exhibitors, this may be the last year they’re in attendance.

 

About one month ago, China’s National Energy Administration (NEA) held a meeting in Beijing to announce a draft of a new piece of legislation – the Wind Power Equipment Manufacturing Industry Entry Standards – and begin soliciting comments on it. The policy is designed to raise manufacturing standards in the wind power industry, stimulate industry consolidation, create new-entry barriers for small-scale would-be manufacturers and put pressure on existing manufacturers with few competitive advantages.

 

In its current form, the entry standards draft includes 35 provisions, most of which are aimed at improving manufacturing processes and weeding out companies that cannot reach them. The first two provisions have made the most waves, that: a) manufacturers must be able to produce single, stand-alone units of 2.5MW or above, and b) manufacturers must have an annual production capacity of 1 million KW or above.

 

What does this mean for turbine manufacturers like those present at last week’s Shanghai wind energy exhibition? The news is not good.

 

Out of the 80 turbine manufacturers currently operating in China, only the top 10 big players – Vestas, Gamesa, Siemens, Goldwind, Dongfang, Sinovel and a handful of others – can fulfill the requirements. For the other 87 percent of the market, the coming year promises to be full of consolidation and closures, as the entry standards are finalized and put into effect.

 

Once the standards are implemented, companies not meeting the requirements within an as-yet undecided timeframe will not be included in the government’s “wind turbine manufacturer qualified vendor list.” Companies excluded from this list cannot receive government investment, taxation, land, or environmental protection and credit policy support.

 

The timing of the policy coincides with a manufacturing overcapacity, driven in part by small-scale producers with limited experience in the wind industry, minimal R&D capabilities and relatively low production capacities. It is important to note that while the title of the draft refers to “entry standards”, the standards are intended to be applied to existing wind turbine makers as well.

 

It promises to be a painful process for some, but from an industry perspective, consolidating and squeezing out low-R&D, low-quality turbine makers is badly needed. The overcapacity situation is important, but more importantly China’s wind power industry needs a new emphasis on the quality over the quantity of its wind power equipment. The large majority of China’s wind turbine makers offers two advantages over large players: cheaper costs and local guanxi-building.

 

The problem is, these low-end turbines tend to fall apart. Whereas a typical wind turbine is designed to generate electricity for 30 years, many of China’s wind farms have already come under attack as mere “vanity projects,” with impressive installed capacity figures, but little reliable power output.

 

Creating entry barriers and forcing out low-capacity, low-tech manufacturers is the government’s version of top-down quality control for an industry that badly needs it.

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