Wind power equipment prices fierce competition manufacturers shuffle soon

“I don’t agree that wind power equipment is totally profitable.” On April 8, Sun Lixiang, deputy general manager of Guodian United Power Technology Co., Ltd. stated at the 5th China International Wind Energy Exhibition that due to fierce competition in wind power, Under the price system, the wind power of wind turbine manufacturers has passed. Now it must reach a certain scale to be profitable.

What is even more worrying is that China’s wind power market that has doubled over the past five years may slow down. On April 8, some media reported that the National Energy Administration is studying and formulating regulations governing the approval system for wind power projects. The power to examine and approve wind power projects below 50,000 kilowatts of local places will slow down the development of wind power.

However, the National Energy Board, who declined to be named, told this reporter that China still encourages the development of renewable energy including wind energy, “how much can be done,” and “the provinces will get disintegrated development each year. Indicators, such as the development of 26 million kilowatts of wind power throughout the country this year, such as A province to obtain 500,000 kilowatts, changes in the approval authority of 50,000 kilowatts or less will not affect the construction of 500,000 kilowatts in A province."

In March 2011, data released by China Wind Energy Professional Committee of the Renewable Energy Society showed that in 2010, China added 18927.99 MW of installed wind power capacity and accumulated wind power installed capacity of 44733.29 MW, ranking first in the world.

“The market development rate in 2011 is still very fast, not worse than in 2010.” Yue Zhihong, Minister of Supply Chain Cooperation of Goldwind (002202) (002202.SZ) stated to the reporter that China’s wind power will continue to develop rapidly in 2011. However, although the wind power market is good, wind power manufacturers are facing the predicament of price competition, "the domestic market has entered a white-hot."

Prior to this, the Chinese government issued in 2009 the “Circular of the State Council Approved by the Development and Reform Commission and Other Departments on Suppressing Overcapacity in Some Industries and Duplicate Construction and Guiding the Healthy Development of Industries”, stating that “in recent years, the wind power industry has developed rapidly and wind power has emerged. The investment in equipment has been rushed to the top, repeated introduction and repeated construction.At present, there are more than 80 complete wind turbine manufacturing enterprises in China, and many enterprises are ready to enter the wind power equipment manufacturing industry. In 2010, the production capacity of wind power equipment in China will exceed 20 million kilowatts. The installed capacity of wind power is about 10 million kilowatts per year. Without timely regulation and guidance, excess capacity will be inevitable."

According to Liu Qi, deputy general manager of Shanghai Electric (601727) Wind Power Equipment Co., Ltd., at the aforementioned exhibition, the fan price is now about 3600-3700 yuan / KW, which is half of the peak period and "still continues to decline."

“The pressure on the overall cost of wind turbines is very high.” Sun Lixiang said that because the main cost of wind turbines comes from external components, it is not within the control of the wind turbine manufacturers.

Yue Zhihong revealed that at the Goldwind Science and Technology Supplier Conference held in early January 2011, its President Guo Jian stated that the decline in the overall price will inevitably be passed on to parts suppliers. In order to solve this problem, parts suppliers will soon Face shuffle.

Min Yang, chief operating officer of Mingyang Wind Power, said at the aforementioned exhibition that the next three years may be when the wind power industry shuffles. “At present, many wind turbines offer 3,500 yuan/KW, while some small wind turbine manufacturers purchase cost more than 5,000 yuan/year. KW”.

"The integration must start with the parts suppliers first." Yue Zhihong told this reporter that parts and components manufacturers will bear the most pressure on the decline in market prices.

In addition, Sun Lixiang said that due to wind power certification trouble, in order to reduce costs, wind power machine manufacturers also want to reduce the number of parts suppliers, "a change of parts must be certified once."

However, Liu Qi said that he hopes that wind turbine manufacturers can form industrial alliances, strengthen self-discipline, and "avoid vicious competition." In fact, after the on-grid tariff of wind power was determined, the revenue from wind power projects was also basically fixed. The continuous decrease in wind turbine prices caused the profits of wind power operators to continuously increase. In March, Longyuan Power (0916.HK) stated that the profit in 2010 increased by 125.8%. More than market expectations.

"Industry alliance is unlikely." Sun Lixiang said, forced to survive the needs of a single fan manufacturers will destroy the market price alliance, "fan manufacturers like a patient, we all know that 1 yuan drug is good, but you can not afford, Even if the 0.1 yuan drug has great side effects, it will be eaten in order to save lives."

Hao Yiguo said that the wind turbine manufacturers should change the model of bidding for power plants in the past and shift to a direct lock-in of wind power projects. “After obtaining wind power projects, they will return to production to share the benefits of wind power operators.”