Wind Power driving China?

China’s renewables industry, along with the rest of the world’s, continues to struggle through financial challenges. But long term government planning for China’s wind industry could be the answer to the country’s ambitious clean energy plans.
Published: Mon 20 Jan 2014

China is forging ahead to become the wind turbine rotor blade market leader in the foreseeable future. This is according to a report compiled by research and consulting firm Global Data. The market value is expected to increase from nearly US$2 billion in 2012 to US$3.7 billion by 2020, at a Compound Annual Growth Rate (CAGR) of 8.2%.

Low-cost labor and governmental support for the local turbine and component manufacturing will be significant contributors to this growth. In 2012, China boasted the top wind rotor blade market, followed by the US and India. China and the US installed 23,261 and 20,182 rotor blades, respectively, and together the countries contributed to over 65% of the installations worldwide. India followed with 3,306 blades-a 5% contribution to the total.

Government support

China is also a major manufacturing center for wind turbine rotor blades, producing approximately 25% of the world’s rotor blades. This is thanks to governmental support in the form of subsidies and favorable policies.

The government’s support of the local wind industry forms part of its plan to stabilize China’s growing power consumption and ever-increasing carbon emissions. The government aims to generate 15% electricity from renewable sources and reduce emissions by 40–45% by 2020. The government has chosen wind power to be the most viable source of energy in order to meet its ambitious goals.

The lesson of solar

Is this report a true depiction of China’s renewables development because the current reality is that the renewables sector, specifically solar, has left the country in a great deal of debt.Wind power has reported a number of failures and could very likely go the way of solar. Most solar producers have gone from soaring growth levels to bankruptcy. This has been due mainly to a decrease in demand for panels as governments in the West continue to cut subsidies which made solar power so attractive. Negative profit margins, soaring debt levels and idle factories are what many solar production companies are experiencing in China now. The government has been scrambling to fix the mess by offering tax breaks to solar companies that acquire or merge with their competitors. Companies such as LDK Solar, once a leading Chinese producer, have turned to the government for protection from its creditors. According to Bloomberg, China’s 10 largest solar manufacturers hold US$28.8-billion worth of liabilities, most of which is owed to government-backed institutions. The average debt ratio of those companies – the amount of debt as a percentage of total assets – is a whopping 75.8%.

China’s ailing wind industry

China’s wind industry hasn't reported a clean bill of health either. In 2012, 17%of all wind turbines were unused because they are too expensive to connect to the grid. In some regions, half of all wind turbines remain unconnected to the grid. The 12.3 billion kilowatts of power wasted last year by wind turbines totaled US$1.73-billion in lost revenue — almost double the amount in 2011.

China is not alone. The manufacturing flood of solar panels and wind technology on the global market caused prices to dip dramatically and left many of the world’s largest producers with negative profit margins. Many flocked to China to take advantage of subsidies, governmental assistance and cheap labor.

So, with this grim reality in mind, will China’s renewable industry become truly supreme amongst other success stories or will it be merely the last corpse to fall in a global industry finding its feet.