Preferential government policies and other factors will also contribute to the development of the wind power business and take it through the current financial crisis. Frost & Sullivan predicts opportunities for investment in China, in particular.
Wind power industry overview: China and the world
According to Frost & Sullivan, the global wind power industry demonstrates a sustained and rapid growth trend in general, with the fast-growing area migrating from Europe to Asia and North America in recent times. In 2008, an approximately 27,260 MW of installed capacity was added to the world’s wind power, which was 29% larger than that of the previous year. The wind generators around the world produced 260 billion kWh of power in 2008, which was 1.5% of the total global electricity generation. In comparison, the percentage was only 0.25% in 2000.
The Chinese market for wind power remains promising, although it is only inevitable that its growth rate will slow down compared to previous years. The installed capacity of China wind power increased from 402 MW in 2001 to 12,150 MW in 2008, with a growth rate higher than the world average since 2004. Frost & Sullivan estimates the cumulative installed capacity of China wind power to exceed 100 million kW in 2020, which indicates a compound growth rate between 20% and 30% from 2009 to 2020, far below the previous rate of nearly 100%.
Frost & Sullivan predicts lucrative opportunities in China for wind power investment in windfarm construction and equipment manufacture-related industries.
The forthcoming revitalisation plan of the Chinese government for the new energy industry will increase the installed capacity of wind power substantially.
As mentioned earlier, the total capacity is expected to exceed 100 million kW by the year 2020, and the following 6 wind power bases with over 10 million kW capacities are the key projects. Jiuquan, Gansu 10-million-class wind power base has a planned total installed capacity of 35,650 MW, and has completed the tendering of the wind turbines for the first-stage construction.
Hami, Xinjiang planned 20 million kW base, Inner Mongolia planned 50 million kW base (20 million in West Inner Mongolia and 30 million in East Inner Mongolia), Hebei planned 10 million kW base in coastal and northern area and Jiangsu planned 10 million kW base (7 million KW offshore wind).
The majority of current investors in Chinese wind power farms are central or local state-owned electric power and energy enterprises, with only a sprinkling of private or foreign enterprises. Of the installed capacity added in 2008, approximately 76% was accounted for by the five major power generation and energy groups.
Wind power equipment manufacturing
At present, the domestic wind power equipment manufacturing industry has formed a production system covering blades, gear boxes, generators, towers and other major parts.
However, the number of blades and turbines currently being made exceeds the predicted market demand for the next two years, leading to overcapacity.
Manufacturers such as Sinovel, Goldwind Tech and Dongfang Electric will have to face the fierce competition of market share in the next few years when the overcapacity brings down the price and profit margin. The current gross profit margin itself is barely satisfactory. Goldwind Tech possesses a gross margin of 18% to 28% in 2008, while the figure for Dongfang Elec is just around 11%.
Nevertheless, investment and profitable opportunities still remain in the manufacture of bearings, where there is a gap between demand and supply. There are limited companies that are capable of producing yaw bearings and pitch system bearings, while the main bearing of wind power generators rely almost entirely on imports. Judging from the present situation, the bearings market will not reach balance quickly and will remain lucrative in the future.
Wind power related industries
According to Frost & Sullivan analysis, tremendous investment opportunities exist in the energy storage battery market, among other related markets. Energy storage batteries can smooth the impact on the grid caused by the intermittence of wind power, to ensure the continuity and stability of power transmission.
Wind power penetration limit (WPPL), the main indicator of local wind power absorptive capacity, stands for the percentage of wind power in the total installed capability of the local grid system. According to the construction plan of wind power farms, Inner Mongolia, Gansu province and Northeast China will have a WPPL of over 10% in 2010, which exceeds the largest capacity that can be absorbed by the local grids. In particular, when a large wind power farm is connected to the existing grid, there will be a consequent disorder in voltage and frequency. As a result, in order to guarantee the safe and stable operation of the grid, matched energy storage batteries are essential to the electricity grid.
Lead-acid battery, nickel-hydrogen battery, lithium battery, sodium-sulfur battery and super capacitor can be used as wind power energy storage batteries. Nowadays the technology for lead-acid battery and sodium-sulfur battery has matured, while the other three kinds of prospective batteries are still in the nascent R&D stage. The lead-acid battery specifically, due to its outstanding cost performance, will be an appropriate investment in the wind power battery market with a high rate of return.