Whether or not to manufacture wind turbine units


  China's wind turbine manufacturing industry once thrived, but now faces difficulties, with most companies experiencing losses. The market's unregulated, unfair, and excessive low-price competition and blind expansion of production capacity are caused by many factors, but equipment manufacturers themselves should also strengthen self-discipline; otherwise, it will be detrimental to the sustainable and healthy development of wind power.
  
  Q: Please briefly introduce the background of the development of wind power equipment in China.
  
  Yang Xiaosheng: Before 2003, the development speed of wind power in China was not fast, with a total installed capacity of about 700,000 kilowatts. This was developed without policies, funds, technology, talent, or equipment, and most wind turbines were directly purchased from abroad.
  
  Starting in 2004, China's wind power entered a period of rapid development. The background at this time was increasing environmental pressure and severe resource consumption, with China's emissions ranking second in the world. At the same time, wind power technology advanced rapidly, with wind turbine equipment changing from fixed-pitch to variable-pitch and variable-speed, improving efficiency and enabling long-term grid connection. At this time, the positioning of wind power had changed from "supplementing" to "replacing" some oil and coal. The national authorities began drafting the "Renewable Energy Law," and at that time, wind power development was not constrained by the power grid, and it grew exponentially for several consecutive years.
  
  With a market for wind power equipment in China, the number of manufacturers began to increase, but they basically followed the path of introducing technology, digesting and absorbing it, and then producing it locally. Domestic production significantly reduced the cost of wind power equipment, thereby further expanding the market and creating a virtuous cycle.
  
  Q: What are the characteristics and technological achievements of China's wind power equipment manufacturing industry?
  
  Yang Xiaosheng: China's wind power technology not only fully utilizes the advanced achievements of world scientific and technological research, standing on the shoulders of foreigners from the outset, but also continuously improves it during use to make it more suitable for China's wind resource characteristics, such as resistance to wind and sand, low temperatures, freezing, and low wind speeds, ultimately forming the mainstream market products in China's wind power market. Currently, China's independently developed 6-megawatt wind turbines have been installed, pushing China's wind power development to the forefront of the world. This approach has been a huge success.
  
  Today, China's installed wind power capacity ranks first in the world. More importantly, Chinese-brand wind turbines occupy the majority of the domestic market. The vast majority of wind turbines rotating in the wind on China's plains are Chinese brands, which is in stark contrast to the development path of the automotive industry's "technology for market," where the streets are full of foreign-brand cars. In addition, during this process, China has gathered a large number of wind power technology talents and built many wind power technology testing facilities and national-level research and testing institutions, laying the foundation for further development of wind power technology.
  
  Q: Currently, China's wind turbine manufacturers are generally facing a survival crisis. How did this happen?
  
  Yang Xiaosheng: Unregulated, unfair, and excessive low-price competition in the market is the main reason. Under pressure from market competition, manufacturers have engaged in low-price competition, with the price per kilowatt falling from more than 6,000 yuan in 2008 to more than 3,000 yuan today, leaving little room for reasonable profit, and some are even losing money to gain market share, with no guarantee for technology investment and development. Developers are also worried, fearing that the technical performance, equipment quality, and after-sales service of the purchased equipment will not be guaranteed.
  
  Blind expansion of production capacity is another important reason. In 2011, China's wind turbine manufacturing capacity reached 30 million kilowatts, but the installed capacity that year was only 16 million kilowatts, with nearly half of the capacity being surplus, and the number of manufacturers reached a record high of more than 80. Although there was some relief in 2012, overcapacity still existed in the market.
  
  Q: In your opinion, how did the overcapacity come about?
  
  Yang Xiaosheng: In recent years, although the number of small and medium-sized wind power manufacturers has been declining, the production capacity of large enterprises has been increasing. According to analysis, there are two reasons for this blind expansion: First, the need for competition; large production capacity can handle large orders, creating economies of scale and thus gaining a certain competitive advantage. However, this reason is far from sufficient to explain the blindness of the expansion of large Chinese enterprises; second, the need to obtain wind power market resources. Some large enterprises are under pressure and temptation from local policies in regions with abundant wind resources, which have a local protectionist character, and are called "resource for industry." They have to build factories everywhere to obtain local wind energy resources and then use the resources to exchange for orders. The expansion caused by this is irrational and quite blind. This reason seems to better explain the current problem. The serious overcapacity caused by blind expansion violates the laws of scientific development and is not in line with the optimization of industrial layout for enterprises, which is a huge waste of social resources and enterprises, and will also drag enterprises into operational risks. Local protectionism uses "resource for industry" to tempt, causing unfair competition and distorting the market. For example, some local governments stipulate that developers building wind farms within their jurisdiction must prioritize or use products from local wind turbine manufacturers, which means that in order to obtain orders, manufacturers must invest in building factories in various places, and manufacturers cannot independently and rationally plan their production layout.
  
  Q: What is the current situation of overcapacity? How should it be resolved?
  
  Yang Xiaosheng: Currently, China's wind turbine production capacity is shrinking. It is said that through mergers, reorganizations, and withdrawals, the number of manufacturers has decreased from more than 80 to 20-30, and only more than 10 are truly mass-producing. This is the result of market competition. Recalling the last century, Europe also had 20-30 manufacturers, and the United States once had dozens, but their markets at that time were much smaller than China's. Through market competition, they have now been reduced to a few. The Ministry of Industry and Information Technology once hoped to only support the top few enterprises, but ultimately let the market solve the problem. In addition to market competition, solving overcapacity also requires breaking down local government protectionism; strict enforcement of the bidding law can solve this problem.
  
  Q: Besides overcapacity, what other problems exist in the wind power equipment industry?
  
  Yang Xiaosheng: Related-party transactions are a common phenomenon in the wind power industry. For example, State Grid, China Guodian, and China Datang both build wind farms and manufacture wind turbines through holding companies or subsidiaries, creating a certain degree of unfairness. In addition, due to the untimely arrival of renewable energy subsidies, developers owe manufacturers money, manufacturers owe component suppliers money, and component suppliers owe material suppliers money, creating a "debt chain." In this debt chain, some companies may go bankrupt due to increased financial costs or even broken capital chains. It is understood that several wind turbine manufacturers once had hundreds of billions of yuan in receivables. However, this debt chain is linear and does not close, unlike the complex triangular debts of the past. "There is a head to the grievance, and a master to the debt." As long as the subsidy funds are in place in a timely manner, the contradiction will be easily resolved.
  
  Q: Local protectionism, related-party transactions, and overdue payments are external factors. The survival of equipment manufacturers is precarious. Are there any internal reasons?
  
  Yang Xiaosheng: Some manufacturers have weak legal awareness and low integrity, providing inaccurate power curves and utilization rates. The actual operating effect is significantly lower than that of foreign brands. Some do not value technology, do not respect knowledge, and some even slander and undermine each other, which seriously affects the healthy development of the entire industry.
  
  These issues have drawn the attention of all relevant parties. The Wind Energy Equipment Branch of the China Agricultural Machinery Industry Association organized its member units to conduct research and concluded that China's wind energy industry has entered a new development period. To promote the healthy and sustainable development of China's wind energy equipment industry, it proposed a "Declaration of Industry Self-Discipline," listing ten principles of self-discipline: abiding by laws and regulations, honesty and trustworthiness, innovative development, reasonable efficiency, sincere cooperation, supporting the industrial chain, equality and friendliness, scientific planning, international markets, and social responsibility. It is hoped that through the conscious actions of all enterprises in the industry, a standardized, fair, and moderately competitive market environment can be jointly maintained. It is believed that this move will play a positive role in promoting the healthy development of China's wind power industry.

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