Wind power chaos: State-owned enterprises "enclosure"

The scene of the country’s retreat by the people is intensifying in the wind power industry in China.

An industry source told the “China Business” reporter that the areas in which the state-owned enterprises are involved have been constructed and operated by downstream wind farms, spreading to the upstream raw materials and equipment manufacturing. This type of attack has caused concern in the industry.

Sitting on the advantages of capital and scale, the “enclosure” wind power of state-owned enterprises directly lowered the price of offshore wind power. In the face of shrinking profits, private capital may gradually go out.

State-owned enterprises play a leading role

Before the two conferences, another powerful state-owned power generation group announced its wind power ambitions. China Three Gorges Corporation on the Yangtze River said on its website that it plans to install 8 million kilowatts of wind power capacity by 2015, more than 8 million kilowatts of projects under construction and construction, and more than 30 million kilowatts of reserve resources.

Among the many state-owned enterprises that seize the wind power market, the Three Gorges Group is only a latecomer. In the downstream of the wind power industry chain – the construction and operation of wind farms, the state-owned power generation group is the absolute protagonist.

In January of this year, the Electricity Regulatory Commission issued the “Regulations on the Supervision of Wind Power and Photovoltaic Power Generation,” stating that the investment entities of wind power projects are relatively concentrated, mainly the central enterprises and local state-owned power generation investment companies with abundant wind energy resources.

The report data shows that China Grid Group Corporation, China Huaneng Group Corporation, and China Datang Corporation all rank in the top three, whether it is grid-connected installed capacity or installed capacity under construction, China Guangdong Nuclear Power Group, China Shenhua The state-owned enterprises such as the Group and China Huaneng Group followed. The grid-connected installed capacity of the top ten companies accounted for 75.85% of the installed capacity of grid-connected wind power in China.

This phenomenon has attracted the attention of people in the industry. Duan Qihua, a partner of the CPPCC National Committee and Duanhe Duan Law Firm, made a speech on the development of wind power during the two sessions. He bluntly said: “State-owned enterprises are hurrying around in new energy fields such as wind power and solar energy, and squeeze out other companies because very few companies can compete with state-owned enterprises.”

In the face of competition from state-owned enterprises, some wind farm operators chose to withdraw gradually. According to Zhao Yu, a new energy and power equipment analyst at Hongyuan Securities, wind farms have changed hands in recent years. Due to the large investment in the early stage of the wind farm and the slow cost recovery, some small and medium-sized wind farms will resold the already established wind farms for the consideration of capital utilization efficiency.

“Buyers buying these wind farms are basically those large state-owned power generation groups,” Zhao said.

In the area of ​​private-owned entrepreneurs and investors gathering upstream, raw materials and equipment manufacturing, state-owned enterprises have also begun to dominate. At the beginning of this year, the general manager of Hubei Energy Group Fu Zhenbang concluded in a public statement that whether it is equipment manufacturing or wind power development and operation, and even supporting the wind power industry chain, state-owned enterprises have occupied a major share.

"In the course of wind power development in China, state-owned enterprises are the main leaders, participants and promoters," said Fu Zhenbang.

The industry is worrying

Why are state-owned power generation groups actively enclosing wind farms?

"State-owned power companies actively participate in new energy bidding, not to develop new energy, but to share the share of thermal power brought about by the new energy share." Duan Huahua said bluntly.

The Medium- and Long-Term Plan for Renewable Energies sets a mandatory market share for non-hydro renewable energy: The power generation enterprises with an installed capacity of more than 5 million kilowatts will have 3% renewable energy quotas in addition to hydropower in 2010. It reaches 8%.

This means that if a power company does not qualify for renewable energy market quotas, it will not be able to successfully build a thermal power project, which will directly lead to a halt in the total installed capacity of the power group.

In addition, the expectations for the development of the industry and favorable policies also attract large-scale input from state-owned enterprises. Although China has surpassed the United States to become the world’s largest wind power installation country, from the perspective of wind power generation, wind power generation is only 0.70% of total generation by the end of 2009, and it rose to 1.04% in 2010. During the second five-year period, more than 50 million kilowatts of new engines were added, and the space is still huge.

"The state-owned power generation group hopes to seize the resources first, and when the state formulates policies, it considers the interests of all parties and can also obtain policy biases," said Zhao Wei.

State-owned power generation groups often have controversial "intentions". Due to the obvious advantages of state-owned enterprises, good government background and strong capital backup support its competition at all costs.

Due to the huge investment and slow recovery, coupled with the difficulty of grid connection, how to make profits from wind farms has always been a problem that has plagued the development of the industry. However, as wind farms continue to lose money on one side, they frequently report "floor prices" at the time of bidding.

For example, in 2010, China's first offshore wind project tender, the low price reported by the five major power generation groups caused an uproar. People in the industry believe that due to high construction costs and maintenance costs, the cost of offshore wind power may be twice that of onshore wind power, but the prices quoted by the five major power generation groups are not much different from onshore wind power.

Ni Weidou, an academician of the Chinese Academy of Engineering, publicly criticized this: “The real operators of China’s wind power are all large state-owned enterprises. They will seize resources, and it does not matter if they do not make money – because they have other, more profitable sources.”

State-owned power companies also have a key advantage. "The relationship between state-owned power generation companies and grid companies is more coordinated and grid-connected issues are more easily resolved," Zhao added. The low rate of wind power grid connection is currently the major bottleneck that restricts the healthy development of the industry. Only smooth access to the Internet can bring profits to wind farms.

“But after the completion of the wind farm, it is necessary to build the access system. Which node receives the approval power in the grid company. It can be said that the grid company decided the fate of the wind farm, can give you trouble, but also can help you save costs "A grid company asked anonymous people to frankly admit to reporters.

The multiple advantages mentioned above make the state-owned power generation companies invincible in their competition with other companies. This trend was caused by the downstream wind farms operating upstream equipment manufacturing, which has caused a recent linear decline in wind turbine prices. According to the above-mentioned industry insiders, many privately-run enterprises created by wind turbines, especially those that are already in the third tier, are losing profitability.

What is worrying is that the wind power industry's “advancement of the country” does not necessarily bring healthy and sustained development to the entire industry.

“The problem will be very serious, and the current situation may be behind the potential of enterprises to control the commanding heights of the industry. This is really the case, then the new technology will not be able to introduce or develop.” Duan Qihua said so.