Monday, April 22, 2013

Energy Watch: China's wind power industry expects better development in 2013

BEIJING, Apr. 22 (Xinhua) ? China's wind power industry continued retrenching in 2012 which started a year earlier with slower installed capacity growth and a continuing power rationing problem.
This resulted in slower growth in wind power generation and wind power companies' deteriorated performance.
The National Energy Administration (NEA) announced on April 9 that China generated 100.8 billion kWh of wind power in 2012, up 41 percent year on year with the growth rate slowed down compared with previous years.
The country's wind power output hiked 81.41 percent year on year in 2010 to 50.1 billion kWh, and then jumped 60 percent on year in 2011 to 80 billion kWh, according to earlier statistics from the State Electricity Regulatory Commission (SERC), which was scraped and merged into the new National Energy Administration (NEA).
But the power rationing problem intensified, with the country's wind power utilization averaging at 1,890 hours in 2012, some 30 hours less than that in 2011.
Particularly, the eastern part of Inner Mongolia Autonomous Region and Jilin province suffered the most serious power rationing, with rationed power accounting for 50 percent of the total consumption during the winter heating period.
In contrast, central China, eastern China and southern China areas saw rapid increases of wind power installed capacity in 2012 with the wind power utilization hours at 1,844 hours, 2,292 hours, and 2,265 hours respectively.
The industry downturn could be better illustrated by financial returns of wind power companies, most of which reported sliding profits last year.
China Datang Renewable Power Corp. (01798.HK) saw its net profits attributable to equity holders fall 84.63 percent year on year in 2012 to 112.1 million yuan, with basic earnings per share decreasing 84.77 percent year on year to 0.0154 yuan.
The Huaneng Renewables Corp. (00958.HK) also saw net profits drop 45.5 percent year on year in 2012 to 557.9 million yuan
The complex and volatile business environment had made wind farms suffer, which moved upstream, where wind power turbine manufacturers also felt the pinch.
The Sinovel Wind Group, for instance, predicted net losses of 490 million yuan for the year of 2012, in sharp contrast to the net profits of 775.72 million yuan in 2011. The financial forecast was based on preliminary statistics and according to a source with the company's investor relations Sinovel is likely to postpone its release of 2012 financial report until April 27.
Goldwind Science and Technology, another major wind turbine manufacturer in China, saw its net profits dropped 74.77 percent year on year to 153 million yuan, with basic earnings per share being at 0.06 yuan in the year compared with 0.23 yuan in 2011.
But Goldwind's gross margin rose from 10.95 percent in the first quarter to 16 percent in the fourth quarter, which reflected improving performance during the year.
Against these falling profits, however, China Longyuan Power stood out with its basically steady performance and development in 2012.
The group generated 2.593 billion yuan of net profits in 2012, up 0.6 percent year on year, with revenues amounting to 16.77 billion yuan, up 6.2 percent year on year.
Longyuan said that the basically unchanged profits compared with 2011 was mainly due to its strategy of reducing wind power development in areas that featured severe power rationing problems in a bid to better control risks and maintain returns on investments.
For example, in 2012, Longyuan had 50 projects listed in the second batch of batch of plans for wind power projects to be approved during the period of the 12th five-year plan for energy (2011-2015) issued by the NEA, with aggregate installed capacity of 2824.8 MW, of which projects in regions not subject to grid curtailment accounted for 89.4 percent.
The Longyuan strategy partly showcases the importance of better geographic spread which can shield power rationing, ensure returns, and help improve industry layout.
The pressing need of dealing with power rationing to improve the development of China's wind power industry was again stressed earlier when the NEA announced the third batch of wind power projects to be approved during the 12th five-year plan (2011-2015) period.
Power grid companies must put their best efforts into facilitated grid construction to ensure the connection and utilization of the wind power generated from the plan's listed projects, says the NEA, requiring that the power grid and those projects shall commence operation at the same time.
Areas where wind power is well developed and utilized can relatively increase or speed up project development while areas with low wind power utilization rate cannot expand their levels of wind power construction until the power rationing problem is solved, the NEA says.
According to statistics from the NEA, China wasted about 20 billion kWh of wind power in 2012. Wind power consumption only takes up 2 percent of China's total power consumption.
The NEA will take a variety of measures to promote wind power's access to power grid, boosting wind power consumption to reduce the serious wind power wastage in some parts of China, it says in a separate announcement.
With much clearer and rational guidance from the government, and the expected increasing domestic installations, industry analysts as well as wind power companies show confidence in the industry's development this year.
As the most mature and commercialized clean and renewable energy source with a cost per kWh closest to that of traditional energies, wind power is an important foundation for China's strategic emerging industries, essential to the restructuring of China's energy mix, says Wu Gang, chairman and CEO of Goldwind.
The domestic wind power industry will continue to have untapped potential for future development, especially when related technologies are better developed and the power rationing problems are better addressed, says Wu.
--Backgrounder: SOEs dominate China's wind power projects
The state-owned enterprises (SOEs) controlled a sweeping majority of investment and construction in wind power projects last year, accounting for about 81 percent of the sector's installed capacity, the NEA said on April 10.
As of the end of 2012, some 1,300 companies had invested in or built wind power development projects, of which 1,000 were controlled by SOEs, according to NEA data. (Edited by Niu Huizhe, niuhuizhe@xinhua.org ) (This article was firstly published in Xinhua Energy newsletter ChinaOGP on April 15, 2013.)