Gamesa warns China’s wind market is losing its puff

April 05, 2012
Gamesa Tianjin wind turbine production

China's wind market bubble will deflate as the industry enters the worst year in its history, according Spanish wind turbine maker Gamesa.

"The first half of 2012 is the worst time in the last four years, triggering a faster industry consolidation," said Jorge Calvet, chairman of the company.

Even though China consolidated its position as the world's wind power leader in both newly and cumulative installed capacities in 2011, with 18-GW of wind turbines installed, that was down 6.9 percent year-on-year. As a result of the slowdown, Gamesa received no orders in the first quarter of 2012.

"We will see even faster deflation in the first half of 2013," warned Calvet who says China's wind industry has excessive capacity, going from 10 to 12 manufacturers in 2005 to more than 85 in 2011.

No doubt hoping to benefit from the impending industry consolidation, Gamesa has been investing heavily in building production capacity in China. Last September it announced its intention to invest an additional EUR90 million (USD128 million) in its China operations by 2012 and in December it opened its sixth Chinese manufacturing plant.

Despite the tough conditions prevailing in China Gamesa did well last year, with turbine deliveries of 3.31GW giving it a 8 percent global market share, up 1.6 percent on 2010. This put Gamesa in fourth position on the global league table of turbine manufacturers compared to the eighth spot it managed in 2010, according to analysts IHS-Emerging Energy Research. The Spanish turbine maker was also the only major wind company to recorded higher profits in 2011.

For 2012 the company has, however, lowered its sales guidance to 2.8GW-to 3.2GW range from the previous estimate of 3GW-to-3.5GW.

According to the China Renewable Energy Industries Association, wind sector encountered a number difficulties in 2011, including slower wind farm construction and a number of accidents.

In addition quality issues last year led to the disconnection of 702 wind turbines from the power grid in the city of Jiuquan in Gansu province and 644 wind turbines in Zhangjiakou, Hebei province. Since then, China has attached greater importance to wind turbine quality.

"We see a shift in profits from manufacturing to services and maintenance," said Calvet.

Gamesa plans to bring its first G10X model, a 4.5-MW wind turbine, to China this year and is currently in the process of site selection. Ninety-five percent of the components used in its 2-MW model, which is assembled in Tianjin, are procured in China.