Oversupply casts doubts over Chinese boom

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Richard Heap
September 26, 2016
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This content is from our archive. Some formatting or links may be broken.
Oversupply casts doubts over Chinese boom

Is China’s wind boom about to turn to bust?

It is a question we are asking following a report by the International Energy Agency last week. This report said that China has built so many coal plant over the last two years that wind farm owners are being forced to shut down their projects for 15% of the time. That is compared to just 1%-2% in most European nations.

That figure should ring alarm bells. China installed wind farms totalling 30GW in 2015, which is over three times the capacity installed in its nearest rival, the US. But China also installed coal-fired power stations with total capacity of 86.2GW last year, which is a 9.4% increase year-on-year in the country’s coal generation.

We may like to think of China as a world leader when it comes to the installation of renewables including wind, but those coal figures tell a dirtier story.

Ah, the sceptics will say, but those coal-fired power stations are so-called ‘clean coal’. That is true, but only up to a point. These ‘clean coal’ plants may be ‘cleaner’ than conventional coal-fired power stations but, according to Greenpeace, nearly half of China’s new ‘clean coal’ power plants are violating emissions standards.

China may be building a lot of wind farms – but it is not the only game in town. And looking at the coal sector also highlights some potential problems for wind.

The Chinese government has said it would stop approving new coal-fired power stations in as many as 13 Chinese provinces until 2018. Greenpeace welcomed the move, but the pronouncement hides a more worrying problem. Restricting the construction of new coal-fired power stations shows that China is worried about energy oversupply, and so tougher regulations to restrict construction of new wind farms could well follow.

The country’s GDP growth was flat in the first half of 2016 and plenty of analysts are now casting doubt over the idea that China is the engine of global growth. If its economic growth continues to slow then electricity demand will fall too, and the wind firms that built those 30GW last year will have a lot of time on their hands.

This will put more pressure on Chinese manufacturers to look outside of China, but only Envision and Goldwind have made any sort of impact overseas – and, certainly in Goldwind’s case, international sales make up only a tiny part of its total sales.

And any moves by Chinese manufacturers to grow faster outside of their home market will also put them up against European and US firms that are seeking market share. It would not be easy.

Weakening activity in their home market plus fierce competition outside of their home market is likely to equal pain for Chinese wind companies. We do not expect many high-profile casualties given that most of these businesses enjoy some form of state backing, but contraction in their wind farm installation operations must surely follow. These firms may end up simply managing the projects that are already there.

Outside China, however, such a slowdown is unlikely to have much impact on the wind market. It would be bad for global installation statistics, but the fact is that very few western wind companies are significantly exposed to the Chinese wind market because it is so difficult to break into. That could be a blessing in disguise.

The boom has not yet turned to bust, but we will not be surprised if it did. Spain has shown us the turmoil that can follow when a major market quickly goes from boom to bust – and China might yet make that crisis look like a minor blip.

Is China’s wind boom about to turn to bust?

It is a question we are asking following a report by the International Energy Agency last week. This report said that China has built so many coal plant over the last two years that wind farm owners are being forced to shut down their projects for 15% of the time. That is compared to just 1%-2% in most European nations.

That figure should ring alarm bells. China installed wind farms totalling 30GW in 2015, which is over three times the capacity installed in its nearest rival, the US. But China also installed coal-fired power stations with total capacity of 86.2GW last year, which is a 9.4% increase year-on-year in the country’s coal generation.

We may like to think of China as a world leader when it comes to the installation of renewables including wind, but those coal figures tell a dirtier story.

Ah, the sceptics will say, but those coal-fired power stations are so-called ‘clean coal’. That is true, but only up to a point. These ‘clean coal’ plants may be ‘cleaner’ than conventional coal-fired power stations but, according to Greenpeace, nearly half of China’s new ‘clean coal’ power plants are violating emissions standards.

China may be building a lot of wind farms – but it is not the only game in town. And looking at the coal sector also highlights some potential problems for wind.

The Chinese government has said it would stop approving new coal-fired power stations in as many as 13 Chinese provinces until 2018. Greenpeace welcomed the move, but the pronouncement hides a more worrying problem. Restricting the construction of new coal-fired power stations shows that China is worried about energy oversupply, and so tougher regulations to restrict construction of new wind farms could well follow.

The country’s GDP growth was flat in the first half of 2016 and plenty of analysts are now casting doubt over the idea that China is the engine of global growth. If its economic growth continues to slow then electricity demand will fall too, and the wind firms that built those 30GW last year will have a lot of time on their hands.

This will put more pressure on Chinese manufacturers to look outside of China, but only Envision and Goldwind have made any sort of impact overseas – and, certainly in Goldwind’s case, international sales make up only a tiny part of its total sales.

And any moves by Chinese manufacturers to grow faster outside of their home market will also put them up against European and US firms that are seeking market share. It would not be easy.

Weakening activity in their home market plus fierce competition outside of their home market is likely to equal pain for Chinese wind companies. We do not expect many high-profile casualties given that most of these businesses enjoy some form of state backing, but contraction in their wind farm installation operations must surely follow. These firms may end up simply managing the projects that are already there.

Outside China, however, such a slowdown is unlikely to have much impact on the wind market. It would be bad for global installation statistics, but the fact is that very few western wind companies are significantly exposed to the Chinese wind market because it is so difficult to break into. That could be a blessing in disguise.

The boom has not yet turned to bust, but we will not be surprised if it did. Spain has shown us the turmoil that can follow when a major market quickly goes from boom to bust – and China might yet make that crisis look like a minor blip.

Is China’s wind boom about to turn to bust?

It is a question we are asking following a report by the International Energy Agency last week. This report said that China has built so many coal plant over the last two years that wind farm owners are being forced to shut down their projects for 15% of the time. That is compared to just 1%-2% in most European nations.

That figure should ring alarm bells. China installed wind farms totalling 30GW in 2015, which is over three times the capacity installed in its nearest rival, the US. But China also installed coal-fired power stations with total capacity of 86.2GW last year, which is a 9.4% increase year-on-year in the country’s coal generation.

We may like to think of China as a world leader when it comes to the installation of renewables including wind, but those coal figures tell a dirtier story.

Ah, the sceptics will say, but those coal-fired power stations are so-called ‘clean coal’. That is true, but only up to a point. These ‘clean coal’ plants may be ‘cleaner’ than conventional coal-fired power stations but, according to Greenpeace, nearly half of China’s new ‘clean coal’ power plants are violating emissions standards.

China may be building a lot of wind farms – but it is not the only game in town. And looking at the coal sector also highlights some potential problems for wind.

The Chinese government has said it would stop approving new coal-fired power stations in as many as 13 Chinese provinces until 2018. Greenpeace welcomed the move, but the pronouncement hides a more worrying problem. Restricting the construction of new coal-fired power stations shows that China is worried about energy oversupply, and so tougher regulations to restrict construction of new wind farms could well follow.

The country’s GDP growth was flat in the first half of 2016 and plenty of analysts are now casting doubt over the idea that China is the engine of global growth. If its economic growth continues to slow then electricity demand will fall too, and the wind firms that built those 30GW last year will have a lot of time on their hands.

This will put more pressure on Chinese manufacturers to look outside of China, but only Envision and Goldwind have made any sort of impact overseas – and, certainly in Goldwind’s case, international sales make up only a tiny part of its total sales.

And any moves by Chinese manufacturers to grow faster outside of their home market will also put them up against European and US firms that are seeking market share. It would not be easy.

Weakening activity in their home market plus fierce competition outside of their home market is likely to equal pain for Chinese wind companies. We do not expect many high-profile casualties given that most of these businesses enjoy some form of state backing, but contraction in their wind farm installation operations must surely follow. These firms may end up simply managing the projects that are already there.

Outside China, however, such a slowdown is unlikely to have much impact on the wind market. It would be bad for global installation statistics, but the fact is that very few western wind companies are significantly exposed to the Chinese wind market because it is so difficult to break into. That could be a blessing in disguise.

The boom has not yet turned to bust, but we will not be surprised if it did. Spain has shown us the turmoil that can follow when a major market quickly goes from boom to bust – and China might yet make that crisis look like a minor blip.

Is China’s wind boom about to turn to bust?

It is a question we are asking following a report by the International Energy Agency last week. This report said that China has built so many coal plant over the last two years that wind farm owners are being forced to shut down their projects for 15% of the time. That is compared to just 1%-2% in most European nations.

That figure should ring alarm bells. China installed wind farms totalling 30GW in 2015, which is over three times the capacity installed in its nearest rival, the US. But China also installed coal-fired power stations with total capacity of 86.2GW last year, which is a 9.4% increase year-on-year in the country’s coal generation.

We may like to think of China as a world leader when it comes to the installation of renewables including wind, but those coal figures tell a dirtier story.

Ah, the sceptics will say, but those coal-fired power stations are so-called ‘clean coal’. That is true, but only up to a point. These ‘clean coal’ plants may be ‘cleaner’ than conventional coal-fired power stations but, according to Greenpeace, nearly half of China’s new ‘clean coal’ power plants are violating emissions standards.

China may be building a lot of wind farms – but it is not the only game in town. And looking at the coal sector also highlights some potential problems for wind.

The Chinese government has said it would stop approving new coal-fired power stations in as many as 13 Chinese provinces until 2018. Greenpeace welcomed the move, but the pronouncement hides a more worrying problem. Restricting the construction of new coal-fired power stations shows that China is worried about energy oversupply, and so tougher regulations to restrict construction of new wind farms could well follow.

The country’s GDP growth was flat in the first half of 2016 and plenty of analysts are now casting doubt over the idea that China is the engine of global growth. If its economic growth continues to slow then electricity demand will fall too, and the wind firms that built those 30GW last year will have a lot of time on their hands.

This will put more pressure on Chinese manufacturers to look outside of China, but only Envision and Goldwind have made any sort of impact overseas – and, certainly in Goldwind’s case, international sales make up only a tiny part of its total sales.

And any moves by Chinese manufacturers to grow faster outside of their home market will also put them up against European and US firms that are seeking market share. It would not be easy.

Weakening activity in their home market plus fierce competition outside of their home market is likely to equal pain for Chinese wind companies. We do not expect many high-profile casualties given that most of these businesses enjoy some form of state backing, but contraction in their wind farm installation operations must surely follow. These firms may end up simply managing the projects that are already there.

Outside China, however, such a slowdown is unlikely to have much impact on the wind market. It would be bad for global installation statistics, but the fact is that very few western wind companies are significantly exposed to the Chinese wind market because it is so difficult to break into. That could be a blessing in disguise.

The boom has not yet turned to bust, but we will not be surprised if it did. Spain has shown us the turmoil that can follow when a major market quickly goes from boom to bust – and China might yet make that crisis look like a minor blip.

Is China’s wind boom about to turn to bust?

It is a question we are asking following a report by the International Energy Agency last week. This report said that China has built so many coal plant over the last two years that wind farm owners are being forced to shut down their projects for 15% of the time. That is compared to just 1%-2% in most European nations.

That figure should ring alarm bells. China installed wind farms totalling 30GW in 2015, which is over three times the capacity installed in its nearest rival, the US. But China also installed coal-fired power stations with total capacity of 86.2GW last year, which is a 9.4% increase year-on-year in the country’s coal generation.

We may like to think of China as a world leader when it comes to the installation of renewables including wind, but those coal figures tell a dirtier story.

Ah, the sceptics will say, but those coal-fired power stations are so-called ‘clean coal’. That is true, but only up to a point. These ‘clean coal’ plants may be ‘cleaner’ than conventional coal-fired power stations but, according to Greenpeace, nearly half of China’s new ‘clean coal’ power plants are violating emissions standards.

China may be building a lot of wind farms – but it is not the only game in town. And looking at the coal sector also highlights some potential problems for wind.

The Chinese government has said it would stop approving new coal-fired power stations in as many as 13 Chinese provinces until 2018. Greenpeace welcomed the move, but the pronouncement hides a more worrying problem. Restricting the construction of new coal-fired power stations shows that China is worried about energy oversupply, and so tougher regulations to restrict construction of new wind farms could well follow.

The country’s GDP growth was flat in the first half of 2016 and plenty of analysts are now casting doubt over the idea that China is the engine of global growth. If its economic growth continues to slow then electricity demand will fall too, and the wind firms that built those 30GW last year will have a lot of time on their hands.

This will put more pressure on Chinese manufacturers to look outside of China, but only Envision and Goldwind have made any sort of impact overseas – and, certainly in Goldwind’s case, international sales make up only a tiny part of its total sales.

And any moves by Chinese manufacturers to grow faster outside of their home market will also put them up against European and US firms that are seeking market share. It would not be easy.

Weakening activity in their home market plus fierce competition outside of their home market is likely to equal pain for Chinese wind companies. We do not expect many high-profile casualties given that most of these businesses enjoy some form of state backing, but contraction in their wind farm installation operations must surely follow. These firms may end up simply managing the projects that are already there.

Outside China, however, such a slowdown is unlikely to have much impact on the wind market. It would be bad for global installation statistics, but the fact is that very few western wind companies are significantly exposed to the Chinese wind market because it is so difficult to break into. That could be a blessing in disguise.

The boom has not yet turned to bust, but we will not be surprised if it did. Spain has shown us the turmoil that can follow when a major market quickly goes from boom to bust – and China might yet make that crisis look like a minor blip.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.