Apr 11, 2010

Suzlon bullish on China despite cost pressure

Competition has got tougher for foreign wind power manufacturers in China, but Indian turbine maker Suzlon Energy still expects to increase its market share as it further cuts costs, the company's managing director said.
"By reducing prices we expect Suzlon will get more business in China in the next two or three years," Tulsi Tanti, who is also company chairman, said on the sidelines of the Boao Forum in the southern island province of Hainan.
He said Suzlon planned to reduce its cost per kilowatt by a further 10 percent within 10 years, by which time wind power would have little difficulty competing with traditional fossil fuel electricity as a result of industry standardisation, efficiency breakthroughs and the construction of smart grids.
Foreign companies, after dominating China's nascent wind sector, have seen their market share gradually eroded over the last few years -- but they are wrong to accuse China of rigging the bidding process or offering secret subsidies to Chinese manufacturers, Tanti said.
"Our supply chain is in China so we are a 100-percent local company, but it is very difficult to compete because locals are working with a local cost structure and we are coming in with a global cost structure and bringing high-end technology," he said.
"But we are making ourselves competitive -- it was a cost gap of 20 percent and now it is only 5 percent."
China's wind capacity reached around 13 gigawatts by the end of 2009, double the figure at the end of 2008, and government officials suggest it could raise the figure to 150 GW by 2020.
But a number of foreign industry representatives have criticised the huge and high-speed roll-out, saying there is severe overcapacity in the sector and that many new wind farms lay idle because of poor grid infrastructure.
With the Chinese wind industry now "maturing", Tanti said that fierce competition -- where small manufacturers fight to undercut the bigger players for vanity local government wind projects -- was just a phase in the market and that higher industry standards would eventually whittle down the sector to around five major local firms.
China has also been criticised for restrictive practices in the wind power sector as it tries to give local firms like Goldwind and Sinovel the clout to compete globally.
Beijing recently dropped a requirement that 70 percent of the components for wind turbines sold on the Chinese market needed to be sourced locally, and Tanti said the move was the prelude to a major onslaught on overseas markets by Chinese manufacturers.
"The local companies have become national champions and they will move to the global market -- and it was wise for the government to remove it and create a level playing field -- otherwise those other countries could also impose a 70 percent requirement," he said.
Tanti predicted the global wind power market would continue to grow despite uncertainties about renewable energy growth.
He said turbine makers need not worry too much about their prospects despite disappointing Copenhagen climate talks, lacklustre infrastructure investment in major markets such as China and a general lack of global industry standardisation, with momentum still very strong.
Suzlon, which celebrated its 15th birthday on Saturday, was ranked the eighth-biggest turbine manufacturer in 2009 with a global share of 6.4 percent, but its position rises to third if its subsidiaries are included. One of them, Germany-based Repower, also produces the world's biggest offshore turbines with capacity of 6.15 megawatts.
Tanti said he expects the company to be producing at full capacity of 6,000 megawatts a year "in the near term", and is now concentrating on reducing costs still further to enable its turbines to compete with traditional fossil fuel power.
"To me it is already competing without subsidy, and the cost of projects has come down 10 percent in two years," he said.
"Costs are cheap, the capacity is available and the only things that are missing are policy and regulatory frameworks, investment in grid infrastructure and financing."
He said Suzlon was eventually hoping to export its China-made turbines abroad, and that the company was looking for the support of the China Import-Export Bank to help finance wind power projects throughout the world.

Sat, Apr 10 05:31 PM

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