[remarks by the pioneer of wind power]
◆ in my opinion, the brand shall be interpreted from two facets, namely “quality” and “image”. the former represents the intrinsic quality which symbolizes the power of the enterprise; the latter is the external performance which is the perfect combination of the popularity and reputation of an enterprise. china longyuan power will continue brand innovation and improve brand competitiveness successively. taking the good opportunity of china’s great development of new energy industry, the company will devote itself to the building of “china longyuan power” into a world-class new energy brand.
◆ the poor performance of quite a few of domestic wind power stations mainly results from the lack of professional development and management. actually wind power is an issue which is much more complicated than they thought.
◆ throughout its history, the wind power industry in china has been always escorted by actual challenges and various contradictions which have mingled with each other.
◆ the object can be achieved or even in advance that the total installed capacity of wind power will reach 150,000mw by 2020, which conforms to the actual situation. it is predicted that the increase speed of wind power will roughly maintain 15,000mw each year in the coming period.
◆ the coming years will be the critical period which is to test the quality of the wind power equipment in china. as to the manufacture sector of wind power equipments, will come the era that is filled with fierce competitions as well as mergers and acquisitions. ultimately 8 to 10 enterprises will be reasonably retained.
◆ the proposition to be commonly answered by us in the coming five years is how to further promote the transformation of energy production and utilization mode so as to construct a modern energy industry system which is safe, stable, economical and clean.
◆ i believe that three transitions concerning the future direction of wind power industry in china are to be realized, namely transition from the focus of development speed to that of development quality; transition from the priority of installed capacity to that of wind power volume; transition from centralized large-scale development to the combination of large scale development and decentralized development.
[success story]
son of wind power
in march 1978, holding the good opportunity of the reform and open policy, xie changjun went to study in the university. his specialty was thermal and power engineering of thermal power plants, the commonly known “boiler” specialty then. however, he could hardly expect that in the coming 30 years, his fate would be deeply involved in the clean wind power.
after graduation, he came to work in jiangsu jianbi thermal power plant, a nationally famous thermal power plant then. he was 24 years old and in his energetic age. one and half years’ field practice gave him a keen insight into thermal power plant.
“till now i would estimate and determine the data concerning thermal power plant by using jianbi thermal power plant’s old data.” after that, by chance, he came back to the former department of science and technology of the ministry of water resources and power. he was assigned to coordinate with an old comrade in the department who was responsible for new energy projects. this is his first close contact with wind power.
he hadn’t left the post until 8 years later he was transferred to zhong neng power-tech development co., ltd. (hereafter referred to as “zhong neng company”). although his job there had no direct connection with wind power, he had been deep in love with the new energy form --- wind power. “i was not engaged in wind power project then. however, i had always paid close attention to its development. while investigating abroad, if possible, i was sure to visit those foreign wind farms. i would do so even through a roundabout journey”. the six years he worked in zhong neng company didn’t make him detach himself from wind power.
on may 12, 1999, the state power corporation then decided to implement the merger and acquisition of its three wholly-owned subsidiaries including china longyuan electric power group corporation (hereafter referred to as “longyuan corporation”), zhong neng power-tech development co., ltd., and china fulin wind power development corporation (hereafter referred to as “fulin corporation”). the latter two became china longyuan electric power group corporation’s wholly-owned subsidiaries. naturally xie changjun, the deputy general manager of zhong neng company then, came to china longyuan corporation.
initially longyuan corporation didn’t mainly focus on wind power. in november 2000, at the beginning of his work as a leader in longyuan corporation, he worked out the development strategy --- to stabilize the basis as well as “fly by the two wings”. the so-called “basis” referred to the two thermal power plants affiliated to longyuan corporation while “two wings” meant the business concerning science and technology brought about by zhong neng company and the wind power operations contributed by fulin corporation.
unexpectedly the wish to “fly by the two wings” cannot be realized because zhong neng company was transferred to gd power development co., ltd. (hereafter referred to as “gd power”) due to business readjustment. then he was troubled more by fulin corporation, which performed poorly and was in a heavy loss.
then what should be longyuan corporation’s proper direction? concerning this issue, he asked instructions from his superior leader face to face and earnestly introduced his plan to invest in wind power. luckily his idea was recognized, which is crucial to him as well as longyuan corporation.
since then, the company set out to investigate wind power resources. from 2002 to 2004, silently it had always stuck to the fundamental works including wind measure and talent accumulation which, to others, has no profit at all. “it can be said that the foundation of the rapid development of longyuan corporation was laid then.” since 2005 the company entered a rapid development period during which its installed capacity of wind power increased by nearly 100% each year in average. in 2007 the company's installed capacity of wind power reached 1,298mw and it became the only domestic wind power enterprise then whose installed capacity had surpassed 1,000mw. according to the world wind energy report 2008 released by btm (denmark), with its 2,600mw installed capacity of wind power, the company rose from sixth to fifth in the global ranking list and ranked first in asia.
as more and more attention was paid to wind power development, it had become the industry consensus to seize favorable wind power resources. at that moment, xie changjun didn’t expand the operation blindly. on the contrary, he gave priority to electricity output. “in 2008 the company’s total profit of wind power exceeded rmb500 million yuan and its power volume was nearly 4 billion kwh. its installed capacity, which occupied a quarter of the national installed capacity, produced one third of the national power volume. its average utilization hours of the year surmounted 2,300 hours… all the production quotas of the company took the lead in the country.” after more than ten years’ accumulation, xie changjun had no longer satisfied with the development speed realized through project benefits. on july 8, 2009 with the approval of the state council, longyuan corporation was entirely reorganized and reformed into china longyuan power group corporation limited (hereafter referred to as “china longyuan power”) so as to make final preparations for its first ipo.
on december 10, 2009 with the full support of china guodian corporation, china longyuan power (hkse: 00916) led by xie changjun became the listed company in hkse. the opening price was 13.5% higher than its issuing price and the initial day price increased by 9.4%. as a result, the company has raised rmb17.7 billion yuan, which set several records for the power enterprises in china, such as the largest amount of money raised through overseas ipo and the highest p/e ratio. in addition, it had been the ipo with the highest estimated value since 2008 in hkse as well as the overseas ipo of the state owned enterprise with the highest estimated value.
xie changjun and his company reached a new high together.
with the contribution of the capital market, it won’t just be a dream to build another china longyuan power within one or two years. however, to xie changjun, what he strives for is not only to build a larger china longyuan power and more installed capacity of wind power. on the contrary, “it is reasonable for him to build the company into the no.1 new energy company in the world!”
[interview]
in 2010, wind power was undoubtedly the fastest development branch of new energy industry. the high speed development of wind power attracted great attention of the energy industry. being the leader of wind power industry, china longyuan power had become an increasing focus. as the pilot of the company, each of xie changjun’s movement had become the vane of the industry development.
2010 was the first full year since the company’s successful ipo as well as the fastest growing year of the company.
in 2010, wind power industry waved farewell to the fast development “11th five-year plan” and was about to greet the hopeful “12th five-year plan”. as the deserved industry leader, what are his feelings about the past and what are his hopes in the future? on march 16, after attending the meeting of the board of directors, he granted an exclusive interview by the reporter of china new energy (hereafter referred to as “cne”).
standing at the crossing
cne: to china longyuan power, 2010 is a year of great harvest. would you please introduce the achievements made by your company in the past year?
xie: the achievements of the company in 2010 can be illustrated through a group of figures: still ranking first in asia, the newly installed capacity and holding installed capacity of wind power have reached 2,050mw and 6,560mw respectively; company wide total electricity output have amounted to 21.8 billion kwh with an increase of 24.9%, among which the electricity output of wind power is 10.1 billion kwh and has exceeded the 10 billion kwh milestone; 2,380mw wind power projects have been approved and the newly added reserves of wind power have been 18,260mw; the operating income is rmb14.2 billion yuan, representing a year-on-year increase of 45.9%; the total profit is rmb3.2 billion yuan and ranks first in china guodian corporation, among which the profit attributable to its parent company is rmb2 billion yuan; by the end of last year, the total assets have reached rmb74.6 billion yuan with a year-on-year increase of 58.5%; and the roe has been 9.6%.
cne: as we know, the electricity output of wind power is crucial to the profitability of a wind farm. to our surprise, the 2010 electricity output of wind power of the company has reached 10.1 billion kwh and would you please tell us how to make this amazing achievement?
xie: indeed, compared to installed capacity, only electricity output is the real “way to fortune” and it reflects the health status of a wind farm’s operation. electricity output is also one of the significant indexes of wind power development to be evaluated by the company.
to guarantee the electricity output of each wind farm, the company possesses a full set of management system.
firstly, we have a professional team to measure winds, which is able to obtain correct data of wind resources. at present, we have over 500 wind measurement towers across china so that we can collect the first-hand data of wind resources in each region of the country in time. the site selection of a wind farm may greatly contribute to the increase of a project’s electricity output after the completion of a project.
secondly, we attach great importance to the design optimization, which is the foundation of high quality construction and efficient operation of a project.
the company has two consultant agencies that have the longest and richest industry experience in the country. they are able to promote typical designs in accordance with the four major regions of wind resources. in addition, they expound comparison and selection of multiple solutions concerning key projects including type selection of wind turbines, micro site selection, foundation design, lines layout inside wind farms and substation deployment so as to choose the most optimized scheme.
thirdly, we have implemented the intensive production and operation management, set up the monitoring center of safety production and operation, utilized the management platform of operation data which has been developed independently and centered on the real time monitoring system of production so that it could execute the real time monitoring of the operation of all wind farms of the company. meanwhile we have established the maintenance company and the spare parts center of wind turbines. we have trained a competent and professional maintenance team, procured spare parts in a unified way, reduced maintenance cost and improved maintenance quality so that the utilization rate of wind turbines is higher than the industry average. in 2010, the average utilized hours of the wind turbines in the corporate system have reached 2,217 hours and the average utilization rate of the equipment has been 98.28%, both of which are higher than the national average.
guaranteed by these, our loss is light although at present grid congestion of wind farms is very serious. the wind farms we have currently developed in the low speed and high altitude regions will perform well due to their good transmission conditions.
cne: to a listed company, high increase and profit are sure to be the best return to its shareholders. according to the data you introduced, we can see that the profit of the company has increased substantially compared to 2009. how have you maintained a good profit level of the wind farms?
xie: the profitability of a wind farm should be enhanced through multiple approaches. our operation cost is low. to a wind farm, the equipment cost occupies roughly 70% of its total cost and it can be reduced as much as possible through design optimization and packaged tendering of the main equipments. compared to 2009, the 2010 procurement price of the main equipments has been reduced by 18%.
of course the ipo of the company is also an important factor. the money, raised through ipo, greatly reduced our financial cost. besides we have successfully issued rmb5.6 billion yuan low-cost financing bond so that we have established the advantage of capital cost.
also we have good project foundation. as you know, both our electricity output of wind farms and the utilization hours of equipments are very high. in addition, our development can be carried out in a good order and at a pace suitable for the company because we have a great amount of excellent project reserves.
finally comes the cdm. as we know, to many wind farms, the cdm plays a role to balance profit and loss. 2010 is a tough year for the cdm market, which is full of uncertainties. however, we have overcome many difficulties and made a fairly good achievement. in 2010, we have successfully registered 30 cdm projects which have surpassed the total number of projects registered in the past years. meanwhile, we have got 1.14 million tons of ver emission reduction. in sum, the profit has reached rmb392 million yuan, 86.7% higher than 2009.
cne: 2010 is the last year of “the 11th five-year plan” while 2011 is the beginning year of "the 12th five-year plan". at this transitional moment, would you please say something about the past five years’ rapid development and about the coming five years during which the company might reach to a new high?
xie: we are indeed deeply touched by the past five years and there are many things to be recalled.
the most memorable thing is sure to be the company’s successful ipo in hkse on december 10, 2009, which set several records for the power enterprises in china, such as the largest amount of money raised through overseas ipo and the highest p/e ratio. in addition, it had been the ipo with the highest estimated value in hkse since 2008 as well as the overseas ipo of the state owned enterprise with the highest estimated ipo. the records we have set up are our honors while the exceptional significance of the ipo lies in the fact that it provides us with powerful capital support to our rapid development.
in addition, we have made breakthroughs in offshore wind power projects. on october 20, 2009, the first two sets of 1.5mw wind turbines in rudong offshore (intertidal) pilot wind farm of the company were connected to the grid, which is a zero breakthrough of the global intertidal wind farm. on september 28, 2010, 16 sets of wind turbines of 32mw were completely launched into production. on october 8, 2010, after fierce competition we became the successful bidder of the chartered wind power project, namely the 200mw jiangsu dafeng intertidal wind farm. on december 2, 2010, our 150mw jiangsu rudong offshore demonstration project was approved.
in the past five years, we have implemented the nationwide deployment of wind power. by the end of december 2010, we have 120 holding subsidiaries, among which there are 103 wind power subsidiaries. our business has been carried out in 28 provinces (autonomous regions or municipality directly under the central government). the accumulated wind power reserves have reached 61,000mw and we have set up wind measurement sites in many provinces except sichuan, chongqing, guangxi, hong kong, macao and taiwan. we have established six major bases of wind power with considerable scale in xinjiang, gansu, inner mongolia, hebei, northeast and southeast coastal areas. as a result, our national deployment of wind power development has generally come into being, which is mainly composed of the six major bases of wind power with the complement of the inland wind power.
at the end of 2009, our company set out to develop the overseas market and officially signed the cooperative agreement on the wind power development in south africa with china-africa development fund company limited and mulilo renewable energy limited in south africa. as a result, we became the first power enterprise that has entered international wind power market.
we have experienced a leap-forward development in the recent five years. by the end of 2006, the installed capacity of wind power had exceeded 500mw; by september 2007, it surpassed 1,000mw; by august 2008, it was over 2,000mw; by 2009, it was more than 4,000mw; by 2010, it went beyond 6,000mw and we have always maintained our absolutely leading position in terms of installation scale. in the past five years, our installed capacity of wind power, in average, has increased by 76.2% each year. especially the total newly installed capacities in 2006 and 2007 have respectively surpassed the accumulated totality of the installed capacity in the past years.
in the past five years, both the scale and profit have increased at the same time. the total assets of our company have increased by 9.7 times and the total profit by 7.2 times in the past five years. in 2010 the average capacity of the single set of wind turbines was 1.21mw, which was 2.4 times larger than that in 2005. the utilized rate of wind turbines in the past five years was 97.65% and the utilized hours of the equipments was 2281, both of which were respectively higher than the national average.
the simultaneous increase of scale and profit cannot go without the technical support systems of the company. we have gradually constructed ten major technical service supporting systems of wind power. as a result, we have acquired the unique advantage in the fields of preliminary wind measurement, design consultation, equipment procurement, operation monitoring, maintenance and technological research and development.
in addition to wind power, our company has realized the diversified development in the field of new energy. by the end of december 2010, the holding installed capacity of the company had reached 8,473mw, among which the installed capacity of wind power were 6,556.4mw; coal power 1,875mw; pv power 12mw; tidal power 3.9mw; biomass power 24mw and geothermal power 2mw.
during “the 12th five-year plan”, we will make great effort to develop wind power and build the core competitiveness with the characteristics of the ten major support systems including wind power construction, operation maintenance and relevant technical service. at the same time, developing the inland and offshore wind power projects together, we will focus mainly on the inland projects and speed up the offshore wind power projects as well as consolidate our leading position in the field of offshore wind power in china. it is imperative to accelerate the wind farm development in the low wind speed and high altitude regions, gradually increase the use of multi mw wind turbines so as to promote the upgrading of wind turbines. in terms of wind power installation, it is imperative to strive for 11,800mw by 2012 and rank among the top three in the global wind power industry. by the end of 2015, it is imperative to reach 22,000mw and rank first in the world.
in addition to the great development of wind power, it is imperative to actively develop pv power and do a good job of new energy projects including the preliminary work and technical reserves for the integration of urban buildings and micro-grid demonstration projects. it is imperative to increase the installed capacity of pv power to 800mw by 2015. from 2015 to 2020, the pv power will enter the stage of large-scale commercial development and 2,000mw installed capacity is planned to be launched into production by 2020. it is imperative to promote biomass power stably; actively follow and push forward the development of generation technology of other renewable energy resources including tidal power and geothermal power; ultimately will come into being a new situation that wind power generation plays a dominant role and multiple types of new energy generation develop side by side.
problems and challenges
cne: in the recent years, the global economy has been changing dramatically and what are the features of the global new energy industry?
xie: in the past several years, the global wind power industry has developed at a high speed.
according to the statistics by the global wind energy council (gwec), the newly installed capacity of wind power in 2010 is 35,800mw and the accumulated installed capacity is 1.94 billion mw, representing a 22.5% increase compared to 2009 (1.59 billion mw).
new changes have taken place in the structure of the global wind power industry.
most of the newly installed capacity of wind power in 2010 comes from the rapidly growing chinese market instead of the traditional wind power markets (europe and north america). with its total installed capacity of 42,300mw, the chinese wind power has surpassed the us for the first time and ranked first in the world. the growth of the american and european markets has slowed down. however, the development of the emerging markets including india, brazil, mexico and northern africa has been exceptionally strong.
another concern is that offshore wind power has entered its substantial development stage. represented by the uk, european countries have made substantial progress in the development of offshore wind power. large wind turbines have succeeded in getting off the assembly line; construction technology is relatively mature and the development scope has been extended to the water depth of 50 meters. in terms of the newly installed capacity (9,900mw) in 2010, nearly half has been contributed by offshore wind power projects, mainly including the newly built offshore projects of the uk, denmark and belgium.
in terms of the equipments, wind turbines tend to be larger in scale and more intelligent. the inevitable trend of the international wind power market is that the capacity of a single wind turbine is gradually growing. as to the capacity of a single wind turbine, the main type abroad is 2-3mw while the domestic type is 1.5mw. the average capacity of a single wind turbine in 2010 is about 2mw (1.6mw in 2009). with the development of offshore wind power, the 3-6mw single wind turbine has entered the commercial operation stage.
after it expires, the cdm mechanism might have some uncertainties although it is considered to play a role to balance the profit and loss in wind power projects. in terms of the current idea of electricity pricing, the profit resulted from the cdm projects haven't been considered. however, in the fierce competition of wind power development, many developers consider the profit of cdm projects to be a significant way to cover the losses brought about by the shortcomings including the reliability of resource evaluation, equipment quality and capability of operation maintenance. therefore, the uncertainty of the cdm mechanism after 2012 is sure to greatly influence developer’s decision making.
cne: in your opinion, what are the problems appearing recently in wind power industry?
xie: firstly, grid constraint is the largest challenge currently confronted by wind power development. since 2005, the development speed of the chinese wind power is full of fierce competition and has been far beyond people's expectation. the development plan of wind power has not combined and coordinated well with that of grid. although the grid plan and construction has maintained a fast speed in this period, yet compared to the development speed of wind power, it has been seriously lagged behind. as the scale of wind power construction is growing larger and larger, the transmission of wind power has become a serious problem and wind power congestion has become the norm.
secondly, the order of the wind power market needs to be regulated. in some areas, due to the lack of a unified plan of wind power development, fierce competitions have appeared. influenced by the trend of the domestic wind power --- “give priority to speed and scale instead of electricity output and profit, some wind power developers have tried their best to seize wind power resources regardless of the cost so that project development cost have become higher and higher. however, they have given insufficient attention to the actual operation and profitability of wind farms, which in turn might do harm to the sustainable development of wind power industry.
thirdly, there is the problem of excess production capacity in the manufacture industry of wind power equipments. with the fast development of our wind power industry, the manufacture industry of wind turbines has experienced a rapid expansion. in 2010, the newly installed capacity of wind power has been 18,000mw. the capacity of five enterprises, such as sinovel, jinfeng, dongfang, united power and mingyang, simply can surpass the above capacity.
in addition, international leading manufacturers including vestas (dk), gamesa (es) and ge wind (us) have all established their production bases in china. therefore the market competition is unprecedentedly fierce.
fourthly, the quality of domestic wind power equipments is yet to be tested. in the recent years, a great amount of domestic wind turbines have been exported to the international wind power market. in terms of the utilization rate and electricity generation level of the equipments, there is still certain gap between domestic wind turbines and international famous brands. the rapid expansion of domestic manufacturers of wind power equipments is mostly implemented through the introduction of production license. many new participants of the industry in china started their business in such haste that many problems have arisen, such as homogeneous introduced technologies, low technical level, unstable equipment performance. therefore, the problem that the development of wind power has to face will be the reliable supply of wind power equipments and the increase of maintenance ability.
fifthly, the lack of talents is the key factor that has restrained the core competitiveness of the wind power industry in china. because of the fast development of wind power in china, the industry is in great need of various talents including those concerning design, manufacture, wind resources evaluation, test and verification. meanwhile we haven’t established the long-term strategic mechanism to talent cultivation and introduction. at present only a great minority of higher education institutions have established relevant specialties and many enterprises merely cultivate talents through practice.
sixthly, local protectionism still exists in some regions. because compared to the manufacturers of wind power equipments, wind power development contributes less to the creation of employment opportunities and tax increase, quite a few local governments proposed the idea --- resources exchange market, market promotes development. therefore, wind power developers are required to give priority to the procurement of the local wind turbines or to be introduced in the directly packaged manner with manufacturers, which, to some degree, have resulted in the poor situation of low level and redundant development of the manufacture industry.
lastly, the delayed payment of the renewable energy fund influences the current cash payback. at present, the payment of the subsidy for the price of wind power is usually delayed 6-12 month, which results in a large amount of account receivable. meanwhile it is against the reasonable management of the fund of the enterprise so that it might do harm to its operational profitability.
pilot of new energy industry
cne: to many enterprises that have invested in wind power, your view on this industry plays a significant role. would you please analyze the trend of the chinese wind power industry in the future?
xie: i believe wind power industry will continue to develop at a high speed in the coming years. the chinese government considers the great development of new energy resources as an important countermeasure against climate change and the promotion of saving energy and emission reduction. meanwhile it promises that china will endeavor to lower its carbon dioxide emission per unit of gdp by 40-50% by 2020 compared to the 2005 level, increase the share of non-fossil fuels in primary consumption to around 15% by 2020. at present the competent departments of the country are taking action to solve the development bottleneck, such as the connection of wind power to the grid. it can be predicted that in the coming years, the growth speed of wind power will maintain about 15,000mw each year.
and in the coming years, the manufacture sector of wind power equipments will enter an era of merger and acquisition. because the prospect of the chinese wind power market is widely believed to be bright, many investors flock into the manufacture sector of wind power equipments and this trend has become overheating. according to the statistics, there are nearly 90 manufacturers of whole wind power machine, 50 fan manufacturers, and around 100 manufactures of wind turbine tower. however, we should consider this phenomenon correctly. the present problems, such as poor independent design, low level of after sale service, are those appearing in the development process. at the next stage, for the manufacture sector of wind power equipments, it will come the era that is full of fierce competitions as well as mergers and acquisitions. ultimately 8 to 10 enterprises will be reasonably retained.
the offshore wind power with strong public concern will become the trend of wind power industry in the coming years. during “12th five-year plan”, the country will fortify the development of its offshore wind power. in addition to those projects in jiangsu, it will promote the development of the offshore wind power in hebei, shandong, zhejiang and fujian so that new growing points will appear in wind power industry.
besides, to wind power industry, the future direction can be summed up with “three transitions”, namely transition from the focus of development speed to that of development quality; transition from the priority of installed capacity to that of wind power volume; transition from centralized large-scale development to the combination of large scale development and decentralized development.
cne: as the wind power industry has vigorously developed in the past several years, there are many opportunities and risks. would you please analyze the current opportunities and possible risks of the industry in the future and as a successful entrepreneur, would you like to give some suggestions?
xie: undoubtedly, there are many opportunities for the industry has developed at a high speed. at present, various capitals show their strong interests in new energy industry. besides, the relatively mature technologies and market of wind power are also the reasons that enterprises decide to enter this industry.
in terms of the industry development, we are quite familiar with some aspects, such as to promote the construction of large scale inland projects of wind power, to accelerate the development of the offshore wind power projects, and to enhance the design and manufacture ability of the wind power equipments.
in terms of enterprises and projects, we believe that it is imperative to greatly stress the issues of power transmission and project reserves of wind power projects. the fact that the company has more than 60,000mw project reserves is also an important reason that it has won the favor of many capitals.
after years of accumulation, we have occupied the advantageous position of technology and talents in the field of new energy. we have established ten major supporting systems of technical service including development study of renewable energy resources, preliminary development service of wind power, consultation and design of wind power projects, management of wind power projects and equipment procurement, operation and management of wind farms, maintenance and technical service of wind farms, spare parts management of wind farms, cdm and its development, vocational training for wind power, and public service platform of wind power industry. therefore, the above ten supporting systems of technical service are supposed to be the foundation of the company’s success.（china electric power news，19 march, 2011）