A Harsh Winter for Sinovel and China's Wind Industry

The Year of the Dragon has gotten off to an inauspicious start for the Chinese wind industry and in particular, Sinovel Wind Group Co. (Shanghai:601558, a.k.a. Sinovel), China's leading wind turbine manufacturer.

In early February, with the official end to the “Spring Festival” only days away, Sinovel reported decidedly chilly preliminary estimates of its FY2011 performance, confirming that Sinovel and indeed the whole Chinese wind industry had, in the words of one Chinese wind industry insider “entered a winter that would be hard to endure”.

Sinovel estimated that its net income for FY2011 declined by more than 50% compared with 2010 profits of 2.856 billion Yuan (~$450 million USD). The decline in profitability of Sinovel in 2011 was attributed to several factors: intense competition in the Chinese wind turbine market, delays in the development of certain wind farm projects and a series of mishaps that adversely affected the grid, which were caused by turbine defects evident during low voltage ride through (LVRT) events.

According to an official with Longyuan Power, the detection of turbine defects, which brought about the low voltage ride through issues has resulted in new rules, which, among other things, require that all wind turbines undergoing upgrades to address this problem obtain the approval of the State Grid Electric Power Research Institute prior to being put back in service. These inspections, being time consuming, have put further pressure on turbine manufacturers. This is an issue that certainly impacts Sinovel because of its large base of installed turbines, and particularly because some of the most prominent incidents occurred at the Gansu Province, Jiuquan wind farm, where Sinovel’s turbines predominate.

In addition to the fiscal and technical challenges Sinovel faces this year, the company also is confronting legal claims of more than $1.2 billion USD and a worldwide public relations blowback as a consequence of the souring of its relationship with AMSC (AMSC), formerly American Superconductor Corporation; indeed Sinovel has become a poster child for U.S. government complaints about Chinese trade practices in discussions with Xi Jinping, China’s incoming leader, who is visiting the U.S. this week.

As previously reported, AMSC has filed for arbitration and also has filed three civil lawsuits in Chinese courts against Sinovel and companies related to Sinovel, alleging breach of contract and intellectual property theft. And while the initial impression is that the Chinese legal system has settled into its role of protecting Sinovel through delay and favoritism, the existence of the litigation has had a decidedly chilling effect on Sinovel’s ambitions to become a serious player worldwide. This was in evidence in November 2011 when Mainstream Renewable Power put on hold its deal for Sinovel to supply it with up to 1 GW of wind turbines.

Sinovel has ridden the wave of rapid wind energy development in China to become the largest producer of wind turbines in China and as a consequence of China’s rapid growth in wind power production, the world’s second largest turbine manufacturer. In 2010 4386 MW worth of Sinovel turbines were installed; in all, China installed a total of 18,928 MW in 2010, which gave Sinovel a 23% market share. The early estimates are that China’s installed wind capacity in 2011 grew by 20,666 MW, but of that total, Sinovel’s installations decreased to 3700 MW and its market share declined to 18%, leading one to speculate that 2010 may have been Sinovel’s high water mark.

(Total installations in 2009 in China were 13,750 MW and Sinovel’s share was 3510 MW or 25.5%; in 2008 wind turbine installations in China totaled 6246 MW and Sinovel’s share was 1403 MW or 22.5%. In 2011 Goldwind Science and Technology’s wind turbine installations totaled 3600MW; in third place was State Power with 3000MW of installations; and in fourth place was Guangdong Province’s Mingyang Wind Power (MY) with 1500MW in installations. The precipitous decline in installations from foreign turbine manufacturers continued in 2011 with the Vestas (VWDRY.PK) being number one among foreign manufacturers with only 660MW, followed by GE (GE) with 400MW.).

Because Sinovel’s rapid growth has been accompanied by a decline in market share amid intense competition, and shares of Sinovel now are selling for 50% of the price they fetched when the dispute with AMSC became public last year, the company enters this year under increased financial pressure; this financial pressure in turn has necessitated Sinovel to return to financial markets to, among other things, supplement its working capital, despite having gone public in a blockbuster IPO in January 2011 (raising the equivalent of nearly $1.5 billion USD on the Shanghai Stock Exchange).

So how does China’s wind industry plan to pass this harsh winter? Of course, simply suffering is a time-honored tradition. One of the most evocative phrases used by the Chinese is “Chi Ku” (to “eat bitterness”) and apparently the Chinese wind industry already is eating a large amount of bitterness.

Next there is hope that the Chinese government will step up the pace of wind turbine installations and on this point there was encouraging news this week when the Chinese government announced the start of the second Offshore Wind Power RFP process for an anticipated total of 1500-2000 MW of installed capacity. At the same time, the State Energy Administration announced its goal of supporting the development of a total of 30,000 MW of offshore wind capacity by 2020; to put this ambitious goal into perspective, presently China has just 1380 MW of offshore wind power installed. Some are estimating that the offshore wind market alone will be worth 100 billion Yuan (~$16 billion USD) through 2020.

Because we have seen this movie played out countless times in a wide array of Chinese industries, we know that the central issue for the Chinese wind industry is how to avoid the cutthroat price competition that juices the sector as it debilitates the industry’s players. There has been a remarkable decline in wind turbine prices over the last four to five years: in 2008 the price of a 1.5-MW wind turbine in China was ~$1.48million USD; by late 2011 the price of a 1.5-MW wind turbine had dropped almost in half to ~$762,000 USD!

The Chinese accomplished this feat of halving the price of a MW of wind power, in large part by rapidly developing an indigenous manufacturing industry that has been able to produce turbines and their components at substantially lower prices. If for nothing else, the Chinese are well known for their penchant to incessantly pressure their suppliers to sell at increasingly uneconomic prices. But here is the interesting point: one of the few categories of suppliers to the wind turbine industry that didn’t make price concessions over the past several years were foreign companies with technology that the Chinese needed but hadn’t been able to replicate indigenously. The prime example of this, of course, is the electrical components and control systems produced by AMSC. A simple “back of the envelope” calculation displays in high relief this conundrum: while the price of Chinese wind turbines and most of their components were declining steadily over the past four to five years, the cost of electrical and control systems supplied by AMSC under its 2008 contract with Sinovel remained constant, so that what accounted for (approximately) 9% of the total cost of a Sinovel wind turbine in 2008, grew to be a 12% item by late 2011!

This dynamic clearly gave Sinovel the incentive (as claimed by AMSC) to steal AMSC’s intellectual property or (as claimed by Sinovel) to develop its own indigenous capability in electrical components and control systems so that Sinovel would be able to reduce the cost of its turbines in this hyper-competitive environment in China today and hopefully halt the slide in its market share.

One somewhat perplexing aspect of this tale is that Sinovel’s relationship with its key technology supplier has become rocky just when the technological requirements that may give Sinovel a competitive edge going forward have grown. With an increasing number of 6-MW turbines, the expected rapid growth of offshore wind farms, and myriad grid connection issues, one would expect that Sinovel might be able to claw its way back up the market share ladder with a superior command of technology. And this is what makes the falling apart of the Sinovel/AMSC relationship mystifying.

Did Sinovel’s chairman, Han Junliang, just spectacularly miscalculate or did he know or believe that Sinovel could keep up with the growing technological requirements that might set Sinovel apart, with or without AMSC? In the glow of its $1.4 billion USD IPO in early 2011, did Sinovel feel at liberty to make off with AMSC’s crown jewels hoping that it could innovate beyond the AMSC technology platform or perhaps hoping that the cost benefits would be enough to keep Sinovel in the game long enough for it to figure out what to do next? Did Han Junliang underestimate how rising competition would affect Sinovel’s profits or is it precisely because he saw that those profits were rapidly shrinking that he felt compelled to lower Sinovel’s costs at the expense of AMSC?

In any event, it remains to be seen how Sinovel will weather the harsh winter that has now beset China’s wind power equipment manufacturing industry. And it will be fascinating to see whether the much anticipated innovation revolution that many insist is imminent in China will arrive in time to benefit Sinovel. In the interim, the best approach for Sinovel may be to settle with AMSC and allow the partnership to resume based on a new paradigm that fairly compensates foreign technology, which in turn allows for a gradually declining return per unit in recognition of the changing economics of the wind turbine industry. Stay tuned.

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Pipelines and Tar Sands: Cure the Disease Not the Symptoms

Treating the Symptom Rather than the Disease

The first issue is to clarify what the pipeline argument is really about. This isn’t really about a pipeline. As one reader pointed out, this is about trying to force Canada to stop developing what is viewed by many as a dirty resource, and that we should “treat the disease.” The addiction metaphor is somewhat overused, but I believe there is a very relevant example that captures my view on the pipeline.

If a person is addicted to a drug, you can treat the addiction, or you can try to eliminate the suppliers of the drug. In the U.S., we have conducted a very long war on drugs that has made the drug trade even more lucrative. Desperate people commit crimes to buy drugs they can’t afford, and drug traffickers commit violent crimes to ensure that those profits keep flowing. And we still have a drug problem.

The point is that as we cut off one supplier, another springs up. We have not cured the disease. However, if demand for drugs fell, the suppliers would go out of business. (It occurs to me that this example will not exactly endear me to oil producers). This is analogous to our dependence on oil. I think protestors who feel that stopping this pipeline will strike a blow for our oil dependence grossly underestimate the lengths that we will go to in order to acquire oil. Thus, I don’t believe stopping the pipeline addresses the root problem, and threatens to worsen some problems that protestors have largely ignored.

Ogallala Aquifier – Red Herring

As noted in the previous essay, I always viewed the issue of the potential for the pipeline to leak and contaminate the Ogallala aquifer as a red herring. Pipelines already crisscross the Ogallala, and farmers dump thousands of tons of herbicides, pesticide, and fertilizers on top of the aquifer every year.

Carbon Bomb is in Asia Pacific

I view the climate change argument of some protestors to be largely misleading. While it is true that development of the tar sands will only further increase global carbon dioxide emissions, I think the characterization of the pipeline as the “fuse to the biggest carbon bomb on the planet” is wrong. It conveys a false impression that snuffing out this fuse will then snuff out that carbon bomb. In fact, as I showed in the previous essay, the real carbon bomb is in Asia Pacific. Relative to the growing coal and oil consumption in the Asia Pacific region, the oil sands development is relatively minor. Thus, my argument here isn’t “Well, since they are burning a lot, we might as well burn a little” — it is rather to correct a misconception about growing global carbon emissions.

Some have mischaracterized my argument as “Since someone is going to burn the oil from the oil sands, it might as well be the U.S.” That’s not it either. It is “As long as we continue to demand oil, we are going to source our oil from somewhere. We should make sure it is from a stable supplier.” I have been crystal clear that I think we should do everything we can to address the demand side of the equation.

Further, demand in the U.S. is declining (admittedly in part due to the economy). But only the most naive among us believes that modern society will be oil-free any time soon. We strive to use less, but if oil supplies fell off a cliff in the next few years, society would collapse. Imagine society with no oil, and you can clearly see that. Imagine society with too little oil too soon, and perhaps the potential implications aren’t fully appreciated.

My View on the Pipeline in a Nutshell

To conclude, it took me a while to even decide how I felt about the pipeline. As one poster noted following my initial essay, I am really laying out arguments against the protests rather than arguments that we need this pipeline. After thinking this over, that’s a fairly accurate assessment. My position isn’t “We really need this pipeline” but rather “What difference does it make?” Protestors thinks it makes a big difference whether it gets built, but I do not. I see a private company wanting to invest billions of dollars to build a pipeline, which will create jobs in a tough economic climate. I don’t think we will consume any more or any less oil because of the pipeline, and I think the arguments against the pipeline are exaggerated.

Cutting off a pipeline does nothing to address our demand for oil, and without addressing that we will simply source the oil from elsewhere (or it will still be transported from the oil sands in a less efficient manner). We will almost certainly source the oil from further afield (hence, more carbon emissions getting it to us) and it may come from places where oil extraction results in even greater environmental devastation, oppressed populations, and enriched dictators.

Oil from unstable regions of the world will put our economies at much greater risk than if we source from a reliable supplier. If on the other hand we address the demand side, development of the oil sands will slow, and we may have a pipeline that is never needed for anything other than an insurance policy (or to displace other unstable suppliers). However, it will have resulted in a multibillion dollar investment in the U.S. by a private company that created jobs that were sorely needed.

This is my opinion based on how I think things will actually play out if the pipeline is or isn’t built. I think the oil will get to market regardless. I could be wrong. There are people that I respect a great deal who disagree. I simply make my best estimate and render an opinion. Then we discuss and debate and perhaps opinions are modified. I would hope those who hold a different opinion will also give some consideration to the possibility that stopping the pipeline will in no way diminish our appetite for oil, and that we will simply continue to source it from unstable regions of the world. Then perhaps we can focus more efforts on the demand side of the equation.

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Pavement Contributes To Poor Air Quality

Sprawl isn't just eating up the countryside—it's also blocking the breezes that would otherwise clear out air pollution. That's according to a new study of Houston from the National Center for Atmospheric Research, to be published in the Journal of Geophysical Research.

Sprawl is first and foremost about pavement leading to all those subdivisions, strip malls and suburbs. That pavement soaks up heat during the day and releases it at night, warming the otherwise cooler nighttime air. It's known as the urban heat island effect.

In Houston, this causes a smaller than usual difference between the temperatures of the land and the sea at night. And that means weaker sea breezes to clear away the smog.

Houston is already fighting an uphill battle against the atmospheric residue of refineries, petrochemical facilities and mile after mile of cars stuck in traffic. What's worse, all those buildings break up whatever breezes there are, further reducing the chances of clearing the air.

The study authors write that “the very existence of the Houston area favors stagnation." Time to pound the pavement—and exchange some for more greenery.

Panasonic Will Build Solar Cell Plant in Malaysia

The Japanese technology company announced last week that it will build a $580 million solar cell plant in Malaysia, according to Reuters report. The company has been attracted overseas by a strong yen, which has made domestic production more costly.

The numbers are quite impressive: the new plant will create 1,500 new jobs and increase by 50 per cent Panasonic’s solar output (to 900 MW). Production is slated to begin in December 2012.

“With environmental awareness increasing globally and introduction of subsidy systems and feed-in tariff schemes in Japan as well as other countries, etc., the solar cell market is predicted to grow further”, the company said in a press statement.

The company said the residential sector is its main target and it expects “robust demand” from it. Competition is fierce in the Japanese solar cell manufacturing sector. Other Japanese solar panel manufacturers include Sharp and Kyocera.

4 Reliable Suppliers Of Alternative Energy

1. Amelot Holdings is a US based company specializing in development of ethanol and biodiesel plants. It establishes relationships between the researchers and suppliers of alternative energy. The company facilitates joint ventures and mergers between the research facilities and the manufacturers of alternative energy. Thus, there is exchange of information and technology which helps to promote the growth of the alternative energy industry.

2. Environmental Power is another alternative energy supplier. It has two subsidiaries namely Microgy and Buzzard Power. Microgy undertakes research and development in the field of alternative energy. It has developed a cost-effective biogas facility by making use of agricultural and plant waste. It focuses on eco-friendly production of renewable energy like biogas to compare with the standards of natural gas. The biogas is used in combustion engines, and for heating homes and offices. Buzzard Power has an 83MW power facility to generate 'green' energy from coal waste.

Environmental Power has been in existence from the year 1982 and has a long history of development in the field of clean energy. The company has developed and operated municipal waste projects and hydroelectric plants and assisted in clean gas generation and energy recovery. It has a team of experts from the agriculture and finance sectors to manage the business and help its growth and expansion.

3. Intrepid Technology and Resources Incorporated (ITR) processes animal waste into natural gas as an alternative energy resource. America's supply of natural gas is depleting. ITR believes that the two billion ton animal waste produced every year can be used to generate natural gas to tide over the deficit. Their 'organic waste digesters' built close to the sites of the organic waste, produce clean methane gas which is a viable option to natural gas. The company is based in Idaho but plans to expand its operations to the whole country.

4. Nathaniel Energy generates energy from waste matter. The company has devised s system known as Total Value Preservation System (TVPS) which sees the potential of waste materials to generate energy. Industrial waste matter which would have otherwise been discarded or destroyed is being put to optimum use to recover the trapped energy. The production costs towards generation of alternative energy are equivalent to the costs incurred by a company to install pollution control systems and preventions. TVPS is an innovative technology which recovers valuable resources that other processes fail to do.

There are many companies such as those listed above, which use innovative technology to augment our diminishing supply of natural resources by adopting environmentally safe methods to generate alternative energy or renewable energy. There is a need to invest in research towards finding alternative sources of energy as a replacement to fossil fuels. The future of the world depends on industries which can help to achieve this goal. The governments of the various countries need to co-operate in terms of exchange of ideas and information to solve the problems of global warming and environmental pollution. Alternative energy suppliers like the above mentioned companies can play a major role in this process and the government can promote these companies by providing them subsidies.

Way Out Alternative Energy Sources

When we think of viable alternative energy sources, we think of solar energy, wind power and even wave power. But have you ever considered the possibility of making energy out of old pills, used diapers and molten salt? Alternative energy from garbage and molten salt sources is no longer stuff of fiction; it has successfully been tried and tested.

Alternative energy prevents waste and emissions

Since companies in the UK have to comply with commercial EPC regulations, alternative energy is not only for bunny huggers; everyone can benefit from producing energy from new sources. The energy needed to power our daily activities can be transferred from almost anything. We are sitting with all this potential energy but without the means to tap into it.

Some innovative scientists and inventors have found ways to convert waste, which is usually difficult to dispose of, into energy and this gives us the possibility of killing two birds with one stone. Not only does this lessen the risk of chemical leakage into water tables and reduces landfill problems, but it also takes the strain off our stocks of fossil fuels and oil.

Use an energy pill

Medication seems one of the most unlikely sources of alternative energy. Expired medication is notoriously difficult to get rid of. If people flush their medication down the toilet, it becomes part of the water system, and if it's thrown away as landfill, the potentially harmful chemicals seep into the soil and eventually water tables. Governments are becoming increasingly concerned about pharmaceutical water pollution, as scientists have found high levels of many drugs in water sources. Some of these are hormone pills, which can cause cancers and animal mutations.

A company in the USA that specialises in the disposal of expired medications sends expired drugs to an energy company that converts waste products into energy. Six and a half million pounds of pills were disposed of in 2006, producing enough energy to power hundreds of homes for over a year.

Fill up the tank with dirty diapers

Another alternative energy company was looking for waste sources that are consistently produced to make diesel fuel from. The answer came in the form of used diapers. The company now transforms 30, 000 tons of diapers into 10, 000 tons of diesel fuel at 50 US cents per liter in a low-emission closed system.

Molten salt versus fossil fuel

We've already looked to the elements, the air, sun and water, for alternative energy sources but a rocket building company and solar energy company in North America thought out of the box and came up with a method of making energy out of molten salt.

Molten salt has commonly been used to make alloys, but analysts say that the idea of combining solar power and molten salts is promising. Solar power is collected by tilting mirrors that direct it onto the molten salt, which is then heated up to over 1000 degrees Fahrenheit; the steam produced is used to drive a turbine. The molten salt can be reused to repeat the process and no emissions are produced.

Drive with drink

Thousands of bottles of smuggled alcohol are confiscated in Sweden each year, and authorities have come up with a brilliant alternative energy use for it - by using alcoholic cocktails as the biogas source to power cars and buses. It seems like a noble use for the large quantity of hard liquor produced for consumption each year.

Alternative energy sources give us a way out of the oil crisis and let us feel all warm and fuzzy inside about saving the environment with renewable energy. However, at the moment, it's difficult to make alternative energy resources accessible to everyone, as new energy systems are expensive to produce.

Nuclear cemetery

As in any process of obtaining energy, it is necessary to use materials that provide a physical and chemical reaction whose energy is then captured by various technologies to generate electricity, and in the case of the Nuclear reactors, generates a large amount of waste that are obviously harmful if that does not properly kept.

Those considered as radioactive waste are usually a group of radioisotopes, elements whose main characteristic is to emit ionizing radiation, that can naturally cause damage to human health and the environment, taking different types and levels of radiation which vary in the periods:

Low activity waste:They are generated by hospitals and industry in general, including also the processing of Nuclear fuel, containing small amounts of radiation of short duration (with a period of 30 years semi-desintegración)Middle activity waste: even though its name suggests not, these wastes contain higher amounts of radioactivity, in some cases requiring a Special protection for storageincluded in this group to the mud, resins and chemicals used in the Nuclear Reactor, so much so as contaminated materials from decommissioning. While having a same period of semi-desintegración of low activity, required to be solidified in concrete or tarWaste of high activity: are those from the operation of the Nuclear reactors, containing by-products of Nuclear fission and the Transuranium elements that are generated at the core of it, being highly radioactive and even possessing high temperature directly.

These residues are derived from 95% of the total radioactivity produced in the process of Nuclear electricity, widely exceeding 30 years for his semi-desintegración.
Among these, stands out the plutonium 240, with 6,600 years; and neptunium 237, with a half-life of 2.130.000 years

As they must assume, each group of nuclear waste will require storage identified for disposal, so tend to locate in the colloquially known as Nuclear cemeteries, which include sites which are carefully kept these materials, previously conditioned according to the type of waste.

Warehouses of low activity: are located on the surface or very shallow, being mainly chosen the Minas Abandonadas, with various barriers and using geologically stable and impervious areas, with all possible security measures.Temporary warehouse: waste of High activity, being used for treatment or recycling of the same, or to achieve their correct isolation, prior to disposal, but they also tend to host materials for less than 100 years.Geological storage: also known as Deep geological storage (AGP) is used to store waste of high activity and deadlines over a thousand years, although they are still in development because of its complexity.Storage submarine: instead of storing beneath the Earth, in this case exploits the Ocean floor, more precisely in the oceanic trenches, where discharges of these materials are carried out from the year 1950.