Ernst & Young has an interesting interview with He Yaozu, China Region CEO, Suzlon Energy .
What is Suzlon’s competitive advantage and what are its future plans in the Chinese market?
Suzlon’s operations in China feature a good combination of strengths from both developed and developing worlds.
Compared with international players, Suzlon comes from the developing world, and is therefore more familiar with China’s general market and more adaptable to its local market.
Compared with local players, our products are embedded with cutting-edge wind technology. With R&D centers in Germany, Denmark, The Netherlands and India, we offer reliable, cost-effective machines that help wind farm owners maximize profit.
Suzlon China will focus on three future priorities:
* Further reduce costs by increasing localization of our supply chain, to offer a realistic “China price,” while maintaining our international quality standards.
* Add increasing value to our customers’ business – providing Chinese customers with full turnkey solutions for overseas projects.
* Actively explore overseas sales opportunities and turn China into a global export base.
There have been continuous price drops in this market; how will Suzlon manage this?
Competition has intensified and WTG prices have been driven down dramatically. Price per kW cannot reflect the overall cost of wind farm construction and operation. It is the WTG life cycle cost (per kWh) that really determines a wind farm’s profitability, and Suzlon’s turbines are highly competitive in these terms.
In addition, such rapid price reductions are unsustainable. With installation of over 18GW in 2010, China’s wind equipment manufacturing has already reached an enormous scale, making further cost cutting through economies of scale very difficult. Further price drops must rely on real improvements in technology and production techniques, which cannot happen overnight.
We have employed a range of measures in response to the drops; core being the three priorities I mentioned earlier.
What is your forecast for China’s future wind energy policies?
With the 15% non-fossil energy target set for 2020, wind energy will remain the focus of renewable energy development. China will remain the largest wind energy market globally, but growth in terms of installation rate will slow.
With increasing concern about quality from the Government and its gradual introduction of relevant industry standards, the focus of the Chinese wind energy industry will switch from quantity to quality, changing the market’s competitive landscape. We can expect concentration to increase, and companies lacking real competitive strengths to be driven out.
Apart from offshore and large onshore turbines, what do you think will be the area of growth in the Chinese market?
Small turbines for scattered household use may be another growth area, but for this to start developing, the grid needs to be more flexible (ie, so households are able to buy electricity from the grid when their turbines cannot provide enough, and sell excess back). Solutions will require changes to both policy frameworks and grid systems.