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China's wind power industry is facing a challenging period, with several issues emerging that are not favorable for its long-term growth. According to Zhu Boyu, an analyst from Bloomberg New Energy Finance, new investments in the sector have seen a significant decline since the fourth quarter of 2012, signaling that wind power capacity may not rebound sharply after 2014.
In 2012, wind power overtook nuclear energy to become China’s third-largest energy source, following coal and hydropower. However, despite rapid development driven by policy support and global trends, the industry has entered a phase of adjustment in recent years. This has exposed underlying challenges, particularly in terms of funding pressures along the supply chain.
Financing remains one of the most critical hurdles for wind power companies. While major state-owned enterprises often enjoy easier access to capital due to their strong financial positions, smaller or private firms face much greater difficulties. For example, Datang Group New Energy, although it has slowed down in recent years, attributes its challenges more to regional power restrictions rather than financing constraints.
Similarly, leading companies like Goldwind benefit from strong backing from state banks, even during periods of tight monetary policy. However, this kind of support is not available to most private players. Han Kerui, who handles sales and financing at a major firm, noted that many private companies struggle to secure loans, as banks are hesitant to fund them. "Since 2011, it has become increasingly difficult to assist small private clients. If we lend money, it’s usually no more than 20% of the project cost."
Financial institutions also face their own challenges. With a less optimistic market environment, they are cautious about lending, especially to riskier sectors like wind power. Additionally, issues such as wind curtailment and safety risks have made some lenders more hesitant, further complicating the financing landscape.
The International Finance Corporation (IFC), part of the World Bank group, has supported a large wind project in Gansu. However, the project has faced delays and underperformance due to factors like inconsistent subsidies and weather conditions. As Dana Younger, an IFC consultant, explained, these challenges highlight the need for better risk management and clearer policy support.
Insurance services for wind power in China are still lagging behind the industry’s growth. State Grid Property Insurance, which handles the largest power business in the country, has yet to develop specific insurance products for wind projects. The low premium rates make it unattractive for insurers, resulting in a mismatch between the needs of the wind power sector and available insurance solutions.
Chen Xin, CEO of the company’s heavy customer service division, pointed out that domestic insurers lack a deep understanding of wind turbine technology and associated risks. In 2011 alone, there were over 30 turbine failures, and the current premiums collected are far from sufficient to cover such losses.
Zhu Yuyu from Bloomberg New Energy Finance emphasized that in more developed markets, financing is typically tied to the project itself rather than the company. This approach ensures that the stability of future cash flows is considered, aligning risks and returns more effectively. He suggested that improving transparency and communication could help create a more efficient and timely financing environment for the wind power sector in China.