Innovation pathways of the Chinese wind power industry Yixin DAI, Yuan ZHOU, Mengyu DING, Di XIA, Lan XUE Presenter: Asst. Prof. ZHOU Yuan School of Public Policy and Management, Tsinghua University Chinese Institute of Engineering Development Strategies 26/06/2014 1 Outline: n Research questions and methodology n Background of China’s wind energy sector n A brief story of innovation process at HT n Impacts of China’s macro-level settings q Market q Technology q Policy: Central and Local n China’s innovation pathways n Two more cases q Goldwind – a lead wind manufacturer in China q Jiuquan wind farm base (Gansu Province) n Implications and discussions 2 Research Questions n “What” Question: What is the innovation path in Chinese wind sector (if it has a different innovation path comparing to other countries)? New Installed and Cumulative Capacity in China after Top 10 Countries by Cumulative Capacity 2000 70000 62364 70000 200% 60000 60000 157% 154% 157% 150% 124% 46919 50000 50000 100% 100% 86% 40000 59% 40000 44733 MW 48% 50% 37% MW 40180 30000 29075 30000 2011 0% 21673 20000 -7% 27215 15880 2010 -47% 20000 10000 -50% 20676 10000 67376640 6018 5365 0 -100% 13066 4083 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 57975660 5204 40083702 new capacity 41.7 66.3 98.3 196.9 506.9 1287.6 3311.3 6153.7 13803.2 18928 17630.9 0 cumelative capacity 381.2 447.5 545.8 742.7 1249.6 2537.2 5848.6 12002.225805.4 44733.4 62364.3 growth rate -47% 59% 48% 100% 157% 154% 157% 86% 124% 37% -7% Research Questions n “Why” Question: What are the determinants of China wind energy innovation path? China’s The specifics innovation of China’s capacity / market? strategy of firms? International China’s knowledge development transfer / strategy and innovation policy network? support? Methodology / Data n Snowball Interviews: q Two rounds of interviews, including: n Domestic wind manufacture firms n Wind farms n Local governments n Central government (NDRC) n Research institutes, experts (i.e. from Grid) n Foreign wind manufacture firm n Policy analysis: q Summarize wind policies with trend analysis, including n 41 policies with regarding to Chinese wind development n 11 policies to encourage the wind industry to development, while 29 with regarding to FIT and renewable energy subsidy. Goldwind Gansu Jiuquan Windfarm Outline: n Research questions and methodology n Background of China’s wind energy sector n A brief story of innovation process at HT n Impacts of China’s macro-level settings q Market q Technology q Policy: Central and Local n China’s innovation pathways n Two more cases q Goldwind – a lead wind manufacturer in China q Jiuquan wind farm base (Gansu Province) n Implications and discussions 10 Background n Wind energy industry grows rapidly in both China and world-wide. The Development of Power Industry 250 238 140.00% 127% 199.52 120.00% 200 112% 106% 106%159.2 100.00% 150 120.7 85% 80.00% 65% 94.1 60.00% 100 74.1 62.36 59.1 40.00% 23.9 39.3 47.6 35% 47.733 50 29% 31.1 25.8 31% 17.4 21% 10.2 13.6 19.60% 17% 12.153 20.00% 0.224 0.268 0.346 0.40216% 0.469 0.567 0.764 1.26 2.599 5.906 0 0.00% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Global China Growth of Global Growth of China 11 Background n Top 10 Countries by Cumulative Capacity 70000 62364 60000 50000 46919 44733 40000 40180 MW 2011 29075 30000 2010 27215 21673 20000 15880 20676 10000 13066 6737 6640 6018 5365 4083 5797 5660 5204 4008 3702 0 China US Germany Spain India Italy France UK Cnanada Portugal 12 Background n Rapid growth of China wind turbine market Boom of the market size Rise of market share of domestic firms CWEA(2011) Shi (2005, 2006, 2007, 2008, 2009), Li (2011) 13 Background n The growing number of patent applications in China 800 0.9 700 0.8 600 0.7 800 0.6 0.9 500 700 0.8 600 0.7 800 0.9 0.5 0.6 400 500 0.8 700 0.5 400 0.7 0.4 600 0.4 300 300 0.6 500 0.3 0.3 0.5 400 200 0.2 200 0.4 300 100 0.2 0.1 0.3 0 0 200 100 0.2 0.1 100 2002 2003 2004 2005 0.1 2006 2007 2008 2009 2010 0 0 0 0 cumulative patent applications of main foreign companies 2002 2003 2004 2005 2006 2007 2008 2009 2010 2002 2003 2004 2005 2006 cumulative patent applications of main domestic companies2007 2008 2009 2010 cumulative patent applications of main foreign companies growth rate of patent application of main foreign companies cumulative patent applications of main domestic companies growth rate of patent application of main domestic companies growth rate of patent application of main cumulative patent applications of main foreign companies foreign companies growth rate of patent application of main domestic companies Growing patent grants(cumulative) Cumulativecumulative patent applications of main domestic companies patent applications of maingrowth rate of patent application of main companies in foreign companies China growth rate of patent application of main domestic companies 14 Outline: n Research questions and methodology n Background of China’s wind energy sector n A brief story of innovation process at HT n Impacts of China’s macro-level settings q Market q Technology q Policy: Central and Local n China’s innovation pathways n Two more cases q Goldwind – a lead wind manufacturer in China q Jiuquan wind farm base (Gansu Province) n Implications and discussions 15 A story on HT n Established in 2001 n The biggest wind turbine blade provider in China n 40% market share in China n Exportation to United States, Japan, South-Africa, etc. Main product 16 Blade is a key component of wind turbine system, accounting for 22.2% of the total cost Value chain of wind 电 网公 energy industry 司 Electronic R&D grid Wind Core Equipment farm materials manufacture Tower Blade Gear box Generator Bearing… System integration 26.3% 22.2% 12.9% 3.44% 2.57% 17 Blade: technology intensive and high quality requirements n large size: e.g. blade: 37.5m long, 5t weigh n high precision: weight tolerance within 5%, gravity centre tolerance within 120 mm n tough working condition (especially in China): q Low extreme temperature：-30℃ ( -50℃ in China) q Violent wind (sand storm in China) q Rain and snow ( Acid rain in China) 18 Growth steps of HT Step 4 International cooperation Step 3 Capabilities building Step 2 Reverse engineering Step 1 Incubation & Transformation 19 Step 1 Before 2000: Incubation & Transformation From a military firm (soviet-union style ) to a high-tech new venture n Parent company: an aviation propeller manufacturer n Technological foundations inherited from parent company n Technological experts transferred from parent company q E.g. Chief engineer of HT: former R&D team leader and associate chief engineer of the parent company 20 Step 2 Before 2005: Start from R&D and imitation n Joint-venture with U.S. established in 2001 n Acquired the know-how of 600 kW blade through reverse engineering and learn-by-doing. n Contribution for the industry: Low cost strategy q No more monopoly of foreign companies q Significant price decrease from 1.3 million CNY to 0.5~0.8 million CNY per pair. 21 Step 3: Technology transfer and localization n Foreign company started to transfer their technology to Chinese company q e.g. CTC transfer their blade design to HT n Technology transfer also enabled the boom of blade manufacturing companies, under the boomed market q e.g. 2 blade companies to 70 companies q China’s wind energy concession project since 2004 n Competition caused the quality differentiation q e.g. 50% basic material cost off by cultivating two major suppliers from Germany and China 22 Step 3: Technology transfer and localization Strategy shift from cost leadership to technology differentiation n Technology improvement according to Chinese specific working conditions q e.g. low extreme temperature decreased from -30℃ to -50℃ n Technology breakthrough addressing the common problems of turbines q e.g. patent of ”structural damper of wind turbine blade” n Vertical integration of the value chain q e.g. 50% basic material cost off by cultivating two major suppliers from Germany and China 23 Step 4: international cooperation From contractual research to acquisition n Contractual Research q Partnership with a German company on MW blade research q Close partnership with a Holland company on blade design n Acquisition for stronger R&D q Acquired the Holland company for blade design capability enhancement n M&A opportunities q A world famous wind turbine manufacturer CTC from Netherland is approaching to HT, exploring the possibility of acquisition. 24 Technology roadmap of HT 25 WHY？ n HT transforms from a military firm to the biggest wind blade provider in China in less than 10 years. q What are the key driven factors of the growth? q What are the roles of market, industrial technology and policy through the development process? 26 What are the key driven factors? Cooperaon with many universi-es, Baoding Huiyang aviaon like Beihang Ver-cal integraon The development propeller factory university、North of key materials of 750kw China electric power university industry- Internal Military Vercal International university Background integraon Acquisition factors collaboration Reverse engineering Capabilities building International cooperation External Market Industrial factors Gov.