BEIJING, May 13 (Reuters) - China's drive into wind power has been a boon to the young industry, but foreign turbine makers say China has stacked the odds so firmly against them that its own clean energy goals could be in jeopardy.
China's wind power generation has doubled in the last year and is expected to surpass nuclear within a decade as China seeks to wean itself off cheap but dirty coal. [ID:nPEK336151]
But Beijing is making it impossible for foreigners to compete for "national-level concession projects" aimed at lifting wind's share of the overall energy mix, said Paulo Fernando Soares, China chief executive of India's Suzlon Energy (SUZL.BO).
Those projects, usually snapped up by domestic turbine producers like Shenzhen-listed Goldwind (002202.SZ), will make up about 65 percent of China's expanded wind-power market, leaving foreign firms like Suzlon, Spain's Gamesa GAM.MC and Denmark's Vestas (VWS.CO) to compete for the remaining 35 percent.
"I cannot say it's deliberate, but the facts show that no turbine suppliers from international companies established here have been selected," Soares told Reuters on the sidelines of a Euromoney renewable energy forum in Beijing.
"Obviously, the government can argue that the prices of international companies are too high compared to local companies. But nowhere in the world are projects evaluated on a yuan per kilowatt basis, because that takes away your performance, your quality, so nobody does it and no banker does it.
"But in China they use the argument that turbine prices are coming down, but they forget to mention that there are issues with locally made turbines regarding performance, maintenance."
The government seemed more concerned with meeting capacity targets than ensuring the actual flow of power, he said, with the result that some turbines were installed in a way that would make it impossible to generate the maximum theoretical capacity.
An executive at another foreign turbine manufacturer said Chinese turbines were far below international standards.
"Domestic producers are in a bubble and they're not forced to compete or innovate and they can't compete overseas right now."
Goldwind Chief Financial Officer Yu Danke rejected Soares' remarks and said there was plenty of room for foreign manufacturers in the Chinese wind power market.
"The policies are designed to level the playing field. My personal view is the policies are affirmative action," he said. "The customer has various needs -- lower end, higher end. Some focus on costs, some on service. You have to fit your products to customer needs."
The foreign executive, who asked that his company not be named because of the sensitivity of the issue, said overseas firms found it hard to keep up with all the regulatory changes. Frustrated by the moving goalposts, many were starting to reconsider their strategy, he said.
"Whenever foreign companies meet the conditions set by the state, the conditions are raised again," he said. "If we knew in 2006 what we know now in 2009, we would not have agreed to such big expansion plans."
Other rules that appear to work against foreign firms include a ban on turbines with capacity of less than 1 megawatt.
"That decision was crazy. No other country has ever done that," he said.
"I fail to understand the benefit of this restriction, how a (bigger) turbine is better than one that is proven, working in tough conditions in the U.S. and Europe and which is fully certified ... I fail to understand what benefit this restrictive policy brings to the industry."
But it does help domestic suppliers to compete.
Foreign-made 850 KW turbines are 10-15 percent pricier than Chinese versions, but the gap jumps to about 30 percent for turbines of 2 MW.
China also insists 70 percent of the components for every turbine installed must come from China. To meet that goal, Suzlon has a plant in Tianjin and Vestas created its own Chinese supply chain, although it has said it would have used Chinese suppliers anyway. [ID:nPEK44264]
Despite the frustrations, there is only one China.
"There are things we don't like but the market is too significant," said Soares. "We may have lost market share but we have increased our market participation in terms of absolute numbers. We are happy with what we have got." ($1=6.822 Yuan) (Editing by Ian Geoghegan)