Wood Mackenzie: China’s wind energy sector faces impact due to the coronavirus

The new coronavirus outbreak could have a significant impact on the wind energy industry in China, according to research by Wood Mackenzie.

In a statement Monday, the research and consultancy firm said the virus — officially known as COVID-19 — had “brought much of China’s wind turbine component production to a standstill in recent weeks.”

While Hubei province — where the outbreak is thought to have originated — had “limited production capacity,” Wood Mackenzie noted that both quarantine and travel restriction measures would “impact an already tight supply situation for key components.”

Wood Mackenzie said this represented “bad news” for wind markets in China and the U.S. — which sources wind turbine parts from China — where developers are trying to finish projects by the end of this year in order to be eligible for subsidies from the government.

“Due to an already tight supply of key components such as turbine blades and main bearings before the COVID-19 outbreak, first-quarter production delays have already reduced annual output of those components by about 10%,” Xiaoyang Li, a senior consultant at Wood Mackenzie, said in a statement.

As of February 16, there had been 70,548 confirmed cases of the coronavirus in China, according to its National Health Commission. More than 1,700 people have died there, authorities say.

Wood Mackenzie’s Li stated that if the outbreak was brought under control in the next few months, components without pre-existing bottlenecks, like converters and generators, should be able to recover from delays in the first quarter.

“In a best-case scenario, the epidemic is contained and production resumes by the end of March,” Li added. “In a bear-case, the epidemic could continue to impact the supply chain well into the middle of the year.”

“Based on these two possibilities, we estimate production delays across the wind turbine supply chain will result in a 10%-50% decrease in 2020 wind installations in China, compared to our Q4 (fourth-quarter) 2019 wind power outlook, which was at 28 gigawatts (GW) capacity.”

China is a wind energy powerhouse. According to the Global Wind Energy Council, it installed 20.2 GW of onshore wind and 1.6 GW of offshore wind in 2018. These figures equate to global market shares of 44% and 37%.

Outside of the Chinese market, Wood Mackenzie said that the “greatest concern” lay in the U.S., which it described as “already struggling with a myriad of supply bottlenecks.”

There, 6 GW of installations aiming for a 2020 commercial operation day had been identified as being “at-risk” before the coronavirus outbreak, Wood Mackenzie noted, needing exemptions from the Internal Revenue Service to “maintain access to 100% value of the Production Tax Credit.” This number was now “likely” to increase, the firm added.

Source: CNBC

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