China is preparing to significantly reduce the number of wind energy companies operating in the country by 90%. The government in Beijing has also ordered banks not to extend loans for wind farm projects that are deemed to be unnecessary or of poor quality.

According to information published in the South China Morning Post, the Chinese government has said that it is to cut the number of wind energy companies currently operating in China from 100 to just 12 in response to signs of excess capacity in the sector. Furthermore, the Chinese authorities have called on banks to restrict financing to all but the best wind farm projects.

According to Hu Yueming, chairman of High Speed Transmission Equipment Group that manufactures wind turbine components, the planned reduction is “a correct measure” because the number of turbine manufacturers already exceeds 100, compared with only a handful just a few years ago. “Ten companies could still be too many for China”, says Hu, who emphasised that surplus capacity only exists in turbine manufacturing, not in the gear transmission segment.

“There are only a few companies manufacturing gear transmission systems and these products are still in short supply,” said Hu. According to this businessman, only five companies manufacture gear transmission systems for wind turbines in China, while only a few major companies do so worldwide. High Speed has about 90% of the Chinese market for wind power transmission equipment.

Shu Yinbiao, Executive Vice President of the Chinese State Grid Corporation (the state-run organisation responsible for building and operating power grids) recommended back in August that a wind energy plan was required for the entire country and that national technical standards for renewable energies were needed, including wind and solar energy.

The wind energy sector in China has grown rapidly over the last few years thanks to the support it has received from the Chinese authorities. By 2008, China was the world’s second largest wind market by newly installed capacity and the fourth largest by overall installed capacity. Between 5 GW and 6.5 GW of new capacity was installed and commissioned in 2008, bringing total capacity to 12.5 GW.

Despite the Chinese authorities’ plans to limit the number of wind power companies, they still see wind power as key to economic growth and it is forecast that installed capacity will double once again during 2009.