Number of producers has increased from six in 2004 to more than 70 today

Businessman Xu Zhichun's plans were thrown up in the air when demand for the wind turbine blades his company made suddenly crashed.

The vice-general manager of Tianjin Dongqi Wind Turbine Blade Engineering Co discovered few any longer wanted the 37.5-meter blades that were popular two or three years ago.

"We were caught unprepared," said Xu. "The blades do not work as well as we thought, and we had to step up production of longer blades."

Now the company makes blades that are 40.3 meters long and production rates have been increased to meet demand. "We produced one blade in 36 hours in the past but now we have to make one per day," said an employee in the workshop.

Tianjin Dongqi is a unit under Dongfang Electric Corp (DEC), a major State-owned power equipment manufacturing company. The company is one among many blade-making enterprises, which invested a lot in the 37.5-meter blades but are now faced with a change in demand.

The problem can be traced back to 2007 and 2008 when companies rushed into the wind power industry.

"Many companies didn't have a deep understanding of wind power at that time," said Xu. "And the government, although it drew up favorable policies, didn't come out with a clear plan for the industry."

There were only six wind turbine makers in 2004 across the country. That number increased by more than 10 times to more than 70 last year. Similarly, installed wind power capacity was 760 megawatts (MW) by the end of 2004, and it surged to over 20,000 MW in 2009, making China the third largest wind power market in the world.

Inadequate research and lack of planning has led the industry to expand dramatically but at the expense of quality. Take turbine blades for example. About 70 percent of the blades in the market are 37.5 meters, which are not long enough to generate anticipated electricity levels, according to Xu.

"This echoes what most people call overcapacity," he said. "It's actually excess capacity of products that don't fit the market well."

Radical expansion has brought another problem: makers of both turbines and parts have seen their profits slump in recent years.

"It's like taking a roller coaster: We are falling all the way from the top to the bottom," said Xu.

Prices of turbine blades have decreased by about one third compared with those in 2004. Profit margins in some companies were 25 to 30 percent in 2004, but now the figures are just about 10 percent, said an industry insider.

"We are not losing money, but not making much profit, either," said Liang Xiaobing, deputy- general manager of Dongfang Electric (Tianjin) Wind Power Technology Co, a turbine-making unit under DEC.

For a 1.5-MW wind power turbine, the price for every kilowatt was around 6,000 yuan at the beginning of 2009, but now it has declined to below 5,000 yuan, said Liang. The decrease in price in the wind power industry is partly due to the fact that some companies, especially small ones, sell their products cheaply at the expense of quality, said some insiders.