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News Analysis: Subsidies - Concerns grow over oversupply in China

Fears are growing that China may not be able to afford to buy power from a new generation of mega wind farms.

By 2020, seven 10GW-class plants are due to come online, helping to bring the country's total installed capacity to a potential 150GW.

An industry expert, declining to be identified, confirms that in Gansu, thermal power is selling to the grid at CNY 0.28/kWh ($0.042/kWh), while wind is selling at CNY 0.52/kWh ($0.077/kWh). The expert says the divergence means central government is massively subsidising wind over thermal, creating an unsustainably expensive market for wind power. This giant subsidy is likely to pose an unbearable burden on central government coffers, say experts.

Shi Pengfei, vice-president of the China Wind Energy Association, says the government should now consider halting construction of the 10GW Jiuquan wind power base.

"Otherwise, there will be huge waste," he says, "if a great lot of turbines cannot send power to the grid."

Li Zhi, chief of Northern United Power Huiteng Xile wind farm, built in 1996 in Inner Mongolia with 132 turbines, warns that the problem of oversupply is already biting. "Some days, we cannot send one kilowatt hour of wind power to the grid," Li complains.

Shi proposes revising evaluating procedures so state-owned power companies are rated by government on the actual renewable power they supply to the grid, rather than by their installed capacity. He says: "If we evaluate the performances of businesses on the basis of generated electric power, state-owned power companies investing in wind farm construction and local governments offering the companies preferential policies (see previous story) will be less inclined to invest so heavily in unneeded wind farms."

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