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China - Testing times ahead with more balanced growth

CHINA: The Chinese wind-power market faces a tough year as the industry gets to grips with new government requirements. Though growth slowed in 2011, the market still performed very strongly, with over 15GW of newly installed capacity. Industry officials expect the wind industry to continue to lead the world in growth in 2012 as the government counts on the technology to raise the nation's consumption of renewable energy.

Under the 12th five-year development plan for renewable energies, China will maintain an average of 20% annual compound growth, installing 15-20GW each year, to meet the 2015 target of 100GW grid-connected installed capacity. The main aim for 2012 is to improve the quality of the industry and explore distributed wind power and offshore wind as the country's best sites on land have already been taken.

Officials say the priority is to curb the dizzy speed of development in order to improve the quality of construction, an emphasis that emerged in the second half of 2011, following an unprecedented outbreak of serious accidents in wind farms, in addition to the long-term grid-access problem.

In the first eight months of 2011, China had 193 grid-disconnections in wind farms, 2.4 times as many as in 2010. They included 12 serious wind-turbine breakdowns, each cutting over 500MW from the grid. The absence of low-voltage ride-through capacity in wind turbines was blamed for the disconnections.

Other problems included the burning of turbine engine rooms and the collapse of towers.

In August the State Electricity Regulatory Commission launched a nationwide inspection on 360 wind projects with access to the grid and 80 under-construction, equal to some 78% of China's installed capacity. It found 1,700 problems relating to turbine quality, wind-farm design and construction, safety management and grid connection.

Better control

Against this backdrop, the National Energy Bureau (NEB) tightened wind-power management. In August, it issued 18 technical standards covering all aspects of large-scale wind-farm construction. It also withdrew the authority of provincial governments to examine and approve wind farms smaller than 50MW. It expects this to restrict new projects being launched blindly, which leads to large numbers of turbines lying idle.

In the same month, NEB announced the first batch of wind projects, totalling 28.8GW, to 29 provinces for the 12th five-year plan. And in January this year, NEB head Liu Tienan said that China would soon start construction on its second instalment of wind-power projects for the 2011-15 period, totalling 15-18GW. Projects that are not part of the two groups will not be approved and will not be connected to the grid or receive feed-in tariff subsidies from the national renewable-energy development fund.

This subsidy is generated by a fund collected from electric power users. In December, it was doubled to CNY 0.008/kWh. The annual total from the charge may amount to CNY 20 billion nationwide.

Overcoming grid bottleneck

The NEB has also completed the framework of the quota system on wind power, which is likely to be implemented this year, to overcome the grid-access bottleneck. Although there was a big increase in the installed capacity in 2011, China's wind-power generation undershot the year's target due to the long-standing headache that much of the power generated is unable to get connected to the grid, said Shi Lishan, deputy director of the renewable-energy department of NEB.

In 2011, China's wind turbines generated 48% more power than in 2010. While this is a slowdown on the 81% increase in 2010, the 2011 figure represents 1.6% of China's total power generation for that year. By 2015, China hopes that wind power will account for 3% of its total energy generation.

Of China's 54GW cumulative installed capacity at the end of 2011, only about two thirds was connected to the grid. To slow down the grid-access problem, the country is developing distributed wind-power projects. These are different from the eight large 10GW-level wind-power bases planned in the north and east of the country, which send wind power over long distances on high-voltage transmission lines. Distributed wind farms are connected to low-voltage grids, with 110kV, 66kV or lower transformer substations, to serve local power users.

Local benefit

A distributed wind farm will be under 50MW to ensure that all the power is purchased while maintaining grid safety, given the variable nature of wind power. China will develop 23GW of distributed wind power by 2015.

NEB has issued guidance for development and construction of distributed wind-power projects to promote and regulate the industry. NEB says it will grant the right of approving distributed wind farms to local governments, encourage them to make pilots first, and then make comprehensive plans to gradually expand the scale of development.

Distributed wind farms will largely be based in inland areas of low wind speeds or high altitudes. These exploitable areas, including Anhui, Hubei, Fujian and Yunnan provinces, account for 68% of Chinese wind-power resources. They are located near electricity users.

So far, China's distributed wind farms are negligible compared with the large-scale projects in the north. But leading power companies are ready to have a try.

Huaneng Renewables has constructed a 9MW pilot project in Dingbian, Shaanxi province, connecting six turbines to a local 10kV rural grid. Datang Renewables has planned a few pilot projects in Fujian and Zhejiang provinces. Longyuan Power, China Wind Power and Huadian Renewables are reserving the right to use land in Anhui, Hunan, Yunnan and Guizhou provinces for distributed wind farms. Industry officials say constructing distributed wind farms in low wind-speed areas mean 5% higher turbine costs than large-scale wind farms. But they can offset the extra costs by tapping better road transportation conditions, construction environments and internal control.

NEB is drafting measures and implementation rules and seeking to amend the electricity law to support distributed energy programmes. Some central and eastern provinces are set to make programmes for distributed projects. Guizhou, Hunan and Henan provinces have finished their draft plans.

The 23GW installation target has drawn interest from wind-turbine makers, as the projects will create CNY 240 billion of business opportunity in five years, says Zhang Shumin, chief engineer of Guodian Group.

Sinovel, Goldwind, XEMC and Mingyang have developed tailor-made turbines, modifying components and control strategies to meet technical standards.

Offshore zeal

Another promising sector is offshore wind, although it is still in the early stages due to complex operating environments for the sites, high technological requirements and construction difficulties.

The NEB target is for 5GW offshore projects to be built for China by 2015 - 5% of its total installed capacity. In 2010, the first pilot offshore wind farm, of 102MW, went into commercial operation in Shanghai, and four contracts were awarded through public tender to power companies to build 1GW offshore and inter-tidal concession projects, to be completed in four years.

In December, the Rudong inter-tidal pilot wind farm went into operation in east China's Jiangsu province, so far the largest offshore wind farm in the country, at 131MW installed capacity. And this year, offshore development will increase. A second request for tenders for offshore projects, totalling 2GW, may be issued in the first half of this year.

The second pilot offshore wind farm off Shanghai is being developed in the Lingang sea area, using 17 Sinovel 6MW turbines. It will be completed in 2014.

North China's Hebei has passed a feasibility report on an offshore farm in Bohai Sea comprising 100 offshore turbines of 3MW, with construction to complete in 2015.

South China's Guangdong province plans to build a 198MW offshore wind farm in the Guishan waters of Zhuhai city this year and connect it to the grid in 2014.

According to the provincial offshore wind-power development plan, Guangdong expects to start constructing up to four 1GW offshore wind farms in 2015. Under the support of the national government, coastal provinces of Jiangsu, Zhejiang, Shandong and Fujian, and Shanghai city have submitted their offshore plans. Across China 24 offshore wind projects, totalling 25GW, are planned.

Viability

Some industry officials have poured cold water on the zeal, doubting whether the public-tender winners could make profits from winning bids offering prices that are lower than production costs. Prices of the four offshore wind farms of Jiangsu range from CNY 0.7-0.8/kWh. Feed-in tariffs should be over CNY 1.2/kWh to yield reasonable investment incomes, according to the Chinese Renewable Energy Industries Association.

Zhang said: "The bid-winning companies are in a dilemma in purchasing equipment. If they apply imported equipment, the prices are high. They cannot recover the construction costs with such low tender-winning feed-in tariffs. If they use common domestic equipment, they will meet higher accident rates and offshore maintenance will be expensive."

The 5GW installed capacity for 2015 means market opportunities worth CNY 80 billion, industry officials say. Like the distributed energy projects, this lucrative offshore market has also attracted turbine makers. In October, Sinovel installed its 6MW offshore turbine in Sheyang county, Jiangsu Province. In January, Guodian United Power announced its 6MW prototype. Goldwind expects to install a 6MW prototype in June this year. Other leading Chinese wind-turbine makers, including Shanghai Electric, Goldwind, and Chongqing Haizhuang are also developing 5MW or 6MW turbines.

Despite moves towards offshore, turbine manufacturers are still relying more on onshore projects for profit. However, last year tighter policy and ferocious market competition led to a sharp decline in profits, a trend predicted to continue this year and possibly for the next three years. China has the manufacturing capacity to produce 35GW of wind turbines a year between some 80 turbine makers. But the Chinese domestic market can consume only about 15GW turbines a year over the next five years.

Looking abroad

With surplus domestic production capacity, Chinese wind-turbine manufacturers are looking abroad. But on the world market, Chinese wind turbines are quoted 20-30% lower than foreign counterparts in unit prices. More supply deals were signed with foreign countries in 2011 than the total sum from 2007 to 2010, according to CWEA, and this is due to accelerate in 2012. Goldwind has over 300MW of turbine sales and project acquisitions in the Americas, Australia, Europe and Africa. Chinese wind-farm developers, including Longyuan,Three Gorges Group and Datang, have also developed wind sites in other countries with Chinese turbines.

Meanwhile, foreign turbine makers are staging a comeback. In late January, Danish Vestas signed an agreement to provide 27 units of tailor-made V100-1.8MW turbines, with a total capacity of 48.6MW to a Datang Renewables wind farm in Hubei, in order to tap the low wind-speed areas. Last year, Shanghai Electric and German Siemens signed a joint venture to supply Siemens blades to the Chinese market and Longyuan handed Siemens its first ever offshore turbine order in China, 21 units of SWT-2.3MW turbines, for the Rudong inter-tidal project. Gamesa said he hoped to introduce the company's upcoming offshore wind turbine, the G11X 5MW, to China within the next two years. The company opened its sixth manufacturing plant in Tianjin city in November as part of its aim to expand market share in the country. The assembly plant takes Gamesa's capacity in China to 1GW.

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