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China

China

China loan condition complaints

China is in a hurry to boost wind energy, but is frustrated by the high cost of imported technology and by conditions placed on foreign government loans. Han Aixing, a director in the Ministry of Construction with responsibility for renewables, claims these frustrations are a "big obstacle" to wind development. "Many foreign organisations are willing to extend loans, but they have commercial aims. We must buy a certain country's technology and in our view the price is too high and the technology is not the most advanced," says Han.

"Foreign investment [in wind energy] has slowed down," he continues. Furthermore, foreign companies "are very slow and cannot satisfy our needs. They promise things but it takes many years. They are rich and not in a hurry. China is poor and in a hurry."

China was at one time aiming for an installed wind energy generating capacity of 1000 MW by year 2000, but officials now admit this target can not be met. Installed capacity connected to the grid was only 215 MW in 1998, plus 15 MW in stand alone generating power, according to a recent article in the official monthly journal Zhongguo Nengyuan (Energy of China). The article complains of wind energy's high cost, quoting this as CNY 9,000-10,000 ($1090-$1200) per installed kilowatt of capacity, or over $0.07/kWh, 20-30% above the world average, says the journal. China's grid connected wind power capacity today is about 250 MW.

TOO EXPENSIVE

A separate article in Zhongguo Nengyuan notes that 99% of China's wind energy plant is imported, and that over 90% of the cost is covered by international loans. Denmark is by far the biggest exporter of wind equipment to China, accounting for 55% of the total.

The journal calls for the development of a domestic wind industry, stating that it would cost $600 million to increase wind generating capacity to the target of 1000 MW and that China cannot afford to spend such a huge sum on imported equipment. "The development of this industry cannot for ever rely on imported technology and designs, so only the development of a domestic industry must be the essential means towards the long term healthy development of wind energy," the journal states. But it notes that this will not be easy, as interest costs on domestic loans are high, and in practice are often used for obtaining foreign exchange for imported equipment.

But despite the problems, wind energy is continuing to expand in China. In June the World Bank announced a $100 million loan and a $35 million Global Environmental Facility Grant to boost wind and solar. This will include the installation and operation of 190 MW of grid connected wind farms in four provinces (Windpower Monthly, July 1999). The power purchase agreements are intended to pave the way for private sector participation in future wind projects.

The World Bank notes that China accounts for 10% of global greenhouse gas emissions from energy use and that rapid rates of economic growth will add to this share. So despite the current problems, China, has little choice but to expand its use of renewables if it is to play its part in combating global warming.

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