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Market Status: China - Breakneck expansion on land and sea

CHINA: Only three years ago, China's total installed wind power capacity was 5GW. The country's enthusiasm for wind last year alone drove it to install around 12GW of new capacity, more than any other country that year.

With total capacity of about 24GW, the country currently ranks behind only the US and Germany. It was a landmark year in other ways as well: 2009 saw the introduction of improved mandated power purchase prices for wind and other policy support. Three wind turbines by manufacturer Goldwind were installed in Minnesota, becoming the first Chinese models to go up on US soil. Meantime, several companies are planning to list shares to fund expansion.

In 2010, China will likely install as much as 10GW more wind capacity, according to the Chinese Wind Energy Association, which at the time of going to press was still preparing exact 2009 figures. Expectations are that China will kick off nearly 380 large wind power projects this year, comprising total investment of CNY 300 billion ($43 billion). Some of the funds will go to boosting connections between wind farms and the electricity grid - a crucial step in a market where a quarter of wind capacity remains offline. More than 200GW of wind projects are planned in the longer term. There are already orders out for over 20GW of wind turbines with top Chinese suppliers Sinovel, Goldwind and Dongfang.

The rapid progress is the result of years of supportive policy. In 2006, the country's Renewable Energy Law came into effect, followed by a raft of measures in 2007 that set mandatory market share of electricity from renewables. In 2008, the Wind Base initiative, establishing seven wind projects exceeding 10GW each, was released as a means of achieving a target of 100GW by 2020 - a goal widely expected to rise to 150GW (Winpow Monthly Special Report, October 2009).

In July, China gave the sector yet another boost, improving fixed prices for electricity generated from onshore wind farms built after August 1, 2009. Prices fall into four categories according to wind resource and project construction conditions, ranging from CNY 0.51/kWh ($0.075/kWh) in the windiest regions to CNY 0.61/kWh ($0.089/kWh) in the areas with relatively little wind. These were a step up from the earlier prices of CNY 0.38-0.52/kWh ($0.055-0.076/kWh) (Winpow Monthly, December 2009).

China's pursuit of wind extends offshore. The first three 3MW turbines of China's first large-scale offshore wind project have been linked to the local power grid. It is the first big step towards what the government says is between 750-900GW of offshore wind capacity potential. The turbines, part of developer Shanghai Dong Hai Wind Power's 102MW Donghai Bridge Offshore Wind Farm off Shanghai City, have just passed a test trial and installation of the remaining 31 turbines was to wrap up in February, according to Sinovel.

In December, Zhang Guobao, director of China's National Energy Board, said China will accelerate offshore wind development in 2010. Last month, the China National Offshore Oil Corporation (CNOOC) held an expert panel meeting in Weihai, in east China's Shandong Province, to study the feasibility of constructing a 100MW offshore wind farm project nearby. Though not yet officially approved by the government, the project is expected to start construction in February 2011 for completion the following December, say officials from the Weihai Municipal Development and Reform Committee. Back in 2007, CNOOC erected a 1.5MW turbine from which it supplied electricity to an offshore platform in its oil field in the Bohai Bay, some 60 kilometres from the coast. It was the first of its kind in the country.

Sour note

Among the few disappointments for the wind sector in 2009 was a government announcement in October that it would restrain funding or approval for projects in some industries, including wind, to guard against creating excess capacity. Developers slammed the decision as misguided, arguing that wind was not overheating at all (Winpow Monthly, December 2009). All the same, that was followed in December by an amendment to the Renewable Energy Law tightening obligations on utilities to buy all power generated from renewable energy sources. It will also fund renewable energy research and new grid capacity. The law goes into force on April 1.

Chinese manufacturers also grumbled late last year when the government abolished a requirement that 70% of all turbine components be manufactured domestically. "On one hand, some businesses from Europe and the United States believe the 70% localisation policy has prevented foreign enterprises from competing fairly in the Chinese market," says Shi Pengfei, vice president of Chinese Wind Energy Association. "On the other hand, the policy was established to protect domestic wind turbine producers edging into the wind turbine market as beginners." Whatever the rights and wrongs of the policy, Shi says that it did at least help cultivate China's domestic market.

They still have their work cut out. "Wind turbines in commercialised production in the country are basically produced with technologies introduced from abroad," says Shi Lishan, deputy director of the Department of New Energy Sources and Renewable Energy Sources. Key components such as principal axis bearings, gearbox bearings, converters and turbine control systems are procured from abroad.

Goldwind, however, is establishing a reputation for independent technology. In 2008, it bought a 70% stake in German turbine design firm Vensys to acquire know-how. Now, Goldwind calls itself the first Chinese manufacturer able to independently develop wind turbines. It has shifted emphasis from sales of 750kW turbines to 1.5MW units and is developing 2.5MW and 3MW machines. Its three 1.5MW permanent-magnetic direct-drive turbines are turning at the Uilk wind farm at Pipestone, Minnesota. The company, which floated shares on the Shenzhen stock exchange in 2007, now plans to be listed on the Hong Kong stock exchange to finance global expansion.

Top Chinese rival Sinovel is also gazing beyond the country's borders. Late last year, it described plans for broad global marketing channels and partnerships to construct overseas factories and research and development (R&D) centres. Foreign sales could eventually comprise as much as 40% of total revenue (Winpow Monthly, October 2009).

Sinovel also plans to tap more into China's offshore wind initiative. The company is building an offshore wind R&D centre at its industrial park in Yancheng, east China's Jiangsu Province. In January this year, it also began construction of a factory to assemble 5MW wind turbines, which it claims to be China's largest and most advanced turbine factory. When completed at the end of this year, the facility, which is also in Yancheng, will have an annual production capacity of 600MW of turbines, designed largely for offshore.

In February, Huayi Electric Apparatus, a relative newcomer to the wind sector, announced plans to raise CNY 460 million ($67 million) to develop 3MW offshore turbines. In doing so, it joins Sinovel, Goldwind and fellow wind turbine suppliers XEMC, Shanghai Electric, Dongfang Electric Corporation and Changzhen Electric in targeting the offshore market. On land and at sea, China is taking the world by storm.

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