Market Status: China - Taking the lead but still a long way to go

CHINA: China now leads the world in wind and fully intends to maintain its stride.

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While its biggest rival in wind energy, the US, stands criticised of letting support for renewables falter, China is seeing years of strong policy support for wind pay off in terms of record installed wind generation capacity. The country is now determined to sort out two of the biggest obstacles to continued growth: grid capacity bottlenecks and problems with turbine quality.

China built 16GW of wind power generation in 2010, bringing cumulative wind capacity to 41.8GW - the highest in the world. But amid the fanfare it is easy to overlook the fact that capacity actually linked to the grid still lags behind the US. Assuming it can meet its grid and quality objectives, China now wants to push cumulative online capacity to 55GW.

China also wants to boost the portion of total primary energy sources represented by non-fossil fuels from 9% in 2009 - the most recent data available - to 11.4% in 2015 and 15% in 2020. Hydro will comprise half of this, but the government wants to expand the role of wind. National Energy Bureau (NEB) officials have submitted a plan to the state council, China's cabinet, to increase investment in "emerging energy" by CNY 5 trillion ($762.25 billion) over the next ten years. This includes renewables but also nuclear energy. Investment in wind alone will total CNY 1.5 trillion.

The main driving force behind Chinese wind last year was the implementation in April of the amended renewable energy law, originally passed in 2005. The law instructs the NEB to work with China's electric power regulatory authority to map out concrete measures, ensuring that the state grid buys all electric power generated from renewables and prioritises wind-generated power over thermal sources.

The amended law requires big power utilities to source 3% of electricity from non-hydro renewables in 2010, a proportion that must rise to 8% by 2020. It also establishes a fund to finance renewables development.

In October, the state council listed non-fossil energy sources among China's seven top-priority industries, further broadening channels of support for wind.

The year 2010 was also marked by a policy shift away from quantity of wind generation capacity towards quality. Having witnessed a series of turbine collapses, the NEB launched a nationwide investigation into the quality of Chinese wind turbines in late October. The probe concluded that poor installation procedures and substandard components were behind many incidents. Affected suppliers include Sinovel, Dongfang Electric, Guodian United Power and Zhejiang Yunda.

Qin Haiyan, secretary general of the China Wind Energy Association, partly blames a surplus in production capacity for the problems. Competition for orders, he says, had compelled manufacturers to undercut each other so far on price that problems with quality became inevitable. Shi Lishan, deputy director at the NEB's new and renewable energy department, says: "The key point here is to face the problem and solve it."

Chinese turbine costs have reduced dramatically

Industry standard

With that objective in mind, China - which has more than 80 wind turbine manufacturers - has established a national industrial standard for the sector with six main areas of focus (see box, below). Industry officials expect a shakeup across wind turbine equipment manufacturers that will result in the emergence of giant suppliers able to compete on the global stage.

China hopes the added rigour will earn it clout. The International Electrotechnical Commission (IEC) - the international non-governmental body that publishes standards for electrical technologies - has long welcomed input from traditional wind-sector leaders such as Denmark and Spain. But China feels it has been ignored and that many standards are unsuited to Chinese conditions. This is seen to hamper exports of Chinese wind turbine technology.

The surge of new Chinese wind capacity in 2010 largely occurred across its large-scale projects. Big achievements were accompanied by big problems that prompted some politicians to ask whether the country was moving too fast.

Land of giants

November brought the completion of stage one of the 12.71GW wind project in Jiuquan, in the north-western province of Gansu. The same day, the province kicked off the second stage, a further 8GW to be completed in five years.

Yet although the Jiuquan project proceeds at full throttle, drawing billions in taxes to the local government, most of its wind turbines have not generated electricity - let alone economic benefits. In the Guazhou wind power zone, one of the two main parts of the Jiuquan project, only about 20% of all turbines installed are connected to the grid. The rest stand motionless.

Officials complain that their country's wind power business has evolved in a haphazard fashion. Wind farms are constructed first and the power grid is planned later. When turbines are installed too quickly, the power grid cannot help but fall behind.

In September, Jiuquan put 750kV power transmission lines into service. But even these have been unable to accommodate all the generation from the more than 5GW new wind capacity installed by 2010. With capacity expected to top 12GW by 2015, even bigger bottlenecks are in store.

New horizons

Such headaches notwithstanding, as China rang in the lunar year of the rabbit last month, some in the wind sector insisted that growth will continue by leaps and bounds in the 12 months ahead.

Many experts are less confident - and the numbers bear them out. In 2010, the Chinese wind power industry grew 68% over the previous year - a figure that, however impressive, ended a five-year run in which installed wind capacity doubled annually. Officials predict smaller growth this year, mainly due to the shortage of access to the grid. How much smaller depends on whether China rolls out plenty of grid technology or gets bogged down.

As the pace of domestic growth slows, overseas markets will assume greater importance to Chinese wind turbine suppliers seeking higher profits and a more diversified clientele. But as confident as the biggest suppliers are on their home turf, they are largely ignorant of the basic rules of investment in overseas markets.

Despite a trade standoff brewing over Chinese wind subsidies, there are signs that Washington is not totally opposed to buying from China. In December, the US Department of Energy and US Department of Commerce co-sponsored a forum in Beijing to educate Chinese wind farm operators and turbine suppliers about policies, financing, laws and taxation abroad.

Whatever disagreements US politicians may have with their Chinese counterparts, when it comes to wind turbines themselves, it seems that the price may just be right.

- Planning and design
- Construction and installation
- Maintenance and management
- Grid access technologies
- Turbine equipment
- Electricity conditioning equipment

Stiff competition
Wind turbine prices in China

Supplier Price (CNY/kW)* Model (MW)
Goldwind 3,850 1.5
Sinovel 3,983 1.5
Shanghai Electric 3,899 2
Dongfang Electric 4,036 2.5
Mingyang 4,100 3
* CNY 1,000 = $152

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