China pauses to take stock and plan ahead

Last year was another good year for wind power development in China. The country's new installed capacity of 19GW -- almost half of the new wind installed globally in 2010 -- secured its position as the world's leading wind player. With the market in the US affected by both the global financial crisis and the shale-gas boom, China has become the driving force of the global wind market.

Grid problems...making China reassess approach to wind
Grid problems...making China reassess approach to wind

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The wind-power-base programme is still the main area for onshore development. This initiative was established in 2008, setting out seven wind complexes to be established that each exceed 10GW (see table). The province of Shandong is set to become the eighth wind-power base, with 10GW planned, and the total capacity of the wind bases should exceed 138GW by 2020.

Offshore development kicked off in China in 2010 with the 100MW Shanghai Donghai Daqiao East Sea Bridge project, and the first offshore request for tenders took place for four projects totalling 100MW.

Chinese manufacturers continue to feature among the world’s leaders. Sinovel, Goldwind and Dongfang Electric have moved up the global top ten, and United Power joined at number ten this year.

Alarm bells ringing

Yet, despite all the strengths, industry experts have started to feel some cold air that signals dramatic changes in the coming years.

Grid issues have never been easy for the Chinese wind sector. The resource-rich areas are in the north and west, while the load centres are located in the eastern coastal area. The mismatch between supply and demand creates a huge challenge for transmission, made worse when the northern and western wind bases integrate high volumes of wind into the system. The situation is most serious in Inner Mongolia, where the grid is independent and the interconnection to the provinces to the east, the Huabei region, is weak.

Chinese grid companies’ inexperience in the challenges of dealing with wind power’s variability contributes to the grid challenge. The absence of a power market makes it difficult to balance the interests of the different sources of generation. An underdeveloped wind-forecast system adds more uncertainties.

The lack of flexibility in the power grid significantly hinders wind development and power curtailment is a common practice. In the first four months of 2011, 16% of wind-produced electricity from wind-power operator Longyuan was curtailed on the grid — in Inner Mongolia the figure was as high as 40%.

The transmission companies — mostly state-owned monopolies — put all responsibility on to the wind farms and turbine manufacturers, making reliability of the turbine the target of any dispute. In February and again in April, several incidents at the Gansu Jiuquan, caused by a cable that short-circuited, led to hundreds of wind turbines tripping off the grid. The grid companies blamed the turbines for not having low-voltage ride-through (LVRT) functions, while the manufacturers claimed different problems. While some machines in the area do not have LVRT, the real reason for the massive wind-turbine trip off the grid in early 2011 was a device at the substation that created an ultra-high voltage after a drop in voltage.

These incidents, the most serious in recent years, led to discussions about both turbine quality and wind farm management as short circuiting of cables is seen to be the result of fast construction without concern for safety and quality control. Central government called for project construction to be suspended and the LVRT function for all turbines to be tested.
These incidents have exposed the various technical problems presented by the wind-power-base projects, such as the best grid technology design for such a high concentration of wind farms. While these will take time to review, the rapid development of wind in China is being questioned for the first time.

Exploring new areas

Against the background of grid constraints, the government is looking at new areas where they can feed wind power into the grid more easily — low wind-speed zones and offshore.

Development of low-speed zones in the south and east, which are close to load centres, is being written into the government’s 12th Five Year Plan for renewable energy (2011-2015), currently being drafted. These so-called distributed wind-energy projects will not be as large as the wind-base projects. Manufacturers are also moving towards turbines with long rotor blades to increase output in low-speed areas.

The five-year plan also has a tentative offshore wind development target of 5GW by 2015 and 30GW by 2020.

China has several small scale inter-tidal projects — near-shore projects installed in waters less than five metres deep. These include the 6MW Jiangsu Xiangshui and the 6MW Shandong Rongcheng project, as well as the 30MW Rudong demonstration project hosted by Longyuan, China’s largest wind-farm developer. Rudong is testing nine models of offshore wind turbines from eight — mostly domestic — manufactures. 

In early 2010, the National Energy Administration, also known as the National Energy Bureau (NEB), and the State Oceanic Administration (SOA) jointly issued interim rules for offshore project development. These stipulate that new offshore projects be put out to tender. In May 2010, bids were requested for four projects totalling 1GW, all in Jiangsu province — two inter-tidal and two offshore projects. Tariffs range from CNY 0.62 to CNY 0.74 ($0.010-0.012) per kilowatt hour compared to onshore tariffs of CNY 0.51-0.64/kWh. The winning bids were all by state-owned utilities, as the rule stipulates that only Chinese companies can participate in the tender. Turbines will be supplied by Sinovel (3MW), Goldwind (2.5MW) and Shanghai Electric (3.6MW). Further requests for bids are planned in the second half of this year, totalling 200MW. 

China’s move into offshore development is not without challenges, however. Conflicts with other marine economic activity forced a change of location for the four sites chosen in last year’s offshore tenders. In July this year, the NEB and SOA issued a new policy stipulating that offshore projects should be at least 10 kilometres from the shore, in waters no less than 10 metres deep. This new rule aims to avoid conflicts of interest with other marine business such as fishing. It will, however, limit the development of inter-tidal projects, which are taking place mainly in Jiangsu and Shangdong provinces.

Low tariffs are also a concern in China’s new offshore development, reminiscent of the first round of onshore concession projects in 2003, where the wind tariff from the tender once fell as low as CNY 0.32/kWh.

The government introduced the tender process partly to drive the tariff to a reasonable level. However, the result has been intense competition on tariffs. The short history of Chinese onshore wind requests for bids has taught us that without specific adjustments to the rules, the economically non-viable tariffs will not benefit the industry in the long run.

Fierce competition in manufacturing    

Wind-turbine prices in China are at a record low, reaching CNY 3.5 million ($549,000) per megawatt during a recent bid for wind-base equipment. This makes it even harder for smaller manufacturers to survive.  

For the first time, China has experienced difficulty with project finance. Investment decisions in Chinese banks are guided heavily by government policy and, this year, when wind development is facing various challenges and the government is slowing development to improve planning and review, the banks take this as a negative signal and tighten up on wind projects.

It seems the time has come for some real changes. China’s wind development over the past four years has amazed even the most optimistic observers, but this high-speed progress is not without negative impacts. The industry needs to slow down a bit to reflect on both the experiences and lessons to be learned — something that is now happening. This does not mean that the wind sector will stagnate. On the contrary, it is still the most important sector in China’s stride towards clean-energy development, which is vital for both energy security and climate change.  

Liming Qiao is China director of the Global Wind Energy Council

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