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China

More complexes of ten gigawatt each -- China wind power doubled in 2008

China's voracious demand for energy drove it to more than double the country's wind power capacity in 2008, an increase of about 6.3 GW, taking the national total to close to 12.2 GW by the end of the year. The country long ago overshot its own target, set in 2007, for wind capacity of 5 GW by 2010 and some in the sector believe it can surpass 120 MW by 2020. A continued emphasis on building a domestic wind turbine industry enabled more than 20 Chinese manufacturers to edge into the sector last year, bringing the number serving the home market to more than 70.

China's National Energy Administration (NEA) can take credit for the rapid pace of development. Soon after its creation back in June, the agency started mapping out construction of six 10 GW wind power complexes in the windy regions of Inner Mongolia, Gansu and Xinjiang, Hebei and Jiangsu. In August, the regional government of Gansu called for proposals for 3.8 GW of turbines for the initial 5.2 GW first stage of the 10 GW Jiuquan complex in the region's north-west. China's three top wind turbine manufacturers -- Goldwind, Sinovel and Dongfang Steam Turbine Works -- won most of the concession. Construction has begun, with completion due by year-end 2010.

Many other giant projects are in the works. In October, NEA began drawing up blueprints for a 20 GW wind farm in Hami prefecture, while planning and construction of other 10 GW complexes has begun elsewhere in Inner Mongolia, as well as Hebei and Jiangsu. Some 7 GW is planned offshore.

No slowdown

Shi Pengfei of the Chinese Wind Energy Association (CWEA) doubts the global credit crunch will derail the rapid growth. "Despite side effects in other sectors, the ongoing global financial crisis will provide opportunity for development to the Chinese wind power sector," he says. As the crisis drags out, he continues, major Chinese wind power developers such as Huaneng Group, Datang, Huadian and Guodian will be kept strong with low interest loans from banks, further fanning growth of installed capacity. For domestic turbine manufacturers, an associated decline in raw material prices will lower the cost of production, while competition with foreign rivals on the home turf will sharpen business acumen, he says. "This will considerably alleviate equipment shortages, shorten wind farm construction cycles, eliminate inferior domestic manufacturers and contribute to the healthy development of the country's wind power sector," says Shi.

Domestic manufacturers must not only compete with foreign companies, but closely study them as well, says Zhang Xiliang, of Tsinghua University. "All the technologies essential for wind power generation remain in foreign hands," says Zhang. "China's strategy is to learn the technologies through purchasing foreign equipment."

Top Chinese turbine manufacturer Goldwind says that although 80% of its products are domestically made, the core technologies come from abroad. It admits that the industry has been troubled by equipment shortages and quality problems. Locally developed turbines have failed quality inspections. "It is common to see power plant waiting for qualified equipment. Some projects can be postponed for as long as 18 months," says CWEA's Qin Haiyan

To cultivate the home industry, the government requires that 70% of all wind plant components be made locally. In 2007, domestic manufacturers supplied 56% of turbines for installations in China, overtaking foreign suppliers for the first time. Last year, the government ordered refunds of value-added tax and import duties on core wind power turbine parts and cancelled its tariff-free policy on imports of wind turbines with rated capacities of less than 2.5 MW. And in August, it introduced a subsidy of CNY 600/kW ($80/kW) for every 1 MW or greater wind turbine produced by manufacturers, up to 50 turbines. Companies assembling the finished turbine product must share half of the money with manufacturers of key components. Proceeds are to be used by manufacturers primarily for research and development of new products.

Tender care

Subsidies have not been able to prevent hardship across the sector, though. To abide by a government mandate that renewable resources, including hydropower, provide at least 5% of total energy consumption by 2010, national power companies say they have no choice but to lose money. "Profit has emerged as the biggest problem for the wind power industry," says Qin. Even with government subsidies, most of the more than one hundred wind farms nationwide have suffered losses.

Reform has improved conditions somewhat. Under a system set up by the government's National Development and Reform Commission (NDRC) in 2003, wind development rights and prices are decided through competitive bidding for central government contracts. For years, development concessions were awarded to bidders offering the lowest price for wind power. The fifth round of wind tenders, in November 2007, changed the criteria, giving preference to bids closest to the average value of all bidding prices -- slightly raising power purchase prices for all wind plant across China in 2008. Shi welcomes the change, saying, "Compared with those of previous concession projects, these on-grid prices are more reasonable, as they take into account local wind power resources, transportation conditions and equipment and construction costs."

A 2008 NDRC survey of power purchase prices at 72 wind farms of less than 50 MW built in agreement with regional rather than central authorities in six provinces revealed a range of CNY 0.51-0.61/kWh ($0.075-0.089/kWh), compared to the average price of CNY 0.35/kWh ($0.05/kWh) for power from thermal plant. To offset the price differences in support of wind power, China last year levied CNY 0.002/kWh ($0.0003/kWh) on electricity consumers.

Big grids

Another pressing issue is that transmission capacity in most of China's windy regions in the north and north-west is not enough to transport wind power to load centres. The lack of transmission capacity stands in stark contrast to NEA's ambition to not only construct large swathes of wind farms but also integrate that capacity into what it refers to as big power grids.

"China's wind farms cannot follow the European pattern of connecting to power grids separately and having electricity consumed in local areas," says Shi. "They have to deliver wind power in long-distance, high-voltage transmission lines. This is a great challenge for network operators." In a first step to meeting that challenge, the State Grid Corporation of China last March began construction of a 750 kV transmission line connecting Lanzou and Guazhou by way of Jiuquan, along the Hexi Corridor in north-west China. With the transmission line completed by the end of 2009, clean wind power generated in the 10 GW wind farm in Jiuquan will be transmitted to power grids in the north and east.

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