Focus on getting the market rules right

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Chinese government officials are head down in developing a market framework aimed at ensuring the growth of a healthy wind power development industry. Meantime, the market is being jump started by a series of 100 MW tenders, with the announcement of winners for a further three contracts to join the two already granted due this month

China's draft renewable energy legislation is progressing slowly. Despite widespread enthusiasm among government officials for increasing the country's wind power generation to 20 GW by 2020, getting the rules and regulations into place for creating a thriving wind power development business in China is taking a lot longer than expected. To reach the 20 GW goal requires building half the volume of wind power plant so far installed worldwide. In 2020, that volume will be enough to meet just over 1% of China's electricity demand.

Two drafts for China's Renewable Energy Promotional Act were considered in June by the Environment & Resources Protection Committee (ERPC) of China's National People's Congress (NPC). One was submitted by the State Development & Reform Commission (SDRC), the other by Tsinghua University. Having considered both, ERPC has produced its own version for public comment, basing it largely on the SDRC submission. The Tsinghua version was well designed, but some of the figures it uses call for verification, notes Wang Fengchun, chief of ERPC's Law Division, adding that in comparison, the SDRC version is considered comparatively comprehensive.

Up to now, major obstacles to growth have been the relatively high price of wind generated electricity and the resulting difficulty in selling it to reluctant grid companies. The new law is expected to even up the electricity playing field with its mighty legal hand. The draft assures renewable energy developers of tax breaks, differential fixed prices, and a guarantee that grid companies will buy the electricity. In other countries, these measures have a track record in creating new industry, says SRDC. The draft also introduces a policy of compulsory renewable energy quotas on power companies or consumers and rules that the higher-than-average cost of renewable energy be distributed nationwide.

Lacking specifics

A final version of the law is apparently some way off though. At present, it is still not specific enough for enforcement, says Zhou Fengqi of China Renewable Energy Scale-up Program Management Office, who also heads the advisory team for drawing up the draft law. "The present version is still coarse," says Zhou. "Major issues should be stated with precision."

The head of SDRC's Energy Bureau, Shi Lishan, concedes that the contents of the draft are "general" in terms. "It's difficult to go specific in a law like this. We avoided prescribing a fixed rate for the compulsory quota, for example. We'll do it in the connected "methods for implementation" that would come out later," Shi says.

The draft has now gone to local governments and industry for detailed consultation, with comments due this month. It is expected to be hotly debated at The Third World Wind Energy Conference and Exhibition 2004, being hosted by China in Beijing from October 31. The hope will be that any comments made at the conference can be considered before a further amended draft, planned for submission to the NPC Standing Committee in December, is finalised. China's officials hope a final version of the law can be put to a vote by the NPC next June, but Zhou Fengqi is doubtful that will happen: "Not bad if it could get passed at the end of 2005." Wang agrees: "An optimistic view is that it will be enacted at the end of next year."

Meanwhile, the China Renewable Energy Industry Association, Greenpeace and the European Wind Energy Association (EWEA) are calling on China to adopt a far more ambitious target for wind power of 170 GW by 2020. Launching the Chinese version of Wind Force 12 (WF12) earlier this year at a three day forum in Beijing, they argued that the target is feasible and would result in wind meeting 12% of the country's electricity demand. If the WF12 scenario for world wind power development is achieved, China would host 14.2% of global wind power capacity by 2020. Greenpeace believes that 20 GW of new wind capacity could be installed in Guangdong province alone by 2015. Wind Force 12 is a blueprint for achieving 12% of global electricity supplies from wind power by 2020, published by EWEA and Greenpeace.

It is a "fairy tale" that is coming true in countries like Denmark, which is home to fairy tales, says the introduction to Chinese WF12, referring to the stories written by 19th century Danish author Hans Christian Andersen. But few in China seem convinced. One veteran wind industry observer comments: "The WF12 estimates can be taken as the high-end possibility." Launching the publication, Steven Sawyer of Greenpeace defended WF12's position on China, pointing out that world wind energy growth rates over the past three years have been well above the projection stated in the blueprint's earlier edition, WF10.

Tempered by reality

While Chinese officials acknowledge Sawyer's comments and have openly expressed their "wish" that a 170 GW target could be achieved, enthusiasm is being tempered with perceived reality. The more conservative 20 GW by 2020 target -- and using effective legislation to meet it -- is the prime focus for attention. Indeed, this more cautionary approach fits with the slower than expected growth of China's wind power sector. By the end of 2003 China had 569 MW installed in 36 wind farms, putting the country on the bottom rung of the global top-ten ladder of installed wind power, behind fellow Asian nations India and Japan. The wind industry and China's officials want to do better, but at what they consider a realistic pace.

SDRC is doing its bit beyond producing legislation, putting considerable effort into promoting large scale wind farm projects and encouraging local equipment production. Last year it sponsored the tendering for two 100 MW projects for franchised operation. Although the outcome was controversial (Windpower Monthly, January 2004), SDRC is determined to stick to its competitive tender approach. This year the right of franchised operation will be granted to winning bidders for three further 100 MW wind projects located respectively in Jiangsu, Inner Mongolia and Jilin. Letters of invitation for tendering have been issued and SDRC has accepted eight applications, with more expected. Announcement of the winning bids is due this month.

With China striving to raise its wind capacity to 1200 MW by 2005, 4000 MW by 2010, and 20,000 MW by 2020, SDRC plans to approve some 20 new 100 MW projects in the following few years. Moreover, it has ambitious plans to foster six 1000 MW wind bases across China. These will probably be in Guangdong, Xinjiang, Inner Mongolia, Hebei (including Beijing), Jiangsu and Fujian.

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