China raises target ahead of new law -- Market set for takeoff

China's wind power target has been raised from 20 GW to 30 GW by 2020, it was announced last month at the Beijing International Renewable Energy Conference 2005. The new goal, revealed by Zhang Guobao of the National Development & Reform Commission (NDRC), comes as the country prepares for its Renewable Energy Law to take effect from January 1. The law will require that all wind power is taken onto the electricity network and bought for a fixed premium price.

With its abundant wind resources, China has the potential to become the world's biggest wind market, says global environment group Greenpeace. The government expects the new law -- which now aims for renewable energy to supply 10% of China's electricity by 2010, equivalent to 60 GW, and 15% by 2020 -- will encourage rapid market growth. By the end of 2004, China's wind capacity was 760 MW across 43 wind farms, putting the country tenth in the world rankings, but far off its 5000 MW by 2010 target.

The 30 GW target for 2020 still falls short of the 40 GW that could be delivered, say Greenpeace and the European Wind Energy Association (EWEA). They want to see 100 GW by 2030 and 400 GW by 2050.

Details of the new renewables law are still to be confirmed, however, and some observers are advising caution. Since the law was passed in February, investments in wind power have accelerated. Today there are around 30 domestic or joint venture companies active in China's wind market and, in recent months, some Chinese companies have shown what NDRC's Zhang Guobao says is extraordinary enthusiasm for renewables, jumping into wind without careful consideration or preparation.

Little profits

"Decisions should be made cautiously and progress achieved step by step," he says. Analysts agree. "Companies must be prepared to get little profits in the initial couple of years," says one. "Their wind farms are most likely to run at a deficit. It takes courage, patience, as well as financial strength to play the wind game in this country."

Meanwhile, China Daily is reporting that the government has drafted its new pricing system for electricity from renewable sources to accompany the renewables law. Quoting a senior official within the NDRC, Wang Zhongying, it suggests the prices will vary from region to region, ranging from CNY 0.49/kWh to a healthy CNY 0.90/kWh ($0.06-0.11/kWh). Further tax incentives for wind power, including a reduction in sales tax, are also being considered, says China Daily.

NDRC declines to confirm the newspaper's report. It says it is consulting the electricity industry on the proposals and hopes to have the pricing system in place come January 1. It refuses to comment further.