On the warm sandy shores of Red Bay in China's southern province of Guangdong, a 16.5 MW wind farm is due for completion this month after five years in planning. Consisting of 25 Vestas 660 kW turbines, it is the first phase of a wind plant which expects to grow by another 20 turbines once the existing 20 MW substation is upgraded to 40 MW. The plant is linked to the provincial grid by a 110 kV line of 36 MW.
The site, with average 7.6 m/s wind speeds at the 40 metre hub height of the Vestas turbines, lies 30 kilometres south east of Shanwei city, with Guangzhou and Hong Kong 300 kilometres to the west and the province's largest wind farm, on Nan'ao Island, about the same distance to the east.
The Red Bay project has some historical significance in China's wind development. It was the last wind farm approved before the door closed on the old wind development mechanism, which guaranteed a power purchase price on a "cost plus reasonable profit" basis. Prices paid to wind reached up to CNY 1.2/kWh (EUR 0.15/kWh) -- a level so high that the State Development Planning Commission (SDPC) feared a loss of price control. As a result, no wind projects have been approved since 2000 and further approvals have been put on hold until the new support mechanisms are established. No firm timeline for that has been announced.
The Red Bay wind farm is set up as a holding company between subsidiaries of the Guangdong provincial SDPC and the local Shanwei Power Company. Low interest loans, tied to the use of Danish technology, were supplied by Denmark. The total project cost of CNY 130 million (EUR 16.1 million) puts the investment just under the cap of CNY 8000 per installed kilowatt (EUR 985/kW) set by the Guangdong SDPC.
Guangdong province's operational wind plant before Red Bay was about 70 MW with most of this capacity (56.9 MW) installed on Nan'ao Island between 1991-2000 in several projects containing some 50 Nordex and NEG Micon (then Nordtank) turbines of 130-250 kW, ten GE wind (then Zond) 550 kW turbines, 40 NEG Micon 600 kW machines, and most recently 18 NEG Micon 750 kW units. The only other wind farm in Guangdong, a 13.2 MW plant of 600 kW Nordex turbines, was installed at Hui Lai in 1999, along the coast between Red Bay and Nan'ao Island.
This is sluggish wind power development for a province that the Guangdong Techno-Economic Development Research Centre (ETE) estimates has at least 6000 MW of accessible land based wind potential. Guangdong also has some of the highest power prices in the country, which makes wind prices seem more attractive. ETE predicts that larger projects in the pipeline, together with clearer support mechanisms, will see up to 300 MW in Guangdong in the next five years (table)
Three systems
Large offshore wind projects are also at the early stages of identifying sites and initiating monitoring projects, with the potential for individual wind farms of several hundred MW along Guangdong's coast. So when will the wind rush begin? China's support for the wind power industry has been strong in principle for several years, but a co-ordinated effective strategy has so far been elusive for sparking investment in wind development at a scale that matches the country's huge potential.
Three serious proposals are on the table, however. The first, a mandatory market share (MMS) concept, was included in China's tenth five year plan from 2001-2006. But it has not been confirmed whether the MMS scope should include large hydro or other cleaner fuels and technologies like natural gas and fuel cells. ETE is not optimistic about the MMS potential to promote major wind power development.
The franchise, or concession, model (Windpower Monthly, March 2002), in which developers bid for projects of pre-determined scale and location, has already been discussed publicly between the SDPC and international developers. Guangdong's second wind farm at Hui Lai is one potential concession area. On the positive side, franchises could streamline the planning process and drive down costs with economies of scale from large projects. But the lack of clear legal enforcement of the contract and the inflexibility of pre-determined locations are concerns raised by some developers. The franchise model may not fire up the market if initial winning bids are predatory bids for market entry that subsequently set an unrealistic low benchmark for future projects.
Third, a system of fixed wind power purchase prices is also under SDPC consideration. This concept would set the wind tariff for the first few thousand "full-load hours" of operation each year, based on the project's investment per kilowatt installed and its allowable rate of return. Any wind production in excess of this amount each year would receive the prevailing power market price. For China, this mechanism tends to balance the regional wind resource variation since projects in windier Inner Mongolia might have a higher capacity factor, but the market power price is low, while projects in Guangdong operate in more moderate winds but would have a much higher market price after achieving their full load hour quota.
While one or more of these support mechanisms may be adopted in the near term, the complex evolution of Guangdong's own power market may also promote the intrinsic values of wind power. The province is facing a real power supply squeeze as electricity demand has surged while the existing transmission system is unable to route power through bottlenecks to where it is needed. In addition, Beijing has approved few power plants in Guangdong in the past five years in order to reduce pollution from small inefficient generators, while the campaign to develop the western provinces has pushed Guangdong to buy more of its power from other provinces, but again at the mercy of upgrades to the regional transmission grid. Wind power is therefore well placed to strengthen weak parts of the grid with strategically located wind plant.
At the same time Guangdong, like the rest of China, is deregulating its electricity market and preparing for power pooling and competitive bidding. Guangdong provincial power authorities are also keeping their promise made in 1999 that power prices would be cut and are pushing ahead with a 14% retail price reduction.
Into the hand of wind
Put together, localised supply shortage, competitive bidding, and retail price caps sound remarkably similar to the California crisis of late 2000. This potential for volatile power prices and regional supply shortages could play into the hand of Guangdong wind power development by favouring a clean generation technology that can be deployed rapidly.
The ability of wind power to increase rural land values and enhance regional development and population distribution by developing peripheral industries and tourism are all factors that could improve Guangdong's power system by reducing the concentration of load demand in urban centres. If such advantages are factored into Guangdong's planning, wind power may become implemented more rapidly as an essential element of sustainable development.
