Change in the air for China concessions

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Among messages delivered to delegates at the Chinese Wind Energy Industry Development Summit was that tactical bidding to hit a mid-range price target could prove to be the winning strategy for gaining government wind farm concessions. Disquiet over the concession system remains.

For several of the global wind industry leaders and local firms moving into the rapidly growing Chinese wind market, a recent summit in Beijing became a platform for restrained protest against the government's latest policy announcements. Against expectations, the Chinese wind market will continue to be based on government controlled tenders rather than a dual system that includes fixed power purchase prices (Windpower Monthly, February 2006). Fear of a market slow down this year, after a record 2005 when China became the world's sixth largest market, was widespread among the 150 delegates at the Chinese Wind Energy Industry Development Summit in late March.

Wind farm developers, who so far have seen China's tendering system almost exclusively favour the lowest rather than the best bid, are clearly disappointed. High on their list of grievances is the cost involved in preparing project bids, with many saying they were no longer as enthusiastic about monitoring wind conditions at earmarked sites. "What's the purpose of doing so, if you lose the bid in the end," said one.

Reassurance from government officials was immediate: companies will be compensated for wind measurement costs if they hand over the data collected. But Zhang Ke of the Strategic Development Department of Farsighted Group (Huarui) said the compensation would not be enough to make up for the entire costs involved, including manpower and chances missed.

Government officials acknowledged the concerns about centralised tendering. "There's not a perfect policy," said Zhou Huang, chief of the new energy division at the National Development & Reform Commission (NDRC). "Every road leads to Rome." Wind power prices, he added, might be fully competitive on the open power market by 2010, making a support program redundant.

A little cool down of wind development might not be a bad thing for China, added Zhu Junsheng, director of the China Renewable Energy Industry Association (CREIA). Urging delegates to, "Put your money in a safe place and wait," Zhu said: "The current situation has problems, but not as serious as to warrant the term crisis." He suggested the industry to focus on improving its management of existing wind plant. Beyond project development, other opportunities are available such as specialising in plant operation and equipment servicing, said Zhu.

Delegates were told that some new requirements could be expected in this year's round of government tenders. Wind farm developers will have to select equipment suppliers before bidding for projects, said Wang Zhongying, director of the Centre For Renewable Energy Development, a think-tank affiliated to the NDRC. In addition, while contract winners may still be determined by the lowest bid, the government could instead decide to award development concessions on the basis of bids submitted that came closest to the average bid price. The required building period for a 100 MW wind farm could also be extended from two to three years, to three to five years.

Tender documents for the new concession projects will be issued soon, added Shi Pengfei of the China Wind Energy Association, a sponsor of the summit. So far three concession projects have been approved by NDRC for tendering this year. They are the 200 MW second-phase Zhangbei Wind Farm to the northwest of Beijing, the 300 MW Huitengliang Wind Farm in North China's Inner Mongolia Autonomous Region, and the 200 MW Bayin Wind Farm in Baotou, also in Inner Mongolia. The last project features very good wind resources, Shi said.

As well as concerns about the tender system and its impact on power purchase prices, some delegates urged government to hasten the introduction of regulation that would mandate the inclusion of significant levels of renewable energy in power supplies by energy providers and utilities. Yu Weizhou of Guohua Energy Investment said it would be a good idea to also place the mandate on grid operators.

Manufacturing push

With the world's leading turbine manufacturers all establishing bases in China, the government is keen to see domestic manufacturers continue to increase their share of the local market. Locally made turbines have raised their share of the market to 28% from 18% in 2004. During the next five years the government will increase its support for development of domestic wind turbines with rated capacities in the 2-3 MW range as well as for larger machines for offshore projects, said Li Baoshan, chief of the energy and transportation division of the science and technology ministry.

"Figures for installed wind power generating capacity do not necessarily reflect the wind power strength of a country," Li said. "The capability of manufacturing wind turbines does." Indeed, CREIA's Zhu Junsheng urged domestic firms to rethink their plans for pursuing turbine production agreements with foreign firms, suggesting it could stymie technological development. "Greater efforts should be made in self-based development," he said.

There was casual talk and speculation of the government increasing its wind target for 2010 from 5000 MW to 7000 MW, and from 30,000 MW to 40,000 MW by 2020, but government officials present refused to confirm the rumours.

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