China

China

Government leaves trail of broken policy promises -- Lots of tender plans but still slow progress in China

Despite successive promises of support from government, only 26 wind farms with a combined generating capacity of 340 MW have been installed to date in China, according to statistics from the China State Power Corporation (CSPC). In the same period, China's overall electricity generating capacity has more than doubled, reaching 316,000 MW at the end of 2000. Of that just 0.1% comes from wind power, even though the theoretical potential for wind is 253,000 MW. A number of new policy initiatives are being aired, however, apparently aimed at meeting a new wind power goal--1200 MW by 2005--due to be announced at the pending annual session of the country's legislature.

Progress has been slow in China since it first embarked upon utility scale wind energy development in the mid 1980s. Despite successive promises of support from government, only 26 wind farms with a combined generating capacity of 340 MW have been installed to date, according to statistics from the China State Power Corporation (CSPC), the former electricity ministry. In the same period, China's overall electricity generating capacity has more than doubled, reaching 316,000 MW at the end of 2000. Of that just 0.1% comes from wind power, even though the theoretical potential for wind is 253,000 MW.

Last year, 76 MW of new wind plant came on-line, but it was nowhere near enough for China to meet its ambitious goal, set in 1994, of 1000 MW by end 2000. The government is now planning to raise the share of new energy in the electricity supply from today's 1.8% to 5.5% by 2005. But, with a CSPC source admitting that the wind goal for 2000 was not scored because "the promised favourable policies did not materialise," there is widespread industry doubt about whether the government means what it says.

A number of new policy initiatives are being aired, however, apparently aimed at meeting a new wind power goal -- 1200 MW by 2005 -- due to be announced at the pending annual session of the country's legislature, the National People's Congress, when the Tenth Five-Year Plan will be formally approved.

There has been talk of the government placing an obligation on provinces or grid operators to buy a specified quota of renewable energy. Regions or companies unable to meet the "green power" quota through their own generation are to buy renewable energy from those with excess supplies. The proposal is being studied and debated, but according to Zhang, it will not be adopted in the Tenth Five-Year Plan period (2001-2005).

Another plan is to launch a pilot 100 MW wind project, the sheer scale of which it is hoped will bring down costs. CSPC is charged with issuing an invitation for tenders. "Enterprises, regardless of forms of ownership and/or countries of origin, are welcome to participate in the bidding. And foreign investors will find it possible, for the first time, to operate a wholly owned wind farm in China," promises Zhang Yuan. The project location and the time of launch are yet to be decided.

domestic turbines

The government's main preoccupation with wind power, however, is to bring down its cost through domestic manufacturing of wind turbines. Imported foreign wind turbines are seen as too expensive. For this reason China last year reintroduced customs duty on wind turbines, starting at 3% for components and 6%-12% for whole turbines. Indeed, the value added tax on wind turbines amounts to 17%.

"It's quite a burden on wind farms. And it is unfair," Zhang says, "A coal fired power plant is able to reduce the tax rate by deducting the tax already paid by coal suppliers. For a wind farm, this is impossible." An appeal to the government to cut the 17% to 6% fell on stony ground, he adds.

"Localising the production of wind turbines may be a solution to cost-burdened wind farms in the long run. But measures like re-imposing a customs duty on wind power equipment imports have considerable negative impact on the industry's current development," another observer points out. China needs foreign expertise in order to build an industry.

With this in mind, there is a plan, approved by the State Economic and Trade Commission, to use a small amount of the money raised from last year's treasury bond issue to build 80 MW of wind farms at three locations: Chifeng in Inner Mongolia, at Yingkou and Dalian in Liaoning, and in Xinjiang, according to sources with the China Agricultural Machinery Industrial Association. The plan requires a proportion of home-made components and the wind farms are intended to become a showcase of Chinese wind technology. China has issued considerable amounts of treasury bonds in recent years to boost domestic demand.

Some local manufacture of 300 kW and 600 kW turbines in co-operation with foreign manufacturers has been started under a state project, "Riding the Wind," that began in 1996. Two joint ventures, based in Xi'an and Luoyang, resulted. In May last year, Xi'an Weide Wind Power Equipment Company Ltd, a joint venture between Xi'an Aero-Engine Corp and Nordex, a division of Germany's Borsig Energy, turned out its first 600 kW wind turbine based on Nordex technology. The machine, with about 40% local content, will be installed on the Yingkou Wind Farm in Liaoning, together with ten further turbines from the Weide workshop. A $420 million investment, Weide can turn out 140, 600 kW wind turbines a year.

China has produced 600 kW wind turbines before, sited at Hangzhou in east China, and Xinjiang in the northwest, with domestic content as high as more than 90%. But these turbines remain show models only. "A wind farm is a big, long-term investment. The quality and function of the turbine mean much. It takes time for investors to build up confidence in the domestic products," explains Zhang.

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