China issues bids for franchise operation -- Two times 100 MW

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China is launching an international tender for two 100 MW wind power stations in a bid to open up the country's market to foreign investment. Almost all existing wind farms in China are funded by government affiliated companies -- leading the State Development Planning Commission (SDPC) to believe that costs have been too high. As a result, the SDPC stopped approval of major wind projects earlier this year, claiming that all were too expensive. Meantime, market growth has become a major government priority, along with cutting costs and encouraging competition.

The aim now is to grant franchises to foreign companies who will build, own and operate the wind farms on a trial basis. Two projects are being considered -- at Rudong in Jiangsu and at Shanwei in Guangdong. They have SDPC approval and are undergoing feasibility studies. The successful bidders are to start development work in June. At Rudong, wind turbines will be installed along a 35 kilometre stretch of land on the country's east coast, not far from the mouth of the Yangtze River.

With franchising being encouraged, the government has set a goal for the development of three to five 100 MW projects. The State Power Corporation (SPC), which handles franchises, will offer prospective bidders maps, franchise contracts, and a power purchase contract. Basic data on wind resources in the targeted areas is also provided at a fee, though bidding companies are expected to do their own resource evaluations. Sources say the government is considering special tax breaks for operators of franchised wind farms.

Pricing reference

The government hopes the outcome of the franchise bidding will provide a reference for future wind pricing. By law all wind power must be bought at premium prices by the grid operators, who have thus resisted integrating it. The SDPC hopes a round of competitive bidding will help gauge the depth of the wind power pond. Among other benefits, China foresees a real market opportunity for domestic manufacturing of wind power equipment.

But Liu Wenqiang, head of wind at the renewables department of the State Economic and Trade Commission, is reserved about the franchise experiment. "It should not be approached with too much zeal," he says. Franchised operation is new to wind power, even among developed nations, adds Liu. China must get the regulations right.

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