China Special - Infrastructure: Introducing fixed prices

China introduced fixed benchmark prices for onshore wind power in August. Grouped into four regional categories, prices have been set according to wind resource and project construction conditions.

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For projects in the windiest parts of the country (some parts of of Inner Mongolia and Xinjiang), the price is CNY 0.51/kWh ($0.075/kWh). These have been dubbed Type One wind resource areas. The price in Type Two areas (other parts of Inner Mongolia, Hebei and Gansu) is CNY 0.54/kWh ($0.079/kWh), rising to CNY 0.58/kWh ($0.085/kWh) in Type Three areas and CNY 0.61/kWh ($0.089/kWh) in Type Four areas. The benchmark rates are generally better than the CNY 0.38-0.52 ($0.055-0.076/kWh) seen in the past for wind projects developed under the state wind project concession programme, which operated from 2003 to 2007.

Qin Haiyan, secretary general of China Wind Energy Association (CWEA), says the four pricing resources areas have been classified following a comprehensive calculation of factors, including local wind power resources, the annual average hours of power generation and project access to local power grids. Prices for offshore wind power will be determined separately.

"This new mechanism will end the low price vicious competition," says Liang Zhipeng, director of the National Energy Bureau's new energy division. "It will arouse the initiative of wind power investors, operators and power grids. Investors will have clear expectations, and thus make better decisions and management." Yu Danke, chief financial officer of Goldwind, one of the largest turbine manufacturers in China, agrees, saying it provides greater certainty for investors. "It will attract more funds into the Chinese wind power sector. However, the upcoming investment tide will indirectly increase pressure to transmit electric power into power grids. It will make the present bottleneck more prominent," he says.

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