Business: Mixed welcome for fixed prices

As the year closes on China's new system of fixed prices for electricity from all onshore wind farms, early assessments from the industry range from cautiously satisfied to decidedly indifferent.

Fixed feed-in tariffs for off-shore wind (source: Azure International)
Fixed feed-in tariffs for off-shore wind (source: Azure International)

While Han Junliang, president of top Chinese manufacturer Sinovel, calls the fixed prices "suitable for the large-scale development of China", Paulo Soares, chief executive of foreign rival Suzlon Energy, says it is "just keeping the status quo".

In July, China replaced its centrally controlled bidding system for wind power prices with a series of fixed power prices for onshore wind plants built after August 1 ranging from CNY 0.51 ($0.075) to 0.61 ($0.089). Higher prices correspond to areas with low wind, while the reverse is true of lower prices (see map). Rates are fixed for the first 30,000 hours of production, then drop to regional benchmark prices, explains Sebastian Meyer, research director at Beijing-based consultancy Azure International. Meyer agrees that little has fundamentally changed. "All it has done is take away the uncertainty," he says.

A system of power prices fixed according to region had been in the pipeline for years, he adds. "Now it has been confirmed," he says. "If I'm a project developer, now I know what my tariff will be. Six months ago, if I was a project developer, I had a pretty good idea what the tariff would be, but I still had a risk that it could be changed. That risk is now gone."

With greater visibility into future earnings, the state-owned companies that are China's biggest developers are far better equipped to judge which projects should be pursued, says Gerald Page, managing director of Equinox Energy Partners, a renewable energy advisory firm based in Beijing. "The fixed tariff is going to be good for everybody," he says. "For the developers, turbine manufacturers and the financial institutions."

Chinese firms are poised to benefit most. The quality of Chinese turbines is improving and developers will likely opt for homemade models rather than more expensive foreign units, says Page.

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