Wind power in China is developing rapidly and receives particularly strong government support. While European wind turbine manufacturers dominate the market, Chinese expertise is developing and local manufacturers are quickly catching up.
China’s abundant inland and offshore wind energy resources provide ample potential for large-capacity, in-grid wind farms. By the end of 2005, China had built 59 wind farms with 1854 wind turbine generators and an installed capacity of 1266 MW in-grid, ranking it number ten globally.
There is also a large market in China for off-grid wind systems. By the end of 2004, China had 200 000 off-grid wind turbine generators, ranking it number one in the world. Chinese enterprises have mastered advanced off-grid wind turbine generator technology through technology transfer from foreign companies.
According to the China Academy of Meteorological Sciences, the country possesses a total of 235 GW of practical onshore wind power potential. The potential for offshore wind power is even greater, estimated at 750 GW. Offshore wind speeds are higher and more stable than onshore, and offshore wind farm sites are close to the major electricity load centers in eastern China. Areas rich in wind power resources are mainly concentrated in two areas: northern China’s grasslands and Gobi desert, stretching from Inner Mongolia, Gansu, and Xinjiang provinces; and in the east coast from Shangdong and Liaoning and the southeast coast in Fujian and Guangdong provinces.
In 1986, China built its first wind farm in Rongcheng, Shandong province. From 1996 to 1999, in-grid wind power developed very quickly, entering a localization stage. By the end of 2004, there were 43 wind farms with 1291 wind turbines in China, with 764 MW of installed capacity. Liaoning, Xinjiang, Inner Mongolia, and Guangdong experienced the fastest wind power development, representing 60 per cent of the country’s installed wind power generating capacity. Currently, Xinjiang’s Dabancheng is the largest wind farm in China, with 100 MW of installed power generating capacity. Most generators range from 500 kW to 1 MW, accounting for 84 per cent of China’s wind turbine generators.
Building a market
To support the development of wind power technology and growth of the in-grid wind power market, the Chinese government has recently pushed hard on renewables. It has implemented a series of projects and also stipulated a series of economic incentive policies:
- Ride the Wind programme: To import technology from foreign companies and to establish a high-quality Chinese wind turbine generator sector, the former State Development and Planning Commission (SDPC) initiated the “Ride the Wind” programme in 1996. This initiative led to two joint ventures, Nordex (Germany) and Made (Spain). These JVs brought 600 kW wind turbine generator manufacturing technology into China.
- National Debt Wind Power programme: To encourage the development of domestic wind power equipment manufacturing, the former State Economic & Trade Commission (SETC) implemented the “National Debt Wind Power” programme. This required the purchase of qualified, locally-made wind power components for new generation projects. China’s government provided bank loans with subsidized interest to wind farm owners as compensation for the risk of using locally-made generators. These loans funded the construction of a series of demonstration project wind farms with a total installed capacity of 8 MW. This programme has been completed.
- Wind Power Concession Project: The National Development and Reform Commission (NDRC) initiated the Wind Power Concession Project in 2004 with a 20-year operational period. This programme aims to reduce the in-grid wind power tariff by building large capacity wind farms and achieving economies of scale. Each of the wind farms built in this programme must reach 100 MW capacity. By 2006, NDRC had approved five wind farms, in Jiangsu, Guangdong, Inner Mongolia, and Jilin provinces.
Although China’s government has, for many years, encouraged the use of wind power, favourable conditions for wide-scale development have yet to fully develop. Through the Wind Power Concession Project, the Chinese government hopes to create further incentives for companies to develop this renewable energy resource. Concession and long-term power purchase agreements protect the interests of wind power investors, encouraging large companies, especially foreign ones, to invest in the Chinese wind power sector. Under this policy, market risk is reduced, which in turn reduces the risk premium of the internal rate of return for wind power projects. Eventually, the wind tariff shared by end-users will be cut due to this decreased risk. By expanding the capacity of wind farms to 100 MW, and creating new wind power tariffs based on the market mechanism and tendering process, the Chinese government has attracted a number of Chinese companies into this programme. Through successful implementation of the project, the Chinese government hopes to make wind power an economically viable power choice, effectively competing with conventional power sources in China.
Incentive policies have therefore finally begun to emerge within China. China also encourages the development of wind power in its “National Middle and Large Term Development Plan”. According to the plan, by 2010, China’s installed capacity of wind power will reach 5 GW. By 2020, it will reach 30 GW. In order to achieve this, China needs to build 800 MW of new wind power capacity each year from 2006 to 2010.
China’s Renewable Energy Law was put into effect on January 1, 2006. The law stipulates that the power grid company must sign a grid connection agreement with the wind power generating company and purchase the full amount of the wind power generated by it. The wind power tariff will be determined by the wind farm project tendering. The winner’s quoted tariff will be the tariff of that wind farm project.
Wind power is a priority “National Clean Development Mechanism Project,” i.e., wind farm developers can sell Certified Emission Reduction Certificates (CERs) to developed countries under the terms of the Kyoto Protocol. This will help to improve income generation.
The Chinese government reduced the VAT for wind power from 17 per cent to 8.5 per cent in 2001 and adjusted the import custom tariff of wind turbine generator sets to eight per cent and that of its components to three per cent in 2004. The import duty of wind power equipment and accessories can be waived if it is for the wind farm developer’s own use.
Some local governments in Guangdong, Jilin, Xinjiang and Inner Mongolia formulated their own incentive policies to develop wind power. By the end of 2005, China’s wind power installed capacity was about 1 GW. According to statistics, the cost of wind power is 33-60 per cent higher than that of coal, which makes the wind power tariff 68-94 per cent higher than the coal tariff. Industry experts predict that the wind power can be commercially viable and compete with clean coal fired power economically by 2020.
Development trends for single wind turbine generators favour large capacity sets, especially at the 1 MW level. Before 1997, the 1 MW wind turbine generators accounted for less than ten per cent of the worldwide market share. In 2001, that figure had risen to 52.3 per cent and reached 62.1 per cent in 2002. Although China has the ability to manufacture wind turbine generators below the 750 kW level, production of higher capacity generators remains a challenge. Although China has made a prototype of a 1.2 MW wind turbine, it has only been used for demonstration projects. There is strong demand in China for wind turbine generators at 1 MW and above levels. Beyond the manufacturing sector, Chinese companies also lack experience for investment, design, and operation of large wind farms.
Although China’s wind turbine generator industry has been developing for more than 20 years, it still remains in a research phase. By 2002, there were nearly ten wind turbine generator manufacturers in China: six generator manufacturers, two joint ventures, and three research and development entities. By the end of 2004, the installed capacity of locally-made wind turbine generators reached 48.5 MW, a figure that is increasing all the time. China still has to import 90 per cent of its large capacity wind turbine generators.
European government financing has helped European companies penetrate China’s wind power equipment market and occupy a dominant position. Danish equipment comprises 52.37 per cent of in-grid wind power projects in China, followed by Germany at 20.27 per cent, Spain 8.05 per cent, the United States 3.75 per cent and the Netherlands 3.74 per cent. By 2004, Danish company NEG Micon – now Vestas – dominated the wind turbine market in China, with a 35 per cent market share.
More than 30 Chinese companies, including the five large power generation companies, are building wind farms in China. The total investment exceeds $1.24 billion. The largest wind power investor is Longyuan Power Co. under China Guodian Corporation. By the end of 2005, the installed capacity of wind power under Longyuan Power’s operation reached 416 MW, and it has another 564 MW of new capacity under construction now.
Major Chinese wind turbine manufacturers
- Xinjiang Goldwind Co: China’s largest wind turbine manufacturer. Manufactures 600 kW and 750 kW wind turbines. Made a prototype 1.2 MW unit. More than 400 units in operation.
- Zhejiang Yunda Co: Manufactures 120 kW, 200 kW, 250 kW and 750 kW units. More than 45 units in operation.
- Shenyang Industry University (Shenxin Co.): Manufactures 75 kW and 200 kW wind turbines. Developing a 1 MW wind turbine.
- Wandian Co: Manufactures 600 kW wind turbines. Six units in operation.
- Shanghai Bluesky Co: Manufactures 300 kW wind turbines. Two units in operation.
- Dalian Heavy Machinery: Developing and manufacturing 1.5 MW wind turbines under German-based Furlander Corporation’s license.
- Dongfang Electric Group: Developing and manufacturing 1.5 MW wind turbines under German company REPower’s license.
- Baoding 550 Co: Developing and manufacturing 1 MW wind turbines with the German-based Furlander Corporation’s license.
- Xi’an Weide Co: A joint venture of Xi’an Aero Engine Co. with the German-based Nordex Corp. Manufactures 600 kW turbines.