With the Copenhagen climate change meeting getting closer, China’s recent progress in constraining the growth of its carbon emissions is coming under close scrutiny. Recent assessments suggest that steps taken in the last four to five years are indeed starting to take effect. The U.K.-based think-tank E3G is quoted as saying that ‘reforestation and a low-carbon transport sector, alongside improvements in energy efficiency and investments in renewable power has put China on course for lower emissions than would be expected under the “business as usual” scenario’. But the article warns that this conclusion will only be proved valid if China meets the targets set in its current five-year plan (2006-2010) as well as tightening the policies in subsequent periods.
China is indeed taking its renewable energy sector very seriously, and not only to address climate change. Three other factors are spurring a surge of investment in renewable energy: first, the nation needs more energy to support economic growth; second, domestic energy sources are seen as more secure; and, third, the government is trying to ameliorate the environmental impacts caused by the predominance of coal in its electrical power sector
Aside from hydro-electricity and rural biomass, wind power is set to dominate China’s renewable energy industry. At the end of 2005, total installed wind power capacity was about 1 Gigawatt (GW). Since then the rate of growth has been dramatic. Total capacity reached 12 GW by the end of 2008 and is set to reach 20 GW by the end of 2009. During 2009, China’s wind power capacity took it to fourth in the world, behind the USA, Germany and Spain. Two years ago the target set for the year 2020 was 30 GW. The target for 2020 currently stands at 100 GW and might be raised yet again. Most of this capacity will be built onshore in north China, in Inner Mongolia, Xinjiang, Gansu, Hebei and Jilin. Some offshore capacity will be built off Jiangsu Province.
As large as these numbers are, they need to be placed in the context of the scale of China’s power sector. During the year 2009, the total generating capacity has broken through the 900 GW threshold, only 100 GW less than that of the USA. Thus 20 GW of wind power is some 2.2% of China’s total capacity. Projections of the future growth of China’s power sector place total capacity at about 1,500 GW in 2020. Thus a target of 100 GW of wind power capacity, would represent some 6.7% of total capacity. Given the intermittent nature of wind power, the actual contribution to nation electricity supply is likely to be closer to 0.4 % in 2009 and 2% in 2020.
The expansion of wind power capacity in recent years has taken place against a background of unpredictable pricing. The Renewable Energy Law of 2005 required that all major projects be subject to competitive tendering, rather than setting a fixed feed-in tariff. As a result, prices were low and most tenders were won by large, state-owned power companies which could bear the losses through soft budgetary constraints and cross-subsidies from other types of power station. But rising coal prices and low power prices caused the power generators to run up growing financial losses, and this undermined their willingness to invest in renewable energy. Further, small-specialised developers and foreign private investors were severely disadvantaged compared to the large state-owned power companies.
In order to stimulate investment, in July 2009 the government announced a system of fixed feed-in tariffs for wind power, ranging between RMB 0.51 (US$ 0.075) and RMB 0.61 (US$ 0,089) per kWh, depending on the location. This compares with tariffs in 2008 of between RMB 0.3 to RMB 0.4 per kWh for coal-fired power stations and of RMB 0.2 per kWh for hydro-power stations. Given the falling cost of wind turbines, these prices should generate acceptable financial returns to the developers. The grid companies will pay this higher tariff and are supposed to be compensated through surcharges on end-user tariffs. The government is also considering placing obligations on the grid companies to purchase a minimum amount of electricity from renewable sources.
Despite this massive progress and these ambitious plans, the effective contribution of China’s wind sector to the nation’s power supply is constrained by a number of factors, as has been outlined by a number of commentators, most recently in an article in the journal ‘Science’ by researchers from Harvard and Qinghua Universities.
First, and most fundamentally, the average wind speeds in China, even in the wind-prone regions, are significantly less than in the USA and Europe. Second, the surveys carried out in China in order to decide the exact site of a wind farm are too hurried and therefore fail to select the best sites. Third, despite great improvements in the quality of locally-manufactured equipment, the level of technical failure is relatively high.
The fourth set of problems relate to the grid. The transmission companies are failing to keep pace with the construction of wind farms. As a result some 20% of wind farms were not connected to the grid in 2008. Further, the ability of the grid companies to take wind power in regions with many wind farms is constrained by their technical ability to keep the system stable with more than 15% of the power coming from intermittent sources. Finally, the grid companies are sometimes unwilling to take this power if cheaper alternatives are available.
As a consequence of these constraints, the average generation rate for operating Chinese wind farms is about 20%; that is to say, the wind farms are supplying electricity to the grid for 20% of the time over a period of a year. This compares to an average across the world of about 25-30%.
The good news in China is that, unlike in the U.K., wind farms do not appear to face great resistance from the local population at the construction stage. This is on account of the remote location of many Chinese wind farms and the less onerous planning approval procedures. Once the industry can address the technical and management deficiencies outlined above, wind power will indeed start to make a significant contribution to electricity supply in the northern part of the country. The remaining regions will require others forms of low-carbon electricity such as hydro and nuclear.
At the same time as building what may become the world’s largest wind-power generation industry, China is also developing substantial manufacturing capacity. Formal and informal rules have succeeded in keeping most foreign turbine manufacturers out of the domestic market, which has allowed more than 40 domestic turbine manufacturers to emerge. The largest of these, Sinovel, is the seventh largest in the world, producing one thousand 1.5 MW turbines in 2008 and with a capacity to produce twice this quantity. Though the first priority of these companies is to satisfy the domestic market, they are turning their attention to international markets, as their cousins in the oil, gas and mining sectors have done already.
Philip Andrews-Speed is Director of the Centre for Energy and Mineral Law and Policy at the University of Dundee, Scotland.