Wind energy in China: policy options for development

Abstract

China's wind energy potential ranks highly in the world scale. In the key wind energy regions, there is potential to develop a succession of large wind-farms of up to several hundreds of MW capacity. In the '90s the government target of 1 GW for the wind-power capacity to be installed by the year 2000 was lowered to 620 MW. In 1994, three government bodies, the then State Planning Commission, the State Science and Technology Commission, and the State Economic and Trade Commission, created the long-term Development Programme for Renewable Energies for the years 1996-2010. In 1996, the new Electricity Law of the PRC, declared "... the State encourages and supports electricity generation by using renewable and clean energy resources". However, key energy objectives of China's Ninth Five Year Plan (1996-2000) reflected the continuing dominance of coal, oil and gas in China's energy policy-making. Between 1993 and 1997, wind generating capacity installed in China had risen from 17.1 to only 167 MW, while capital and operating costs for wind generated electricity (1998) were still too high in relation to coal and hydro generation. The 10th-Five Year Plan aims to promote more environment-friendly power generation including hydropower development in the western region. The plan will allocate more natural gas and renewable energy for power generation. With no value being ascribed to inherent cleanliness of wind energy, electricity produced from this relatively immature sector continues to need higher prices than that from entrenched, mature fossil-fuel-based power generation. In China this has contributed to a perception that wind is a niche-market resource, primarily relevant to remote rural areas which conventional power grids are not able to reach economically. Expansion of wind energy to a larger role runs into opposition from newly liberalised power networks who are more than ever concerned, and required, to keep the cost of supplies as low as possible. Within these limitations, some success has been and still is being achieved in buying down the costs through technical and scalar innovation in a growing number of grant-aided projects. For greater penetration to be achieved, a market needs to be created for wind energy. There is recent evidence in Europe and the United States that realistic incentives can encourage industry to consider much larger wind-power development projects with consequent improvement to the economics. Competitive bidding from wind-energy development companies can ensure that the targets are met at lower cost. A system of competitive bidding for licence areas (or concessions) for areas big enough to support very large wind-power plants, and chosen from prime wind regions by government, can be issued, regularly for bidding, as in oil and gas development. An accompanying institutional framework such as the renewable portfolio standard (RPS) is essential. China is considering introducing a trial mandated market share (MMS) intervention, based on RPS for a selected region to assess its applicability to both China nationally and the renewable energy sector as a whole. There is a case for enactment of an encompassing Renewable Energy Law, which will provide a point focus for regulating renewable energy development, setting any RPS/MMS levels within time-frames and with all related modalities, including green certificate trading. An electricity price in the region of 4.5-5.0 USC/kWh will also need to be achieved when power purchase agreements are negotiated, if the bidding process is to achieve success. Local production of hardware needs to lower capital costs by an estimated 25-30% of current (2000) costs if economic returns are to be sufficient at these price levels. A concessionary approach, linked with a renewable portfolio standard law and aimed at large projects, can help achieve a faster development and a rapid buy-down of costs of wind energy technology. © 2001 International Energy Initiative, Inc.