Is China’s Wind Power Growth Sustainable?
By 2020, the Chinese government plans to generate 15 percent of the nation’s total energy consumption by increasing the use of alternatives to fossil fuels, such as wind and solar power. Today, China is the largest wind power market in the world, but this rapid growth is experiencing a backlash on several fronts. For example, the country is now imposing new quality standards to weed out smaller companies whose products have suffered from quality control, and concentrating manufacturing in larger, more established firms.
Furthermore, European manufacturers that entered the Chinese wind power market, such as the Spanish company Gamesa, have not generated the revenues they had hoped. This is largely due to the China’s strict local content rules that require 70 percent of all components be manufactured by its domestic supply chain. In what has now become a familiar tale, foreign manufacturers try to balance the pros and cons of doing business in a market that is clearly tilted toward maximizing returns for China – and not foreign international corporations. There are inevitable winners and losers.
In 2010, China increased its total wind power capacity to 41.8 GW, up 62 percent from the previous year. However, for the first time since 2005, growth in wind power is slowing down in China because of the following reasons:
- While China used Germany’s feed-in tariffs and mandatory grid access as a model, so far its laws have never been enforced. In fact, it is estimated that approximately 30 percent of China’s installed wind capacity has yet to be connected to the grid and actually delivering valuable carbon free electricity.
- Many PPA’s signed in China contain grid curtailment provisions that lack compensation, reducing expected profits for developers.
- Traditionally, subsidy payouts from the Chinese government happened monthly. Subsidies have been paid out every six months, creating cash flow issues for developers. This bi-annual payout makes it particularly difficult to finance projects in China when depending upon international sources of credit.
There is a striking lack of coordination between different provincial government actions and the central government. While such bureaucratic matters are not unique to China, the country’s inexperience in managing such large portfolios of variable renewable generation raises questions about the sustainability of the world’s hottest market for green energy.
The Chinese company that has the most sophisticated strategy for global wind power development is Goldwind Science & Technology Co, Ltd., a state-owned company, that is impressing wind industry veterans with its superior technology and creative business approach. The company appears to combine the best of all possible worlds: European engineering experience, U.S. entrepreneurship and China’s ability to drive down technology costs to the lowest possible levels.
Unlike other successful Chinese wind turbine companies – such as Sinovel Wind Group – Goldwind is looking well beyond China’s borders for business opportunities and has launched a joint venture in the United States. For example, the firm has installed its 1.5 MW turbine in Pipestone Town, Minnesota and has also signed a contract for a larger turbine delivery project (>106 MW) in Shady Oaks, Illinois.
Article by Peter Asmus, appearing courtesy the Matter Network.
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