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China Rushes to Harness Wind While the Government Pays

Wednesday, 29 Oct 2014 06:47 AM

(Updates to add background comment from Vestas in last paragraph.)

Oct. 29 (Bloomberg) -- China is on course this year to build four times the total wind power installed in all of Denmark as developers push to build the turbines ahead of cuts to incentives originally designed to spur the industry.

“The trend is toward a rush of installations,” said Qin Haiyan, secretary general of the Chinese Wind Energy Association. The nation may add as much as 20 gigawatts of wind power in 2014 and maintain that pace next year, Qin said.

Should that target be reached, China this year will surpass the 18 gigawatts of wind the nation installed in 2011, the highest annual number on record, according to data compiled by Bloomberg. Installations in Denmark, a pioneering nation in the application of wind energy, will edge 1 percent higher to a total installed base of 4.9 gigawatts by the end of 2014, according to Bloomberg New Energy Finance data.

By annual additions, China is set to build almost twice as much onshore wind power as Europe and more than triple new installations in the U.S., according to Zhou Yiyi, a Shanghai- based analyst for Bloomberg New Energy Finance.

All that new wind energy means China’s policy makers are now at the stage where they’re set to withdraw the incentives brought in to encourage developments.

China has proposed cutting tariffs by as much as 11 percent for projects to be built after June 30, 2015, Zhou said in a Sept. 23 note, which cited a draft document from the National Development and Reform Commission outlining the change.

Market Driver

The current tariffs were introduced in 2009 and comprise four different levels for onshore wind farms ranging from 0.51 yuan a kilowatt-hour to 0.61 yuan a kilowatt-hour. China surpassed the U.S. a year after the tariffs were brought in to become the world’s biggest wind market. Capacity has doubled in the past three years.

China aims to more than double its wind capacity to 200 gigawatts by the end of 2020. The nation had 89.6 gigawatts of wind installations at the end of 2013, according to BNEF data.

The rush “will be a driver for fast development of equipment makers,” said Apple Li, a Hong Kong-based analyst from Standard Chartered Bank (HK) Ltd. “The entire wind power market will be very robust before the first half of 2015.”

China’s biggest turbine maker will account for at least 4 gigawatts of installed capacity in 2014, Wang Haibo, chief executive officer of Xinjiang Goldwind Science & Technology Co., said in a conference in Beijing last week. Guodian United Power Technology Co. will double shipments this year, general manager Chu Jingchun said.

Idled Capacity

“If the tariff cut is implemented, China would see an obvious decline in installations in 2016,” said BNEF’s Zhou. “Developers building projects originally planned for 2016 or 2017 then won’t have enough capital and the issue of idled capacity at wind farms could worsen,” she said.

Switching off wind turbines in China because their electricity can’t be absorbed by the grid is limiting how much planners can cut incentives given to renewable power producers, Yi Yuechun, deputy chief engineer at the China Renewable Energy Engineering Institute, said in April.

The idled capacity is a result of the rush to build turbines in the windiest areas of China, surpassing the transmission grid’s ability to handle and transmit the power. Leaving wind farms turned off cost operators at least 8.16 billion yuan in lost revenue last year, according to the institute.

Cost Competition

China had 11 percent of its wind power capacity sitting unused last year, with the rate rising to more than 20 percent in the northern provinces of Jilin and Gansu, according to the institute.

The planned tariff cut in China is “not in anyway unique” when compared with other parts of the world, said Anders Runevad, chief executive officer of Vestas Wind Systems A/S, the world’s biggest wind turbine maker. “We have to focus on bringing down the costs of wind electricity” to compete with other energy sources.

Vestas Wind will extend its push into China with plans to use more component contents from Chinese suppliers while also bringing models suited for varying wind conditions to the country.

The company will “look at much more tailored service offerings toward different customers with different needs,” Runevad said in an interview in Beijing.

(An earlier version of this story corrected the dateline to Oct. 29.)

To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net Iain Wilson, Indranil Ghosh

© Copyright 2017 Bloomberg News. All rights reserved.

 
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