In 2011, China led the global wind power market again, by adding 17.63 GW of new wind capacity, equivalent to 43% of the global annual market. While the US showed slow recovery from the downturn in 2010 by adding 6.8 GW, China cemented its place as the world‚Äôs leading wind market with a total installed capacity of 62,364.2 MW.
At the end of 2011, four Chinese manufacturers were among the global top ten; Goldwind leading the league with a total installed capacity of 3.79GW, ranking number two right after Vestas, followed by Sinovel (No. 7 with 2.95GW), United Power (No.8 with 2.86GW) and Mingyang (No. 10 with 1.18GW). The global top 10 manufacturers accounted for 78.5% of the global annual market, out of which the four Chinese companies accounted for 26.7%.
Thirteen Chinese provinces have passed the 1GW milestone, including the top ten (see table) followed by Shan Xi (1881.1MW), Guangdong (1302.4MW) and FuJian (1025.7MW). Inner Mongolia has the highest wind capacity with a total of 17.6 GW at the end of 2011.
Top 10 wind power provinces in China
|¬†||Province||2010 Cumulative (MW)||2011 Annual (MW)||2011 Cumulative (MW)|
A Year of Change
In the middle of 2011, the Chinese government introduced a new regulation ‚ÄúWind Farm Development and Management Interim Rules and Regulations‚Äù, which aims at improving the permitting/approval process. According to the new regulation, new wind projects need to be reported to the central government and approved and announced by the NEA before getting final approval. Consequently, projects that are not formally approved will not be granted feed-in tariff or grid access. This regulation reflects the central government‚Äôs more stringent control over the wind farm planning and permitting process, which on one hand, aims at solving the mismatch between the grid and wind farm planning and on the other hand, helps improving both the quality of the turbines and wind farm management.
To date the NEA has announced two batches of approved projects: the first one consisting of projects totaling 28 GW and the second batch consisting of projects totaling 16.7GW. More batches are expected to be announced in the next years. Construction of the wind farms begin soon after the announcement has been made.¬†However, in comparison with past years, the new approval process has significantly slowed down the development of wind farms.¬†Meanwhile, a grid code and some other safety management rules were introduced by the government. Although the new permitting process has slowed down wind development, it improves issues related to planning and grid connection and has helped the implementation of a number of standards.
However, the new regulations have also an impact on manufacturers. In the past, the turbine market used to be a ‚Äúseller‚Äôs market‚Äù, but the new regulations and the slow-down have put an additional stress on the Chinese market which already has overcapacity. The WTG manufacturers are trying to adjust to this by managing their inventory and supply chains etc.
The Grid and Grid Curtailment
The grid remains the most serious challenge to wind development in China. The main problem in the past years has been linked to the lack of grid connection for new wind farms. Yet the widely quoted ‚Äú1/3 of the capacity not being connected‚Äù is misleading as the real situation in China is better, especially after the introduction of the new wind farm management regulation and improved planning.
Nevertheless, the issue of grid curtailment is increasingly becoming a problem. According to the National Energy Administration, about 10 billion kWh were lost in the curtailment in 2011. In a recent report released by the State Electricity Regulatory Commission, this figure was updated to 12 billion kWh, with an average curtailment rate of about 16%, resulting to a loss of 6.6 billion RMB.
As a result, the amount of full-load hours in many of the provinces has decreased. In some provinces the average full-load hours reached was 1600 hours. (Another reason for the decrease in the full-load hours was the less-favorable wind conditions in 2011. Nevertheless, the grid curtailment remains the main cause contributing to the low full load hour level). Provinces where the wind base projects are located have suffered most from the decreased level of full load hours: Western Inner Mongolia (1829hours), Eastern Inner Mongolia (1863 hours), and Gansu (1824 hours). In the past these areas achieved full-load hours of more than 2000 -2200 hours or more.
Solving the issues linked to grid curtailment is challenging: the grid system was designed for a coal dominated power system and the lack of flexibility makes it difficult to integrate more wind in the system. This is especially the case in areas with rich wind resource in the northwestern and northeastern China - some large wind bases are planned to be built in this area. The fact that the grid companies are the biggest monopolies in China makes discussion of improving grid services difficult.
Overcapacity and Tight Finance
In the end of 2011, there were more than 20 wind turbine manufacturers (this numbers differs from the 80 widely quoted in the past, as the 20 meant those who has products in the market) in the Chinese market with a total production capacity of over 20GW. The fierce competition has driven turbine prices down dramatically from RMB 6700/kw in 2009 to RMB 3500/kw in 2011. This price level leaves little margin for the companies to survive. A big enough market is required for the companies to be able to compensate the reduced profits in unit sales with a higher volume.
Another reason causing delays for wind development in China is the lack of finance. In the past there has always been sufficient finance available for wind projects in China, where the wind developers are state owned utilities. However, since 2010, due to the difficulties in the coal fire business, the utilities have suffered substantial losses, and therefore they are not willing to take more loans before the mother company has paid back the bulk of the loss. Moreover, the series of incidences involving turbines tripping off the grid and other safety concerns have made the banks less enthusiastic to finance wind projects.
China installed another 107.9 MW of offshore wind in 2011, bringing its total to 258.4 MW, third in the world after the UK and Denmark. China has an ambitious target for offshore development of 5 GW by 2015, and 30 GW by 2020. According to the policy, China‚Äôs offshore development should follow the concession tender model, in which both developers and tariffs are determined by a tender. The second round of offshore concession tendering of 2000 MW was supposed to take place take place in 2011, but has been postponed until this year, primarily as a result of planning and siting difficulties faced by the projects tendered in the first round in 2010.
These delays have not completely stopped offshore development, however. Smaller ‚Äòdemonstration‚Äô projects are being approved and built, initially in the range of 20-30 MW, but last year the Jiangsu Rudong 150 MW project was developed as a ‚Äôdemonstration project‚Äô, enjoying more favorable tariffs than those received in the first round of tenders, while at the same time building the offshore industry‚Äôs knowledge and experience.
Lack of coordination between state administrations and a lack of an offshore marine utilization master plan are the main challenges for the Chinese offshore wind development. However, some positive signs have recently emerged in southern China, where the southern grid is collaborating with the Guangdong utility in conducting joint research on preliminary offshore work. This shows that offshore is attracting wider interest. There are some expectations that this might also trigger a series of demonstration projects and would become a copy of the dual track project approval model of onshore wind development that took place before 2009.
Lower Wind Regions And Distributed Wind Power Generation
In 2011, the government also put forward a policy to encourage the development of wind farms in lower wind speed regions in the Southern and Eastern China. These distributed wind projects are connected to the distribution grid, not to the transmission grid.¬†This helps to ease the bottleneck with the constraint of the grid. Since 2008, the emphasis has been on the wind base mega-projects, which are located primarily in remote regions and need major transmission upgrades to transport the power to load centers.
Today, there are 40 provinces with wind power in China including four new provinces (Guizhou, Guangxi, Sichuan, Qinghai) that joined the league in 2011. While the windiest areas, such as the Inner Mongolia, were suffering from grid curtailment with full load hour reaching record low of 1800 hours, some lower wind areas performed better: Fujian 3096 hours, Yunan 2240 hours, Jiangxi 2340 hours and Henan 2309 hours.
Liming Qiao, GWEC China Director