Overview of China's wind development

 

China's wind resource

China has abundant exploitable wind resources both onshore and offshore due to its large land area and long coastline. The 4th National Wind Resource Investigation, using data from 400 wind masts refined with computer simulations, gives the results summarized in the table below. China's commercial onshore potential is between 1,000 and 4000 GW; and the offshore potential in waters from 5-50m deep is another 500 GW.

Technically exploitable potential of onshore wind resources (GW)
Height above the ground

Grade 4 or higher

(wind power density 400w/m2)

Grade 3 or higher

(wind power density 300w/m2)

Grade 2 or higher

(wind power density 200w/m2)

50m80020002900
70m100026003600
100m150034004000

Source: ERI & IEA "China Wind Energy Development Roadmap 2050", 2010

China continues to be the main driver of growth in the global wind power market, setting a new record in 2014 with 23,196 MW of new installations, representing a 45% increase in the annual market.  China’s cumulative installations reached 114,608 MW, up 25.5% from 2013, the first country in the world to pass the 100 GW mark.

The record-setting installations are a solid sign of the recovery of the industry after a slowdown in the past few years. China consolidated its leading role, accounting for 45.2% of the annual global market, and 31% of the global cumulative installations. The 23,196 MW also marked the first time a single country has installed more than 20 GW in just one year.

 

Wind Energy Market in 2014

Wind power now accounts for 2.78% of national electricity consumption with annual production reaching 153.4 TWh. The average annual full load hours reached 1893 hours, which represents a decrease of 181 hours from 2013. This is partly due to the fact that 2014 was a less windy year.   

 The rate of grid curtailment decreased slightly in 2014 (8% nationwide), down by about 4% from previous year, and is the lowest in the past four years since curtailment became an issue.  

The main reasons for this remarkable surge in installations in 2014 are: on the one hand, the industry was recovering from a downturn since 2011, during which lack of grid capacity was limiting wind power’s expansion. The situation has improved substantially over the past year, with several high voltage lines under construction, such as the Xinjian Hami-Zhengzhou 800 kV line, and the air pollution crisis in China's cities has led to a decision to build nine new HVDC lines in the period from 2014-2017.

 Secondly, the larger than expected installations were at least partly in response to the proposed reduction of the onshore FIT, especially considering the numbers in the draft that was released last summer, which proposed a dramatic cut of 7-8% in the windier areas. Fortunately, the final onshore FIT adjustment which was published at the end of last year turned out to be much less, and won't come into effect for the most part until the beginning of 2016. This much milder reduction in the FIT, and delayed implementation, will hopefully prevent the boom-bust cycles we've seen in some other large markets. It seems clear, however, that there will be a continuation of the boom in 2015 to get as many projects as possible up and running at the current rates.   

 

Key players in Chinese wind market in 2014

 

Manufacturer

MW

Market Share

1

Goldwind

4434

19%

2

Guodian United

2582.5

11%

3

Mingyang

2058

9%

4

Envision

1962.6

8%

5

XEMC

1781

8%

6

Shanghai Electric

1735.6

7%

7

Dong Fang

1298

6%

8

CSIC

1144

5%

9

Windey

898

4%

10

Sinovel

729

3%

11

Inner Mongolia CASC

705

3%

12

China Creative Wind Energy

700.5

3%

13

CSR

610

3%

14

Sany

495

2%

15

Huayi

466

2%

 

Others

1597

7%

 

Total

23196

 

 

The top eight manufacturers dominated the Chinese wind market in 2014 installing over 1 GW each. The top five players jointly installed over 12 GW.

The ranking of the top five manufacturers in 2014 stayed exactly the same as last year, while their total share of the market (55%) was also nearly identical to that in 2013. The biggest reshuffle happened in the ranking after the top 6, where Dongfang almost doubled their market share, and swapped ranks 7 and 9 with Sinovel.  2014's black horse was CASC, a manufacturer based in Inner Mongolia, which jumped to 11th with 3% of the market.

Unfortunately, the existing Foreign Invested Enterprises (FIEs)'s market share shrank further, and they've disappeared from the top 15 completely. It's still tough going for FIE's in China, even though prices have bounced back. With tighter pricing due to the FIT reduction, there could be an acceleration of the shift in emphasis from cost of equipment to cost of energy, which would be a good thing not only for the FIE's but for the health of the industry as a whole. 

New onshore feed-in tariff

A number of important new policies with an impact on wind development were introduced in 2014. A new regulation amending the feed-in tariff (FIT) for onshore wind, and the introduction of a FIT for offshore were the most anticipated developments of the year for the Chinese wind industry. (See information about the offshore FIT in the Global Offshore Chapter).

To the sector’s relief, the reduction in the tariffs published in December 2014, was much less than anticipated by the Chinese wind industry. The wind categories remain the same, i.e., the country is divided into 4 zones, with a sliding scale of tariffs from the lowest prices for the best wind areas, to the higher prices for the lower wind areas. The old prices were 0.51 (EUR 0.07/USD 0.08), 0.54, 0.58 and 0.61/RMB/kWh, and what has been adopted by the government is a reduction of 0.02 RMB/kWh (EUR/USD 0.003) for the first three categories, while leaving the last category as it was; so the price table now reads 0.49, 0.52, 0.56 and 0.61 RMB/kWh.

The new tariffs will apply to the projects approved after 1st Jan 2015, or to those projects approved before 1st Jan 2015 but installed after 1st Jan 2016. The new tariff will have less adverse effects to the industry than the previous draft with drastic cut on FIT. However, given the fact that the Chinese manufacturers are running a very thin margin of profit due to heavy competition, the price cut will affect future investments and it is expected that the IV category of wind resources, which is the lower wind area, will see a surge of development in the next few years.

 

 Wind Development at Regional Level

Top 10 Provinces with new capacity installed in 2014

 

 Province

2014 New  (MW)

2014 Cumulative (MW)

1

Gansu

3630

10725.95

2

Xinjiang

3216

9668.06

3

Inner Mongolia

2081

22312.31

4

Ningxia

1693.7

6144.1

5

Shanxi

1590.2

5845.25

6

Hebei

1372.5

9872.4

7

Shandong

1282.8

8263.3

8

Yunnan

1156.5

3640.5

9

Guizhou

811.1

2001.2

10

Jiangsu

760.5

3676.15

 

Top 10

17594.3

82149.22

 

In 2014, Gansu province led the Chinese market with a record installed capacity of 3,630 MW. This marks a welcomed change in Gansu, a province with exceptional wind resources, that has suffered from grid constrains in the past few years. The record installations are due to expansion of the transmission lines and improvement of the management of the grid companies allowing electricity generated by wind power to be transferred to neighboring provinces, as well as to the eastern provinces. Cumulative installations in Gansu reached 10.73 GW, making it the second province after Inner Mongolia to pass the 10 GW milestone.

Another province benefiting from the improved grid infrastructure was Hebei, adding 1,372 MW of new capacity to the grid, for a total of 9,872 MW. The lower wind speed area Yunnan, a province with high biodiversity, returned to the top ten list with new installations of 1,157 MW, passing 1 GW, and ranking No. 8 in 2014. Yunnan had dropped out of the top ten list in 2013 due to environmental concerns which halted all on-going projects. Measures were taken in 2014 to find a solution which combined wind development with protection of the habitat, a combined effort from both the government and project developers.

The top ten provinces accounted for 76% of the annual installations, and 72% of cumulative installations.

 

Latest policy developments

The Chinese government published a new decree on “Regulating the wind manufacturing market (decree 412)” in September 2014. While introducing some new policies, the new regulation also pulls together pieces of old regulations and gives further details on the implementation of these regulations.  The focus of the new regulation is placed on quality control, introducing a compulsory certification process: all main turbine parts and components need to be certified before entering a tendering process. This addresses one of the core problems that has plagued the industry during the past years, and should have been adopted already long ago.

As a further measure to increase transparency in the market regarding wind turbine and component data, the National Energy Administration (NEA) introduced the long anticipated “performance data” requirement, which creates an evaluation system for wind turbine quality assessment including a reporting system for turbine faults and ‘incidents’. This measure highlights the need for  supervision by the government or a third party on quality and performance issues in the market.

Moreover, the new regulation aims to improve transparency in the tendering process; in particular, to prevent local governments from influencing local tenders. Since 2009, local governments have been implementing their own local content requirements in the provinces, where only project developers purchasing locally produced turbines would win the bids for new projects. This forced manufacturers to expand their manufacturing facilities in different provinces, exacerbating the over-capacity problem. Therefore, the regulation now forbids any local interference in the bidding process. Finally, the new regulation also tackles the issue of exiting the “warranty phase”, establishing a set of rules on “exit warranty period” tests, creating a mechanism for dispute settlement as well as a disclosure of information related to warranty and end of warranty.

 

Transmission

To tackle the bottlenecks in the transmission system, the NEA, State Grid and Southern Grid are working on installing twelve new long distance transmission lines, nine of which are HV transmission lines. State Grid will have four HVDC and four HVAC lines, while Southern Grid will have one HVDC line. Several of the lines will connect Inner Mongolia and Hebei provinces, where vast wind development is taking place, with load centers in densely populated areas.

The Renewable Energy Portfolio Standard (RPS), which is expected to be the strongest policy measure to force grid companies to respect the Renewable Energy Law, which gives wind and other renewable electricity sources priority access to the grid, was not introduced in 2014, despite expectations that it would be. However, progress was made in the government approval process during 2014, and the RPS is likely to be finally introduced in 2015. The RPS will require provincial governments and grid companies (especially at provincial level) to fulfill the renewable portfolio standard. Currently, local governments and grid companies are negotiating the details of the RPS.

 

Key barriers to wind development

The grid remains the most serious challenge facing the wind industry in China. While the government is adding new transmission lines, the major issue still lies in the management and structure of the grid system. Lack of flexibility in the system, coupled with lack of a real electricity market where electricity can be traded, are the key barriers for higher penetration of renewable energy in system. There are positive signs with increased discussion about electricity market reform, but given the current situation, this is not likely to happen in the near future. 

 

Outlook for 2015 and beyond

China, especially Beijing and its surroundings, is suffering from an increasingly severe air pollution problem, which has become a critical issue in the country during the past few years. This offers the renewables industry an opportunity to further expand and to consolidate its role as a clean energy provider.

Given the effect of the FIT adjustment, and the continuing imperative to address the air pollution crisis, the Chinese wind industry is expecting to have another good year in 2015.