He Dexin, Chinese Wind Energy Association
Release Date: 2009-06-24
How is the pricing process for wind energy in China and the policy for subsidies for wind energy?The standard electricity price is achieved from biding and supervised by the central government. The average price varies from one province to the other, but for most of wind power projects, the price per KW usually averages around RMB 0.5 per KW. There are no subsidies from the government, but the grid company will levy surcharge from the users.
Without subsidies how can the government attract investors in wind farms?
The bidding process is organized by the government and the grid companies are legally bound to purchase all the electricity produced in wind farms. Developers and manufacturers are the main parties. The winninng bidder gets its price guaranteed for a period of 20 years.
In the past the winner was always that with the cheapest price offer and margins were not that great. But this is now changing and the government is now paying more attention to other factors such as technology solutions.
As a result recently the winners were not necesseracly the cheapest bid but those offering innovative solutions at an average prices. So margins should be better and investing in a wind farm more attractive.
Although coal power still represents the bulk of our electricity (around 70percent) in the long term its share should gradually decrease for two reasons: coal resources are decreasing gradually and the priority of the government has shifted towards clean and renewable solutions.
The central government is now shutting down small thermal power plants and focusing on wind power and renewable energies. Also with rising coal prices, coal plants are not as attractive as they used to be.
Wind power now is one of the most promising source of renewable energy. In China, the potential for wind power resource is huge and has already attracted lots of investment.The government also release the policies to support it.
How does the 2005 renewable energy law benefits wind power companies?
This law mainly set up the development plan for renewable industry and provide investors with guidance and technological support, ensure stable market conditions and help promote the use of new technologies. It also fixes the condition for pricing of renewable energies price.
The Chinese government has released two important policies to stimulate wind power companies. First it revised the import tariff of key components for high-power generators. Those companies meeting the requirement of the policies can import components tax free. The second one is the government will give the cash award to the megawatt level wind power equipment manufactures, promoting and updating the localization of wind power equipment industry with the awards instead of subsidy. These two policies are focus on state-owned component and equipment manufactures.
What is the current installed capacity and the expectations for the coming years?
In 2008 only 6,246 MW were installed. Which represented a 106% growth from 2007. By the end of 2008, China total installed capacity reached 12,153 MW, the world' 4th largest. With large investment in the pipe, we expect to see another 8,000 MW installed in 2009.
The Chinese installed capacity is increasing quickly, but does not always find its way to the grid. Can you explain this phenomenon?
The development goal of Media & Long Term Development Plan on Renewable Energies issued by the Chinese government in 2007 targeted a 5,000 MW of wind power installed by the end of 2010. However, this figure was actually reached three years early. We estimate the installaled capacity will actually reach 20,000MW by 2010, four times what was planed. The pace of the construction of wind power capacity has overtaken that of grid network and as a result many completed wind power projects can not be connected with grid network in time. But there is no precise statistics about the phenomenom due to the dynamic state of these issues.
The other reason is the method of calculation as Dec 31 is the deadline to calculate lifted quantities. The most centralized season for wind power installation falls into the fourth quarter of each year. This means that several farms finished after lifting, the wind power project can not be immediately connected to the grid network. That is one of the reasons for inconsistence between installation statistics with real synchronization.
How will the wind sector benefit from China’s stimulus package?
In the coming years, Chinese government will invest 3,000 billion yuan into the development of renewable energy. But this also includes nuclear energy. It is still a mystery that how much will go to wind power.
There are more than 70 turbine manufacturers in China. This is a huge number, do you expect concentration of the sector in the coming years?
Wind power is a high tech, high risk and high yield sector. According to the international experience, the wind power manufacturing sector will face merger & acquisition after it reach a certain degree. The companies lacking competitive strength will be eliminated by the market or merged to bigger ones.
Is there hope for foreign companies on the fast growing Chinese market?
China’s wind power market is promising and many companies have have the opportunity to benefit from this boom, regardless of them being domestic or foreign. China devotes a lot of effort in this sector, and is thirsty for advanced technologies and the latest equipments.
There already some good examples, of foreign companies that not only set up factories in China but also their R&D centre, and they product the equipment according to Chinese recquirements instead of just selling their normal products. That is the key factor of success.
| Company: | Chinese Wind Energy Association |
| Position: | Chairman |
| Country: | China |