Wind power in China: new opportunities in a transforming market
China enters new era of wind power development as it finds solutions to fundamental problems
China leads the world in installed wind power by a wide margin, but in 2013, when it came to actual generation, China produced 20 percent less electricity from wind than the United States.
While China is the fastest growing market for wind power in the world, its power generation capacity to date has been hindered by grid gap (wind turbines not physically connected to the power grid) and high rates of curtailment (power grid companies opt to limit the use of wind power due to difficulties in integrating this volatile power into the grid). Both of these issues reflect the challenges the power industry has dealt with over the past years.
Yet according to the 2014 edition of the Global Wind Energy Outlook (GWEO) and given the Chinese government’s commitment to developing its wind resources, the GWEO moderate projection scenario foresees a realistic continuation of wind power growth in China, with annual installations increasing from last year’s 16 GW to 19 GW by 2020. By 2016, the total installed capacity is anticipated to reach 143 GW. Capacity is expected to grow to 217 GW by 2020 and 414 GW by 2030.
Those are some very big projections.
I attended the recent China Wind Power 2014 conference in Beijing on October 22-24, and through my participation and talking to a wide range of industry leaders saw how the Chinese wind market is entering into a new phase, despite the current challenges. Numerous conference announcements and speeches confirmed just how large the market is: new grid connected capacity could reach 20 GW this year, the country’s target to reach 100 GW installed capacity by 2015 should be reached earlier than planned and the plan for the next five years targets a total installed capacity of 200 GW.
The offshore market is on the brink of taking off. The almost 400 MW installed so far come from a number of demonstration projects and intertidal installations. The first wind farm installed significantly far from shore and connected through high voltage links to the grid is scheduled to come online next year. However, targets for 2020 have been reduced down from the overambitious 30 GW, which is in line with the Chinese wind sector’s more realistic expectations.
From the conference buzz it is clear much is going on in the Chinese wind power market. Transmission build out is starting to pay dividends. Curtailment is improving and midterm plans include bringing the high wind resource provinces of Inner Mongolia and others back into the picture. One could say that China is entering into a new era of wind development as it finds solutions to fundamental problems.
Chinese media outlets reported in September this year that China’s National Development and Reform Commission (NDRC) has proposed cutting the Feed In Tariff (FIT) from 0.51 yuan ($0.08), 0.54 yuan, 0.58 yuan and 0.61 per kilowatt-hour (kWh) — depending on where a project is located — to 0.47 yuan, 0.50 yuan, 0.54 yuan and 0.59 yuan/kWh, respectively.
With this new FIT proposal another significant change is occurring: performance and reliability are focus areas for the Chinese wind industry. The country is shifting its focus on the amount of kW installed to the amount of kWh produced. In other words, China is following more competitive business models in which efficiency and performance are key factors needed to succeed. The process will take time as the industry becomes more transparent and technology improves. In line with this trend, operation and maintenance are being discussed and a number of new players are entering the market. Product announcements from Goldwind, Envision and Vestas reflect this new reality.
In such a transforming market the role of international companies should be highlighted and the collaboration between them and local players enhanced. Combining the experience of European industry players with the fast growing capabilities of local players will help build the specific products and solutions this huge market needs.
As this collaboration takes place, the wind industry will gear up to address the next challenge of how to integrate such a large amount of variable renewable power. Industry leaders and government authorities will have to figure out how to introduce the needed flexibility in the system and how to incentivize investment to provide the ancillary services and other advanced solutions required. An exciting new market is shaping up and ABB is proud to be part of it.
Sources: Wilson Center’s Environmental Change and Security Program; Global Wind Energy Outlook 2014; China’s National Development and Reform Commission (NDRC); ReCharge.