By Zhang Yongwei, Development Research Center (DRC)

Research Report No 120, 2009

I. Prominent Problems in the Development of China's Wind Power Industry

Since 2003, the central government promulgated the Renewable Energy Law of People's Republic of China and drew up China Renewable Energy Development Plan to improve the environment for the development of renewable energy including wind power. At the same time, a series of incentive measures, such as the launch of wind power franchise rights bidding and favorable fiscal and tax policies, greatly enhanced the development of wind power exploitation and wind power equipments manufacturing. China's gross installed wind power capacity reached 12.21 GW by the end of 2008, 21.5 times as much as that of 2003 and two years ahead of schedule for the country to meet a target of 10 GW by 2010. Now China's installed gross wind power capacity ranks the first in Asia and the fourth in the world. The manufacturing capacity of wind power equipments in China hits 10 GW now and will exceed 20 GW in 2010. While recognizing the achievements in wind power industry, we should also admit that prominent problems still exist in the industry and these problems have severely affected the quality and sustainability of wind power industry.

1. Lack of a unified and coordinated development plan and industry advancing mechanism; serious project slice up to win approval and disorderly wind power market

(1) The plan lacks predictability and coordination between various government agencies. Medium and Long-term Development Plan of Renewable Energy promulgated in 2007 proposed to bring installed gross capacity of wind power to 5 GW in 2010, while it reached 5.91 GW in 2007; the 11th Five-Year Plan for Renewable Energy Development, promulgated in 2008, planned to bring the installed gross capacity to 10 GW in 2010, while it reached 12.27 GW in 2008. Meanwhile, the wind power installation plan does not fit well with other development plans such as power grid construction, resource exploration, science and technology development and industry coordination. Relevant departments, including the National Development and Reform Commission, National Energy Administration, Chinese Academy of Sciences, Chinese Academy of Engineering, the Ministry of Science and Technology and Power Grid Corporation, are all involved in the wind power planning, but they have little interactive cooperation. The plan would be of no guiding significance and restraining forces over market development if there were no united and coordinated medium and long-term development plan of wind power.

(2) Project examining and approval does not refrain over-heated investment. According to current regulations, the National Development and Reform Commission is in charge of wind power project construction above 50,000 kw, and local governments are responsible for the ones below 50,000 kw. But the wind power networks cost is still approved by the National Development and Reform Commission. As a result, some local governments and investment enterprises circumvent the state approval by splitting big construction plans into a bunch of small ones in order to easily get local government approval. A project with 300,000 kw capacity is split into more than 6 smaller ones (Each one less than 50,000 kw). “Small wind power projects” directly approved by local government blossom everywhere, which lead to severe wastes of wind power resources. The disconnection of these splitting projects and power grid construction will further intensify the conflict between wind power and power grids.

(3) Project wins a tender with low price while developers care for scale rather than effectiveness, and they pursue “quick start and large scale”. The fact that the one who offers the lowest bidding price will win the special development rights make developers not to consider current project benefit, but to take winning the special right as the first priority. Some large state-owned power generation enterprises tried to “enclose market shares by making preemptive investments” and “occupy wind energy resources”. Tempted by the irrational investment impulsion, developers intentionally pulled down their bidding prices and therefore the projects are difficult to become profitable. State-owned enterprises winning a bid can charge off the deficit through cross subsidization, but private ones will quit totally due to huge investment risks. Foreign-owned enterprises then stand on the sideline observing the situation. When bids go to the fourth round, there bidders are nothing but state-owned large energy corporations. The distorted bid mechanism will finally deviate the original goal of achieving diversified wind power development, introducing investment through market mechanism and enhancing investment efficiency and sustainable development of wind power.

2. While forming huge manufacturing capacity of wind power equipments, most enterprises fail to improve their own technology and don't own the key technology

With huge market demand for wind power equipments and manufacturing capacity, China now has developed a complete industry chain for wind power equipment manufacturing and professional production of parts and components. What's more, China has mastered the basic producing technology of megawatt wind turbine and can batch produce non-key parts such as blade, generator and wind gear box. However, local enterprises in China haven't mastered the key technology in wind turbine design, large wind turbine bearing, control system and inverter system. With lower localization of parts and components production in these fields, China depends on import for these products. As usually some 18 months are needed get the key parts imported, the production of domestic enterprises is often severely influenced. Taking wind turbine control system for example, in the international market, wind turbine control system occupies less than 8% of the total cost of the whole wind turbine. As China's wind turbine control system is basically imported from Denmark and Austria, not only our costs are more than doubled, but that we are in a very passive position in terms of delivery and product variety. We usually have no choice but to follow others' footsteps.

3. Lower threshold for power grid connection, lacking normal management measures for wind power farm connection, product standard, certification and supervision

Although wind power develops rapidly these years, obviously it lags behind in industry technology standard and support policies and regulations. Renewable Energy Law of People's Republic of China has excessively loose regulations on wind power grid connection, which doesn't mention any necessary technological requirements on wind power connection. The administration division fails to kick off technology standard and certification system on wind power equipments in time, establish or modify relevant connection rules. While these standards and rules are the important preconditions for healthy development of wind power industry, connection management measures of wind power farm, which adapts to Chinese power grid characteristics and large wind power generation, are not established necessarily. The current Technical Rule for Connecting Wind Farm to Power Network has lower standards, which is unable to be adapted to the concentrated connection in large wind power base. The complete machine and parts of wind power equipments lack many technology standards and manufacturers have no standard in design. Unsound inspection and certification system makes most of generation equipments fail to pass test certification and connection inspection. Now there are only two certification institutions at home, certification is not mandatory, but voluntary. Enterprises which pass the certification on complete machine and parts is quite limited. In many countries as Germany, Denmark and India, relevant certification in wind power field is mandatory, and all wind turbines can't be sold at home market until they receive the certification and inspection. This not only guarantees wind turbine quality, but promotes technology accumulation and realize the destination of arranging technical barriers to trade and protecting local industry. Most wind turbine generator systems in China can't provide model parameters now and are unable to meet the requirement which power grid enterprises operate connection emulation calculation. This brings great difficulty to power grid connection. Now wind power industry in China has entered a rapid-developing stage in large scale, if relevant technology standards were not perfected and healthy certification supervision system were not improved, wind power market flooding lots of bad-quality equipments would bring catastrophic result.

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