China should cap wind power on-grid tariffs in order to bring tariffs set by local governments into line with those set through the national public bidding system, according to a report recently released that was compiled by the National Development and Reform Commission's Energy Bureau.
While the report did not propose any specific price caps, the adoption of such a system would serve as a blow to foreign developers in China's wind energy market who have relied on favorable local on-grid tariffs for small-scale wind power projects in order to generate acceptable profits
Wind generators projects with over 50 megawatts of capacity need to go through a public bidding process, organized by the NDRC, in which low power tariffs are the primary criterion for winning. Tariffs for projects awarded by local governments tend to be RMB 0.1 ($0.013) per kilowatt hour higher than those awarded through the central government's bidding system.
Beijing aims to drive down the price of wind generated power in order to encourage its use, which it believes can be achieved through such a competition bidding system as well as the localization of wind power equipment production.
However, such an approach has benefited deep-pocketed state-owned power companies that have emission-reduction targets to fulfill. Such companies tend to submit uneconomic bids in order to win the project, and then leave the wind farm either undeveloped or equipped with low-quality equipment in order to cut costs.
By going through local governments though, foreign companies can secure better power on-grid tariff rates as well as more control over key aspects of their projects, such as the location of the wind farm. Such important issues can sometimes make or break a deal, Alberto Mendez, the China general manager of Spain's Gamesa, one of the world's largest wind turbine makers and wind farm developers, said at an industry forum held in May.
At present, wind farm projects planned or awarded via tenders by the central government have a combined power generation capacity of 2,000 MW, while those handled by local governments have a combined capacity of almost 8,000 MW.
Industry insiders have long called for a premium rate for wind power that would be set around RMB 0.25 ($0.03) per kWh higher than power from coal-fired plants in order to create further incentives to attract investors.
The report also said that China should adjust its wind turbine development targets at an appropriate time as, if current trends continue, the country is likely to achieve a wind power capacity triple that of its current 2020 target of 30,000 MW.
China could even achieve 120,000 MW of installed wind power capacity by 2020 if the country's policy environment is improved, according to the report.
The NDRC currently expects over 2,000 MW of wind power generating capacity to go into operation this year, adding to the 2,600 MW of wind generators generating capacity that was installed last year.
Of the total capacity added last year, Goldwind from northwestern China's Xinjiang Autonomous Region accounted for 33.2 percent of the addition, followed by Denmark's Vestas, one of the world's largest producers of wind turbines, with 23.5 percent. Gamesa accounted for 15.8 percent of newly installed capacity, while U.S.-based GE accounted for 12.6 percent, according to the China Wind Energy Association.
From:Hummer Blog
