In mid-February, the National Energy Administration issued its official document on 2017
Energy Work Instruction. Apart from announcing a projected annual plan constructing 25,000 megawatts (MW) of wind power projects this year, the instruction clearly conveyed the central government’s mixed attitude toward the development of the wind energy sector, continuing its stern warnings about the distorted expansion of wind power. Specifically, it warned that the authorities should “strictly restrict the construction of new wind power projects in regions where deliberate curtailment of wind farm output is already prevalent, and suspend new distribution of wind power ‘scales’ [assignments of generation allowances] in those provinces where the wind energy rejection rate [the amount of power being generated but not reaching the local energy grid] reached over 20 percent in the previous year.”
So why is the government both pushing the expansion of wind energy and reining the sector in? The new instruction reveals the paradox faced by the sector in China for years.
Boom
On the positive side, China’s wind energy industry has witnessed rapid growth over the previous decade thanks to the central government’s dedication to developing renewable energy. Since the Renewable Energy Law was passed in 2005, wind power, along with other renewable energy sources like solar has enjoyed a favorable environment in China.
The law proposed incentives to encourage companies to participate in wind power generation. For example, the law requires local government to provide financial support such as tax exemptions or reductions, and loan interest subsidies to wind power developers. To mitigate the high cost of wind power generation at the initial stages, the law also provides subsidies. The implementation of the law has had significant effect. With strong policy incentives, installed wind capacity increased at an unprecedentedly fast rate.
By the end of 2007, the cumulative installed wind energy capacity had reached 6.04 gigawatts (GW), meaning China surpassed Denmark and ranked amid the world’s top five developers of wind power. In 2008, the cumulative capacity reached over 10 GW and in 2009, China added anther 13.8 GW, a remarkable annual growth of 124 percent. In 2010, the newly-installed wind capacity was 18.9 GW and the total capacity hit 44.7 GW, making China top the US as the largest user of wind power. The installation continued to increase in the following years but the growth rate declined for a few years before a sharp recovery after 2014, which still continues.
As the wind power industry boomed, domestic manufacturing of necessary equipment was encouraged by the government. Thus the scale of wind turbine manufacturing in China also grew immensely. Manufacturers strengthened their technological capacities through technological importation, digestion and re-innovation. The domestic market share of Chinese wind power manufacturers grew rapidly, from less than 10 percent before 2000 to over 55 percent by 2007 and reaching 90 percent by 2010. According to the Review and Prospects of China’s Wind Power Industry in 2010, in 2004, there were only six domestic turbine manufacturers in China, while at the end of 2010, China had become the largest source of wind turbine manufacturers, with over 100 firms. By 2015, five out of the top 10 wind turbine manufacturers globally were Chinese, the most recognized being Goldwind China.
Thanks to the scale of the new projects the price of wind turbines in China began to decline from around 2010. Domestic turbine manufacturers began producing key components and parts including blades, generators, converters and control systems.
But despite being regarded as the most promising renewable energy source in China by the central government, and despite better grid connections and turbine technology, the use of wind power has met consistent hurdles in recent years.
Paradox
In 2015, the average utilization time of wind power generators for the whole year was equivalent to 72 days of continuous power generation, 7.4 days less than in 2014, and 15 days less than in 2013. Utilization time refers to the period when the generators are actually operating and producing power.
Between 2010 and 2016, the overall wind energy rejection rate in China, used to measure waste power, was above 10 percent. In 2016, the wind energy rejection problem became more serious. Based on statistics released by the National Energy Administration, the overall wind energy rejection rate in China was 21 percent, which is 6 percent more than the rate in 2015. The rejection rates in western Gansu province and the Xinjiang Autonomous Region, where wind power has been particularly pushed due to the wide and flat environment, were 47 percent and 45 percent respectively.
The rejection problem has become the biggest barrier for the further development of wind energy in China. According to an article by Qin Haiyan, secretary general for the Chinese Wind Energy Association in 2015, even in western Inner Mongolia, where wind power utilization accounts for the highest proportion in total power generation, the ratio was merely 13 percent. “This is far from China’s goal established by President Xi Jinping on attaining 20 percent of its energy from non-fossil-fuel sources by 2030.”
In reality, wind’s potential is only viable when it can be integrated into the power system via practical infrastructure and operational conditions.
There are a range of analyses on the reasons behind the widespread rejection of wind energy, with some blaming it on the over-construction of wind farms, technical barriers including mismatching with electric power grids, limited flexible units, low-quality equipment, and deliberate favoring of coal power over wind by grid operators.
In particular in the last two years, according to a report by engineering magazine IEEE Spectrum in May 2016, government statistics show that curtailment – in which regional grid operators order wind farms to stay offline – has gotten worse. The report further explains that “Some of China’s curtailment is a symptom of inflexible power grids. In the wind-rich North in particular, coal-fired power plants supply district heating as well as electricity. So they must run during the winter, clogging transmission lines and crowding out wind power.”
The key problem faced by China’s wind power industry is a mismatch of the old systems for operating and managing energy with the fast development of the wind sector. According to Qin Haiyan, this situation was also faced by other countries, such as Germany and Denmark, as they developed wind power.
“The sustainable energy revolution is a global development trend and China has certainly played a leading role in promoting renewable energy and setting up favorable stimulus policies,” Qin said to the NewsChina reporter during a recent interview in late March: “China has really made significant achievements in this regard. But it is encountering some problems at the moment, with the most significant one being that the power management and operation system is no longer in accordance with the development of renewable energy.”
Local Incentives
Miao Hong, China Energy Program Lead with the Washington-based World Resources Institute told NewsChina that “most coal-fired power plants are pork-barrel projects for local government from the very beginning of their construction to the practical power generation process, highly pegged to local GDP and tax income, and so understandably, local governments still prefer coal.”
Coal-fired power generation was the basis of China’s grid system and provided the fuel of economic development. As the state grid enjoys an absolute monopoly and has been the chief beneficiary of the industry, grid operators are under pressure to give each plant a share of the market. That’s why over 70 percent of the total energy generation in China is still produced by coal-fired power plants today.
Thus, according to both Qin and Miao, the deliberate curtailment of wind farm operations by local governments is not due to the“overcapacity” of wind energy, but the glut of coal-fired power capacity. In the Ningxia Autonomous Region, as Qin explained, keeping coal-fired plants operational can also secure the coal mining industry within the same area, thus securing the local government’s tax revenue and GDP growth rate. “This is why Ningxia would prefer shutting down its wind power plants rather than coal-fired ones, even though they obviously know the latter cause more pollution and pose a threat to public health.”
Chinese authorities started policies to reduce similar “institutional” curtailment, which included enforcement of existing laws to ensure priority grid access for renewable generation, and mandatory compensation for wind and solar operators when curtailment occurs. The policies have had some initial effects and started to reduce a large chunk of the curtailment.
Qin Haiyan mentioned Hebei Province, which surrounds Beijing, as an example of positive progress. Due to the central government’s dedication to tackling the air pollution issue in Beijing and its surrounding regions in recent years, strong enforcement of wind energy adoption rather than coal-fired plants has resulted in the wind rejection rate finally dropping from 14 percent in 2015 to 9 percent in 2016 in Hebei Province. “Despite the new wind energy installment increases within the province this year, Hebei could limit its wind rejection to below 10 percent.” Qin Haiyan continued: “This means a strong political will together with local governments’ enforcement can actually solve the problem.”
As a result, Hebei has been removed from a warning list on the national wind investment monitoring system this year. “This shows we can improve the lack of local government willingness to take action,” added Qin.
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