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INSIDE STORIES
                                                                                                           on climate
                                                                                                          compatible
                                                                                                        development
                                                                                                                         November 2011



Key messages                                   How China built the world’s largest
● A clear expression of political will,
  backed by a set of effective policy
  measures, has been key to China’s
                                               wind power market
  success in building the world’s
  largest wind power market.                   The story of the Chinese wind power industry is remarkable. From a
● The establishment of a stable and            small number of demonstration projects at the beginning of the century,
  favourable pricing mechanism is              the Chinese wind power market has grown to become the world’s largest.
  crucial for the development of wind          At the end of 2010, it overtook the United States to become the leader in
  power, because it increases the              terms of cumulative installed capacity. Even though China used to import
  chances for profitability and growth.        80% of its wind energy equipment, domestic manufacturing has exploded
● A strong domestic market                     since 2006 and now supplies more than 70% of the domestic market. In
  contributes to the growth of                 2010, China’s wind power market attracted investments of RMB 89 billion
  local wind power equipment                   (US$14 billion) and employed over 150,000 people1.
  manufacturing.


                                               Overview of China’s wind                        viable technologies, making it today’s
                                               market                                          market leader. The figure below shows
                                                                                               the growth of China’s wind market over
                                               Just as China’s economy has grown at            the last decade. Since 2006, the year that
                                               a breathtaking pace over the past two           China’s Renewable Energy Law came
                                               decades, so too has its energy demand.          into effect, the wind market in China has
                                               Such development puts enormous                  almost doubled its capacity each year3.
                                               pressure on the security of the country’s
                                               electricity supply in China, 70% of which       In 2005, the Chinese government
                                               is based on coal. The price of coal has         announced a target of 30 GW installed
                                               been rising steadily, gradually making          capacity of wind power by 2020. As
                                               wind power a competitive alternative.           shown in the figure above, this target
                                               Moreover, coal’s environmental impacts          was surpassed a full 10 years ahead of
                                               – such as air pollution, solid waste            schedule. Today, according to the China
                                               generation and climate change – have            Wind Power Outlook 2010 report, the
                                               also become major concerns to both the          industry believes that it can achieve as
                                               government and the public2.                     much as 200 GW by 2020. Under this
                                                                                               scenario, assuming that 200 GW of wind
                                               As a result, the Chinese government             power capacity could generate 440,000
                                               is increasingly looking at renewable            GWh of electricity, wind development will
                                               energy sources to help provide electricity      help reduce greenhouse gas emissions
                                               in an environmentally and socially              by 440 million tons by 2020. It will
                                               acceptable way – and at a competitive           also limit air pollution by reducing coal
Author:                                        price. Among various renewable energy           consumption, generate over RMB 400
Ailun Yang                                     sources, wind power is one of the most          billion (US$63 billion) in industrial added
World Resources Institute                      technologically proven and financially          value, and create half a million jobs.4




CDKN helps developing countries to design and deliver climate compatible development. When decision makers in government, business
and civil society speak to us about their aims and needs, they often ask about ‘best practice’ in other countries or, indeed, mistakes to
avoid. What are the leading innovations in integrating climate change planning with economic growth strategies and poverty reduction?
What are the biggest challenges faced along the way: institutional, financial, political, technical? This paper is one of a series of policy
briefs that explore the ‘Inside stories on climate compatible development’: briefing papers that aim to answer these questions.
Growth of China’s wind power market                                                                                In reality, the implementation of these
                                                                                                                        policies has encountered problems. For
                           50000
                                                                                                                        example, delays in grid construction
                           45000                                                                                        by the grid companies have hindered
                                                                                                                        the ability of existing wind farms to sell
                           40000
                                                                                                                        power. As state monopolies, the grid
                                                                                                                        companies often escape accountability.
 Installed capacity (MW)




                           35000
                                                                                                                        The Renewable Energy Fund remains
                           30000
                                                                                                                        embryonic: the amount of money in the
                           25000                                                                                        Fund has yet to be defined and detailed
                                                                                                                        provisions regarding its use have yet to
                           20000
                                                                                                                        be announced. And, although the ‘30 GW
                           15000                                                                                        by 2020’ development target clearly
                                                                                                                        underestimated market growth and has
                           10000
                                                                                                                        already been met, the government has
                           5000                                                                                         not provided a new target to further
                                                                                                                        inspire market development.
                              0
                                   2000   2001   2002   2003   2004   2005       2006   2007       2008   2009   2010
                                                                                                                        However, the existing framework has
        Newly
        Installed                    77     57     66     98    197        507   1288   3311       6154 13803 18928     sent a strong signal regarding the
        Capacity
                                                                                                                        government’s intended policy direction,
        Total
        Installed                   342    399    465    563    760       1267   2555   5866 12020 25805 44733          and has successfully provided the
        Capacity
                                                                                                                        incentives needed for the development
     Source of data: China Wind Energy Association                                                                      of the wind market in China.

                                                                                                                        Pricing mechanisms:
Package of supportive                                                       companies are legally obliged to            feed-in-tariff versus
policies for wind power                                                     purchase 100% of the wind power             concession bidding
                                                                            generated, thus ensuring full grid
The key to China’s wind power success                                       access for wind power.                      Wind power is a proven technology.
is a clear expression of political will,                              ●     Stable and favourable pricing               The main barrier to the large­scale
combined with a set of effective support                                    mechanism: This provides more               development of wind power is that it
measures. China’s policies promoting                                        predictability and profitability for wind   is often not yet competitive compared
the development of wind power are                                           power investors and developers.             with traditional fossil fuels. Therefore,
enshrined in the Renewable Energy Law,                                ●     Cost sharing for wind power                 a favourable pricing mechanism is the
which has been in effect since January                                      development: The added costs                main factor affecting the level of active
2006, and its related implementation                                        of developing wind power as                 investment by developers and market
rules and regulations. Collectively, these                                  compared to those of traditional            growth.
measures send a clear message to                                            fossil fuel generation (determined
businesses and government officials at                                      by local prices of desulphurised            According to the ‘True cost of coal’
all levels that China has great ambitions                                   coal generation) are shared across          study5 released in 2008, it is estimated
for wind power. They also form a legal                                      the country so that places rich in          that each ton of coal burned in China
framework that can be summarised by                                         wind resources have incentives              generates an environmental cost of
the following key elements:                                                 to develop their full potential. This       RMB 150 (US$24). Many countries
● Clear development targets: The                                            helps create a level playing field          with renewable energy policies use the
      ’30 GW by 2020’ goal was the                                          for the wind power market across            external costs (environmental, social,
      country’s first target for wind power.                                different regions.                          health, etc.) of fossil fuel to justify
      Representing 23 times the installed                             ●     Creation of the Renewable En-               supportive pricing mechanisms for wind
      capacity when it was announced in                                     ergy Fund: This fund aims to                power, which are normally considered
      2005, the goal sent a strong signal                                   support      technology        research     market phase­in subsidies.
      that wind power development was a                                     and development, wind resource
      government priority.                                                  assessment, development of tech­            However, countries have used different
● Compulsory purchase of re-                                                nology standards, and demonstra­            tools to design these subsidies, including
      newable energy power: Grid                                            tion projects.                              the most common forms:




                                                                                               2
●   A feed-in-tariff system offers a            0.61 RMB/kWh (US$ 9.6 cents)7. While        rule out that the localisation requirement
    guaranteed rate for all generated           the bidding system could still be used –    played some role in accelerating local
    wind power fed into the national            for example, for offshore wind projects     manufacturing, the Chinese government
    grid, in order to provide wind power        – the feed­in tariff allowed wind farm      and most industry players argue that it
    developers with more certainty as to        developers to plan their projects based     was mainly the strong domestic market
    the profitability levels. Feed­in tariffs   on a guaranteed price. The industry and     that fuelled the transition8. By 2010,
    have contributed to the success             most experts warmly welcomed this           7 of the 15 largest global wind power
    of the wind power industries in             move, as it eliminated one of the biggest   equipment producers (in terms of
    a number of countries, including            uncertainties standing in the way of wind   annual installed capacity) were Chinese
    Germany and Spain.                          power development in China.                 companies9.
●   In a concession bidding system,
    developers bid to provide wind              The growth of local                         China’s advances in the production of
    power at the cheapest prices. This          manufacturing                               wind power equipment have reduced the
    competition mechanism aims to                                                           cost of wind power significantly. Since
    lower the cost quickly. However,            At the same time as the government          2005, the price of wind turbines has
    bidding systems in countries such as        created a huge domestic market,             dropped by one third in China, benefitting
    the United Kingdom have so far had          the Chinese government was also             not just China but the global wind power
    little success in promoting market          determined to have it supplied by its own   market due to China’s growing export
    growth, mostly because developers           wind equipment manufacturers. In July       ambition10.
    bid so low that they later decide not       2005, the National Development and
    to implement their projects.                Reform Commission of China released         Falling prices seem to have led to some
                                                a directive stating that wind farms had     sacrifice of quality control, as with a
Starting in 2003, China used a                  to buy equipment in which at least          number of incidents where some locally
concession bidding system to determine          70 percent of the value was domestic­       manufactured wind turbines had to be
the tariffs for wind power. China’s             ally manufactured. This was a formidable    disconnected from the grid due to quality
Renewable Energy Law promised that              challenge, since in 2005 only one           failures. In early 2011, the Chinese
the government would determine feed­            Chinese wind equipment manufacturer         government issued a series of technical
in­tariffs for renewable energy projects,       (Goldwind) was able to produce on a         standards in response to this problem.
based on the characteristics of different       commercial scale.                           These new policy initiatives from China
types of renewable energy and the                                                           contribute to the general trend among
situations in different regions. However,       Foreign players in the global wind          global wind manufacturers to change
even after the Renewable Energy Law             market heavily criticised this local        the focus from quantity to quality in
was adopted, the government continued           sourcing requirement. Many claimed          order to achieve sustainable market
to organise concession bidding as the           that it violated World Trade Organization   development.
tool for price discovery. By 2007, there        (WTO) rules. In late 2009, the Chinese
were five rounds of bidding, with a total       government revoked the requirement.         Lessons and implications
installed capacity of 3.35 GW6. However,
because the bidding prices were too low,        However, by then, the objectives of the     Examining the rapid growth of China’s
some of these concession projects have          localisation requirement had already        wind power market leads to the following
suffered losses while others did not even       been achieved – over 70% of wind            reflections:
go forward.                                     equipment bought by wind developers         ● China’s experience with pricing
                                                was produced in China. Normally,                 policies for wind power shows
In order to ease the growing tensions           producers of wind equipment choose               that at the early stages of market
between the enthusiasm of the wind              to locate their factories as close to the        development, it is very important
market and the ineffective pricing system,      point of delivery as possible, because           to prioritise support for wind power
the Chinese government announced the            the components of turbines are large             developers over efforts to lower
Notice on Pricing Policy Improvement            and expensive to ship. By 2006, the              the price of wind power. The use
for Wind Power in 2009, which set up            major international manufacturers had            of policy instruments such as feed­
a systematic feed­in tariff model for           already started to move their production         in tariffs provides a stable market
wind power with variations according            to China. Inspired by the huge market            environment with greater certainty
to the quality of the wind resources            potential, many of the biggest Chinese           of profitability. In contrast, the use of
in different regions. There are four            heavy industry manufacturers had also            a concession­bidding model for the
different categories for the tariff ranging     established new production lines for wind        purpose of price discovery could risk
from 0.51 RMB/kWh (US$ 8.0 cents) to            power equipment. While it is difficult to        discouraging potential investors,




                                                                   3
especially     smaller    or   foreign                      be replicated elsewhere. Fortunately,                        it has made little progress in
       investors, because of uncertainty                           wind power is a truly global market,                         restructuring its energy mix in the past
       regarding profitability.                                    with over 80 countries around the                            few years. The massive gap between
●      China’s achievements with wind                              world working to deploy this clean                           energy supply and demand has
       power development demonstrate                               technology. Each country will decide                         created space for the development
       that a stable and favourable market                         for itself whether it makes more                             of all sources of power generation.
       environment is what ultimately                              economic sense to support local                              That is why the proportion of coal in
       creates the demand that fuels                               manufacturing or to import. Some                             China’s energy production remains
       local industry. At the same time,                           countries may also consider the                              at over 70 percent. To achieve a
       the compatibility between policies                          creation of a regional market, as                            cleaner and more balanced energy
       promoting domestic clean industry                           with the experience of the European                          mix, it is imperative to tilt the playing
       and WTO rules will continue to be a                         Union, in order to attract investments                       field by introducing policies that take
       hot topic in the years to come.                             and accelerate market growth.                                into account the externalities of fossil
●      The sheer size of China raises the                    ●     Although China has made great                                fuels.
       question of whether its success can                         strides in developing wind power,


References
China Wind Energy Association (CWEA) (2011)                       policy support mechanisms. Energy Policy                Mao Yushi et al. (2008) True Cost of Coal in
    Data on Installed Capacity of China’s Wind                    35 1844–1857.                                               China. Beijing, China: China Coal Industry
    Power Market. http://www.cwea.org.cn/                    Li Junfeng et al. (2006) A Study on the Pricing                  Press
    download/display_info.asp?id=39                               Policy of Wind Power in China.                          National Development and Reform Commission
Global Wind Energy Council (2010) Global                     Li Junfeng et al. (2007) China Wind Power Report                 (NDRC) (2009) Notice Regarding the Price
    Wind Energy Outlook. http://www.gwec.                         2007. Beijing, China: China Environmental                   Policy on Wind Power into the Electricity
    net/fileadmin/documents/Publications/                         Science Press.                                              Grid (Fa Gai Jia Ge [2009] No. 1906).
    GWEO%202010%20final.pdf                                  Li Junfeng et al. (2010) China Wind Power                        http://www.sdpc.gov.cn/zcfb/zcfbtz/2009tz/
Government of China (2006) Renewable Energy                       Outlook 2010. Beijing, China: Hainan                        t20090727_292827.htm
    Law.      http://www.china.com.cn/chinese/                    Press.                                                  NDRC (2005) Regulation about Wind Power
    law/798072.htm                                           Li Junfeng et al. (2011) China Wind Power                        Project Development (Fa Gai Jia Ge [2005]
Lewis, J.I., Wiser, R. (2007), Fostering a                        Outlook 2011. Beijing, China: China                         No.1204). http://www.sdpc.gov.cn/nyjt/
    renewable energy technology industry: An                      Environmental Science Press.                                nyzywx/t20050810_41378.htm
    international comparison of wind industry



Endnotes:                                                    About CDKN
1.    Li Junfeng et al., 2011
2.    Mao Yushi et al., 2008                                 The Climate and Development Knowledge Network (CDKN) aims to help decision­makers in developing
3.    China Wind Energy Association, 2011                    countries design and deliver climate compatible development. We do this by providing demand­led
4.    Li Junfeng et al., 2010                                research and technical assistance, and channelling the best available knowledge on climate change and
5.    Mao Yushi et al., 2008                                 development to support policy processes at the country level.
6.    Li Junfeng et al., 2010
7.    NDRC, 2009                                             About WRI
8.    Lewis and Wiser, 2007                                  The World Resources Institute (WRI) is an environmental think tank that goes beyond research to
9.    Li Junfeng et al., 2011                                create practical ways to protect the Earth and improve people’s lives. (www.wri.org)
10.   Ibid.



                                                                                                                                        Front cover photo: Zhan Tian/iStockphoto
                                                                                                                      Editing, design and layout: Green Ink (www.greenink.co.uk)




www.cdkn.org                                                             e: enquiries@cdkn.org                                                     t: +44 (0) 207 212 4111

This document is an output from a project funded by the UK Department for International Development (DFID) for the benefit of developing countries. However, the views
expressed and information contained in it are not necessarily those of or endorsed by DFID, which can accept no responsibility for such views or information or for any reliance
placed on them. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon
the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy
or completeness of the information contained in this publication, and, to the extent permitted by law, the Climate and Development Knowledge Network’s members, the UK
Department for International Development (‘DFID’), their advisors and the authors and distributors of this publication do not accept or assume any liability, responsibility or
duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

Copyright © 2011, Climate and Development Knowledge Network. All rights reserved.                                                                      Printed on recycled paper

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GreenNet Presentation

  • 1. INSIDE STORIES on climate compatible development November 2011 Key messages How China built the world’s largest ● A clear expression of political will, backed by a set of effective policy measures, has been key to China’s wind power market success in building the world’s largest wind power market. The story of the Chinese wind power industry is remarkable. From a ● The establishment of a stable and small number of demonstration projects at the beginning of the century, favourable pricing mechanism is the Chinese wind power market has grown to become the world’s largest. crucial for the development of wind At the end of 2010, it overtook the United States to become the leader in power, because it increases the terms of cumulative installed capacity. Even though China used to import chances for profitability and growth. 80% of its wind energy equipment, domestic manufacturing has exploded ● A strong domestic market since 2006 and now supplies more than 70% of the domestic market. In contributes to the growth of 2010, China’s wind power market attracted investments of RMB 89 billion local wind power equipment (US$14 billion) and employed over 150,000 people1. manufacturing. Overview of China’s wind viable technologies, making it today’s market market leader. The figure below shows the growth of China’s wind market over Just as China’s economy has grown at the last decade. Since 2006, the year that a breathtaking pace over the past two China’s Renewable Energy Law came decades, so too has its energy demand. into effect, the wind market in China has Such development puts enormous almost doubled its capacity each year3. pressure on the security of the country’s electricity supply in China, 70% of which In 2005, the Chinese government is based on coal. The price of coal has announced a target of 30 GW installed been rising steadily, gradually making capacity of wind power by 2020. As wind power a competitive alternative. shown in the figure above, this target Moreover, coal’s environmental impacts was surpassed a full 10 years ahead of – such as air pollution, solid waste schedule. Today, according to the China generation and climate change – have Wind Power Outlook 2010 report, the also become major concerns to both the industry believes that it can achieve as government and the public2. much as 200 GW by 2020. Under this scenario, assuming that 200 GW of wind As a result, the Chinese government power capacity could generate 440,000 is increasingly looking at renewable GWh of electricity, wind development will energy sources to help provide electricity help reduce greenhouse gas emissions in an environmentally and socially by 440 million tons by 2020. It will acceptable way – and at a competitive also limit air pollution by reducing coal Author: price. Among various renewable energy consumption, generate over RMB 400 Ailun Yang sources, wind power is one of the most billion (US$63 billion) in industrial added World Resources Institute technologically proven and financially value, and create half a million jobs.4 CDKN helps developing countries to design and deliver climate compatible development. When decision makers in government, business and civil society speak to us about their aims and needs, they often ask about ‘best practice’ in other countries or, indeed, mistakes to avoid. What are the leading innovations in integrating climate change planning with economic growth strategies and poverty reduction? What are the biggest challenges faced along the way: institutional, financial, political, technical? This paper is one of a series of policy briefs that explore the ‘Inside stories on climate compatible development’: briefing papers that aim to answer these questions.
  • 2. Growth of China’s wind power market In reality, the implementation of these policies has encountered problems. For 50000 example, delays in grid construction 45000 by the grid companies have hindered the ability of existing wind farms to sell 40000 power. As state monopolies, the grid companies often escape accountability. Installed capacity (MW) 35000 The Renewable Energy Fund remains 30000 embryonic: the amount of money in the 25000 Fund has yet to be defined and detailed provisions regarding its use have yet to 20000 be announced. And, although the ‘30 GW 15000 by 2020’ development target clearly underestimated market growth and has 10000 already been met, the government has 5000 not provided a new target to further inspire market development. 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 However, the existing framework has Newly Installed 77 57 66 98 197 507 1288 3311 6154 13803 18928 sent a strong signal regarding the Capacity government’s intended policy direction, Total Installed 342 399 465 563 760 1267 2555 5866 12020 25805 44733 and has successfully provided the Capacity incentives needed for the development Source of data: China Wind Energy Association of the wind market in China. Pricing mechanisms: Package of supportive companies are legally obliged to feed-in-tariff versus policies for wind power purchase 100% of the wind power concession bidding generated, thus ensuring full grid The key to China’s wind power success access for wind power. Wind power is a proven technology. is a clear expression of political will, ● Stable and favourable pricing The main barrier to the large­scale combined with a set of effective support mechanism: This provides more development of wind power is that it measures. China’s policies promoting predictability and profitability for wind is often not yet competitive compared the development of wind power are power investors and developers. with traditional fossil fuels. Therefore, enshrined in the Renewable Energy Law, ● Cost sharing for wind power a favourable pricing mechanism is the which has been in effect since January development: The added costs main factor affecting the level of active 2006, and its related implementation of developing wind power as investment by developers and market rules and regulations. Collectively, these compared to those of traditional growth. measures send a clear message to fossil fuel generation (determined businesses and government officials at by local prices of desulphurised According to the ‘True cost of coal’ all levels that China has great ambitions coal generation) are shared across study5 released in 2008, it is estimated for wind power. They also form a legal the country so that places rich in that each ton of coal burned in China framework that can be summarised by wind resources have incentives generates an environmental cost of the following key elements: to develop their full potential. This RMB 150 (US$24). Many countries ● Clear development targets: The helps create a level playing field with renewable energy policies use the ’30 GW by 2020’ goal was the for the wind power market across external costs (environmental, social, country’s first target for wind power. different regions. health, etc.) of fossil fuel to justify Representing 23 times the installed ● Creation of the Renewable En- supportive pricing mechanisms for wind capacity when it was announced in ergy Fund: This fund aims to power, which are normally considered 2005, the goal sent a strong signal support technology research market phase­in subsidies. that wind power development was a and development, wind resource government priority. assessment, development of tech­ However, countries have used different ● Compulsory purchase of re- nology standards, and demonstra­ tools to design these subsidies, including newable energy power: Grid tion projects. the most common forms: 2
  • 3. A feed-in-tariff system offers a 0.61 RMB/kWh (US$ 9.6 cents)7. While rule out that the localisation requirement guaranteed rate for all generated the bidding system could still be used – played some role in accelerating local wind power fed into the national for example, for offshore wind projects manufacturing, the Chinese government grid, in order to provide wind power – the feed­in tariff allowed wind farm and most industry players argue that it developers with more certainty as to developers to plan their projects based was mainly the strong domestic market the profitability levels. Feed­in tariffs on a guaranteed price. The industry and that fuelled the transition8. By 2010, have contributed to the success most experts warmly welcomed this 7 of the 15 largest global wind power of the wind power industries in move, as it eliminated one of the biggest equipment producers (in terms of a number of countries, including uncertainties standing in the way of wind annual installed capacity) were Chinese Germany and Spain. power development in China. companies9. ● In a concession bidding system, developers bid to provide wind The growth of local China’s advances in the production of power at the cheapest prices. This manufacturing wind power equipment have reduced the competition mechanism aims to cost of wind power significantly. Since lower the cost quickly. However, At the same time as the government 2005, the price of wind turbines has bidding systems in countries such as created a huge domestic market, dropped by one third in China, benefitting the United Kingdom have so far had the Chinese government was also not just China but the global wind power little success in promoting market determined to have it supplied by its own market due to China’s growing export growth, mostly because developers wind equipment manufacturers. In July ambition10. bid so low that they later decide not 2005, the National Development and to implement their projects. Reform Commission of China released Falling prices seem to have led to some a directive stating that wind farms had sacrifice of quality control, as with a Starting in 2003, China used a to buy equipment in which at least number of incidents where some locally concession bidding system to determine 70 percent of the value was domestic­ manufactured wind turbines had to be the tariffs for wind power. China’s ally manufactured. This was a formidable disconnected from the grid due to quality Renewable Energy Law promised that challenge, since in 2005 only one failures. In early 2011, the Chinese the government would determine feed­ Chinese wind equipment manufacturer government issued a series of technical in­tariffs for renewable energy projects, (Goldwind) was able to produce on a standards in response to this problem. based on the characteristics of different commercial scale. These new policy initiatives from China types of renewable energy and the contribute to the general trend among situations in different regions. However, Foreign players in the global wind global wind manufacturers to change even after the Renewable Energy Law market heavily criticised this local the focus from quantity to quality in was adopted, the government continued sourcing requirement. Many claimed order to achieve sustainable market to organise concession bidding as the that it violated World Trade Organization development. tool for price discovery. By 2007, there (WTO) rules. In late 2009, the Chinese were five rounds of bidding, with a total government revoked the requirement. Lessons and implications installed capacity of 3.35 GW6. However, because the bidding prices were too low, However, by then, the objectives of the Examining the rapid growth of China’s some of these concession projects have localisation requirement had already wind power market leads to the following suffered losses while others did not even been achieved – over 70% of wind reflections: go forward. equipment bought by wind developers ● China’s experience with pricing was produced in China. Normally, policies for wind power shows In order to ease the growing tensions producers of wind equipment choose that at the early stages of market between the enthusiasm of the wind to locate their factories as close to the development, it is very important market and the ineffective pricing system, point of delivery as possible, because to prioritise support for wind power the Chinese government announced the the components of turbines are large developers over efforts to lower Notice on Pricing Policy Improvement and expensive to ship. By 2006, the the price of wind power. The use for Wind Power in 2009, which set up major international manufacturers had of policy instruments such as feed­ a systematic feed­in tariff model for already started to move their production in tariffs provides a stable market wind power with variations according to China. Inspired by the huge market environment with greater certainty to the quality of the wind resources potential, many of the biggest Chinese of profitability. In contrast, the use of in different regions. There are four heavy industry manufacturers had also a concession­bidding model for the different categories for the tariff ranging established new production lines for wind purpose of price discovery could risk from 0.51 RMB/kWh (US$ 8.0 cents) to power equipment. While it is difficult to discouraging potential investors, 3
  • 4. especially smaller or foreign be replicated elsewhere. Fortunately, it has made little progress in investors, because of uncertainty wind power is a truly global market, restructuring its energy mix in the past regarding profitability. with over 80 countries around the few years. The massive gap between ● China’s achievements with wind world working to deploy this clean energy supply and demand has power development demonstrate technology. Each country will decide created space for the development that a stable and favourable market for itself whether it makes more of all sources of power generation. environment is what ultimately economic sense to support local That is why the proportion of coal in creates the demand that fuels manufacturing or to import. Some China’s energy production remains local industry. At the same time, countries may also consider the at over 70 percent. To achieve a the compatibility between policies creation of a regional market, as cleaner and more balanced energy promoting domestic clean industry with the experience of the European mix, it is imperative to tilt the playing and WTO rules will continue to be a Union, in order to attract investments field by introducing policies that take hot topic in the years to come. and accelerate market growth. into account the externalities of fossil ● The sheer size of China raises the ● Although China has made great fuels. question of whether its success can strides in developing wind power, References China Wind Energy Association (CWEA) (2011) policy support mechanisms. Energy Policy Mao Yushi et al. (2008) True Cost of Coal in Data on Installed Capacity of China’s Wind 35 1844–1857. China. Beijing, China: China Coal Industry Power Market. http://www.cwea.org.cn/ Li Junfeng et al. (2006) A Study on the Pricing Press download/display_info.asp?id=39 Policy of Wind Power in China. National Development and Reform Commission Global Wind Energy Council (2010) Global Li Junfeng et al. (2007) China Wind Power Report (NDRC) (2009) Notice Regarding the Price Wind Energy Outlook. http://www.gwec. 2007. Beijing, China: China Environmental Policy on Wind Power into the Electricity net/fileadmin/documents/Publications/ Science Press. Grid (Fa Gai Jia Ge [2009] No. 1906). GWEO%202010%20final.pdf Li Junfeng et al. (2010) China Wind Power http://www.sdpc.gov.cn/zcfb/zcfbtz/2009tz/ Government of China (2006) Renewable Energy Outlook 2010. Beijing, China: Hainan t20090727_292827.htm Law. http://www.china.com.cn/chinese/ Press. NDRC (2005) Regulation about Wind Power law/798072.htm Li Junfeng et al. (2011) China Wind Power Project Development (Fa Gai Jia Ge [2005] Lewis, J.I., Wiser, R. (2007), Fostering a Outlook 2011. Beijing, China: China No.1204). http://www.sdpc.gov.cn/nyjt/ renewable energy technology industry: An Environmental Science Press. nyzywx/t20050810_41378.htm international comparison of wind industry Endnotes: About CDKN 1. Li Junfeng et al., 2011 2. Mao Yushi et al., 2008 The Climate and Development Knowledge Network (CDKN) aims to help decision­makers in developing 3. China Wind Energy Association, 2011 countries design and deliver climate compatible development. We do this by providing demand­led 4. Li Junfeng et al., 2010 research and technical assistance, and channelling the best available knowledge on climate change and 5. Mao Yushi et al., 2008 development to support policy processes at the country level. 6. Li Junfeng et al., 2010 7. NDRC, 2009 About WRI 8. Lewis and Wiser, 2007 The World Resources Institute (WRI) is an environmental think tank that goes beyond research to 9. Li Junfeng et al., 2011 create practical ways to protect the Earth and improve people’s lives. (www.wri.org) 10. Ibid. Front cover photo: Zhan Tian/iStockphoto Editing, design and layout: Green Ink (www.greenink.co.uk) www.cdkn.org e: enquiries@cdkn.org t: +44 (0) 207 212 4111 This document is an output from a project funded by the UK Department for International Development (DFID) for the benefit of developing countries. However, the views expressed and information contained in it are not necessarily those of or endorsed by DFID, which can accept no responsibility for such views or information or for any reliance placed on them. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, the Climate and Development Knowledge Network’s members, the UK Department for International Development (‘DFID’), their advisors and the authors and distributors of this publication do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. Copyright © 2011, Climate and Development Knowledge Network. All rights reserved. Printed on recycled paper