2011 China wind power outlook ｜Greenpeace

CHINA WIND POWER OUTLOOK

2011

It is now a globally recognized fact that the large-scale adoption of wind power is an effective way to slow down climate change, enhance energy security, and support low-carbon industrial and economic growth. Many governments around the world have already begun investing in wind power and its technological research and development, while wind power has also attracted the attention of the energy sector.

In particular, the development of China’s wind power sector has been especially dynamic, with its rapid expansion making headlines around the world. Over the past years, China’s installed wind power capacity doubled in size four years in a row and in 2010 surpassed that of the United States to become the world’s largest. This marked a milestone in the history of China’s wind energy development.

In China Wind Power Outlook 2011, Greenpeace and experts and scholars from the Chinese Renewable Energy Industries Association closely analyzed the development of China’s wind power sector in 2010. They analyzed policies and other trend indications related to wind power in the government’s 12th Five-Year Plan (2011 to 2015).

The report also provides recommendations on how to promote the industry’s development.

Simultaneously, China’s solar photovoltaic (PV) power sector has grown so that it is now at a stage comparable to that of the wind sector five years ago. Today, the PV sector is poised to take off and develop rapidly. The solar power sector can learn from many of the experiences and lessons of the wind power sector. Greenpeace hopes that these two renewable energy forms will both undergo rapid and healthy development and bring a bright future to China’s renewable energy sector.

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Yet despite its rapid growth, China’s wind power sector still faces many challenges. Policy makers and industry are now struggling with the problem of transforming this rapid expansion into a sustained growth path.

Wind Power After five years of rapid development, the global wind power sector began to slow its growth for the first time in 2010, under the influence of the world’s slow economic recovery and unclear U.S. policy. The growth rate fell to 3.1%, a decline of 40% compared to 2009 rates.

Despite this trend, wind power will continue to grow over the next five years. The European Union hopes that by 2015, the installed capacity of wind power will reach 150 to 180GW. The U.S. is set to lay out favorable policies for the development of both wind and solar power generation after 2011. At the beginning of India’s Eleventh Five Year Plan, the Indian government hopes to have renewable energy make up 35% of its total installed energy capacity. There are also many encouraging signs from North Africa, Sub-Saharan Africa and Latin America, among other regions. These new trends and changes ensure the continued fast development of the wind power industry.

In 2010, Mainland China added 18.93GW of newly installed wind power capacity, thus maintaining its lead in the global growth ranking. By the end of 2010, China’s total installed wind capacity reached 44.73GW, overtaking that of the U.S. to become the largest in the world. Currently, 29 provinces and regions in Mainland China have wind farms. Inner Mongolia has 13.85GW of installed capacity, the largest in China, closely followed by Gansu, Hebei and Liaoning Provinces.

China is the first nation outside of Europe to build offshore wind farms.

As of the end of 2010, its total installed capacity of offshore wind farms grew about 150MW. This should expand to 5GW by 2015 and about 30 GW by 2020, according to current targets. At the same time, according to estimates by industry experts, by the end of 2015, the total installed capacity of China’s wind power sector is expected to reach 100 to 150GW. With improvements in the economics of wind power generation, the gradual resolution of issues related to connecting wind power to the grid, and with the strong support of government policy, China will continue to lead the world in wind power generation for the next five years.

Even though China’s wind power sector is more than 20 years old, it only began to develop at a significant rate in 2003. The following are the key political reasons why the sector’s development has been so successful: Clear development objectives and plans; Establishment of a clear legal framework; Involvement of a variety of investment sources in the sector.

The figure below outlines the key policies that have influenced China’s wind power sector.

2003 2005 Wind Energy Resources Survey

Renewable Energy Law Renewable Energy Industry Development Guidance Catalog

2006 Trial Measures on Management of Cost-Sharing for Renewable Energy Power Generation Prices & Expenses Management Rules Related to Renewable Energy Power Generation

2007 2008 2009 2011 Mid- to Long-Term Development Plan for Renewable Energy

Renewable Energy Development Plan “11th Five-Year Plan” Finance Ministry notice on the Interim Measures on Management of Special-Project Funds for the Industrialization of Wind Power Generation Equipment

15% non-fossil fuel energy target 40-45% carbon intensity reduction target Perfecting Policies on Grid-Connected Power Pricing for Wind Power

The Emerging Energy Industry Plan 12th Five-Year Plan of Renewable Energy Development

Solar Photovoltaic (PV) Power In 2010, the global solar PV sector continued its strong growth.

According to preliminary statistics, the installed PV capacity increased by 15.8 GW in 2010, more than doubling the 2009 capacity. Last year, solar PV generation expanded in more than 100 countries, but the problem of regional disparities remains. Germany remains the world’s largest PV market (42.5% of the global total), while China, the U.S. and India – countries with great potential for solar energy development – continued to develop at an unsatisfactory rate. Africa and South America have still to start developing PV. Europe is still the center of the PV industry. In 2010, for the first time, the European Union added more newly installed PV capacity than wind power.

From 2011 to 2015, the outlook for solar PV is continued growth but at a gradually declining rate. Strong efforts to improve market growth will be needed to counter the effects of global economic volatility in the aftermath of the financial crisis, the social and political instability in North Africa and the Middle East and Japan’s nuclear accident. There are great expectations for the PV industry, but strenuous, long-term efforts will be needed for it to keep pace with the wind power sector.

In 2010, China’s PV module output rose to 10GW, accounting for 45% of world production, and maintaining its lead as the world’s biggest producer of PV modules for four straight years. By 2010, China’s total installed PV capacity reached 900MW, ranking it among the top ten nations in the world. However, the output of thin-film panels remained low; the silicon-based thin-film panels industry is still not mature.

Under market demands, China’s PV sector has developed a full production chain. The sector has basically grasped the key technologies required at each step of production, thus accelerating the process of localized production. Currently, China’s entire PV production chain has an annual output value of RMB 300 billion, an import-export value of US$22 billion, and employs 300,000 people.

In a discussion paper on the 12th Five-Year Plan of Renewable Energy Development, the National Energy Administration suggested that by 2015, China’s installed solar power capacity will reach 10GW. Of this total, 5GW would consist of on-grid mid-sized power plants in the desert, 3GW would consist of on-grid power plants in urban and rural areas, and 2GW would consist of other off-grid and distributed PV capacity. By then, China will become the world’s biggest PV market.

Under such favorable policies, the outlook of China’s PV sector for the next five years looks very promising.

However, there are still some problems facing PV power generation:

Production:

Insufficient investment in research and development; Blind expansion, backward production capacity, and redundant production; Lack of sustainable, clean development concept.

Market: Lack of support for domestic market development, lack of long-term development goals; High cost of electricity production.

Valuable Lessons from Wind Energy Development Both in China and globally, solar PV generation lags behind wind power by about five to six years. If we overlook the still-unresolved issue of high production costs, The PV sector has grown to a large enough scale that the preconditions now exist for a rapid development like that enjoyed by wind power five years ago.

In 2010, China produced 10GW of PV modules, while total installed capacity on the mainland did not even reach 1GW. It is now imperative for China to actively develop its domestic PV market, and for this it can learn valuable lessons from the development of wind power. These lessons include introducing incentives, establishing initial market conditions, and most importantly, drawing up feasible development goals, ensuring the pricing mechanism benefits all parties and setting up an overall mechanism that would help connect PV power generators to the grid. At the same time, China must continue to promote the PV production industry and work towards lowering production costs. Below are four specific recommendations for the development of the domestic PV market: Set up overall ambitious development goals: By 2015, the total installed capacity should not be less than 10 GW; By 2020 it should not be less than 50GW. Using concession bidding, set out feed-in-tariff for solar power: Implement this on a regional basis: with eastern regions at RMB 1.5/kWh, central regions at RMB 1.2/kWh and western regions at RMB 1/kWh; Beginning in 2012, lower prices by about 5% every year, until 2015 when they will be: RMB 1.3/kWh in eastern regions, RMB 1/kWh in central regions and RMB 0.8/kWh in western regions.

Ensure that grid connection is mandatory: It should not only be mandatory for grid companies to provide timely grid connections for concentrated PV power from national bidding as well as “Golden Sun Scheme” projects, but they also need to accept electricity generated by independent PV power producers. Grid companies that buy solar power should enjoy the same beneficial policies that they do for buying wind power.

Promote the lowering of production costs: By 2015, production costs should fall to RMB15,000/kW; By 2020, production costs should fall to RMB12, 000/ kW. At the same time, the government needs to focus on resolving the issues of cost, the allocation of fees, taxation policy and other issues.

The 12th Five-Year Plan: An Outlook In the first year of the 12th Five-Year Plan, both wind and solar power face challenges and opportunities in equal measure. The pace of global nuclear power industry has slowed down in the wake of Japan’s nuclear accident, pushing even greater expectations and responsibilities on renewable energy such as wind and solar. At the same time, social and political unrest in the Middle East has caused oil prices to surge, while various factors have pushed up the price of natural gas, with the result that uncertainty over connecting renewable energies to national grids may intensify.

Production costs for wind and solar power are falling: Solar power is already close to grid parity.

In some areas, wind power is already economically competitive with coal.

Renewable energy, such as wind and solar, will take on greater responsibility due to Japan’s nuclear accident and unrest in oil production areas.

The persistence of electricity grid bottlenecks remains the biggest uncertainty facing wind and solar energy.

In 2010, China included wind energy and solar energy as part of its “strategic emerging industries,” creating an unprecedented favorable environment for the development of wind and solar energy. In terms of industrialization, resources and economics, wind and solar power are superior to all other new energy sources. They will become an essential part of China’s path to sustainable development and are also likely to be at the forefront of future world development.

Because of differences in development stage and basic technical issues for different renewable energy sources, the 12th Five-Year Plan of Renewable Energy Development has adopted different strategies and tasks for each energy resource. See below: Wind power generation: with the continuation of strong policies supporting the development of wind power, the sector needs to move from rapid expansion to a stage of healthy development. By 2015, annual generation of wind power will reach 190 TWh, which is more than the energy produced by 60 million tons of standard coal.

Solar energy generation: the sector needs to achieve fast development and expand installed capacity. Development goals are 5 to 10GW by 2015.

Hydropower generation: Due to resource constraints, it may need to be succeeded by wind, solar and other renewable energies. By about 2020, wind power and solar power will replace hydropower as the key pillars of China’s renewable energy sector.

The 12th Five-Year Plan will usher in the next development stage for wind and solar energy, both of which will be vital to optimizing China’s energy structure and reducing greenhouse gas emissions. This cannot be achieved without the support of even more detailed and active policy systems, as well as solutions to the issues of high production cost and grid connection difficulties. Concrete ideas are below: Organize industry experts, businesses, grid companies and other stakeholders to draw up plans and policies for solar PV production and market development.

Beginning from 2011, start implementing feed-in-tariff policy measures based on resource disparities to drive down production costs.

Draw up and introduce policy measures on decentralized power generation. Encourage industries and businesses to install their own PV power generation systems with the primary goal of meeting their own energy needs or directly supplying others. Excess generated power can be fed back to the grid, to offset any electricity consumed, or to be purchased by the grid at the stateregulated price for PV generated power.

Urgently introduce quotas for the amount of renewable energy grid companies must purchase and the amount of renewable energy each district must consume, and also set up a quota trading mechanism.

Publish assessment indicators for the average carbon intensity per unit of electricity generated for big power companies.

Call on agencies within the National People's Congress to urge the State Electricity Regulatory Commission and other government bodies to inspect and enforce the grid connections of renewable energy generators. We ask the NPC to urge grid companies to resolve the lack of grid connection, delays in connection, or the abandonment of wind or solar power.

Call on the National People's Congress to routinely inspect Renewable Energy Funds to insure that their disbursement is in place, timely and effective, among other issues. Suggest that the NPC evaluate the results and effectiveness of the Funds.

Set up an evaluation mechanism to determine subsidy amounts based on the total and average amount of electricity generated by power companies.

Urge governments and companies to not only focus on installed capacity but also the amount of electricity generated and its benefits.

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