In their U.S.-China Quarterly Market Review (Fall 2011), the American Council on Renewable Energy (ACORE) and the Chinese Renewable Energy Industries Association (CREIA) argue that China faces three major problems for continued wind power development: interest rate hikes, uncertainty over the Clean Development Mechanism income, and grid bottlenecks.
As research at the Climate Policy Initiative has shown, wind power, which dominated China's renewables portfolio in 2010 with over USD $20 billion in investment, will continue to comprise a significant portion of China's renewable energy in the 12th Five Year Plan Period. [Note that these figures do not include hydropower, whose installed capacity, at 18% of China's total, is roughly equal to wind. More to come on the shrinking potential of hydropower in China in a later post.]
The growth of wind power in China was spurred arguably by strong government support, including the implementation of a renewable energy portfolio standard in 2007 and increased access to credit and land for state-owned enterprises. Chinese windmill manufacturers also co-opted technology from European and American wind companies who were aching to grab a piece of the Chinese renewables market, subsequently ramping up manufacturing capacity and filling the market with cheap parts. Finally, government investment in large-scale wind power projects during the 11th Five Year Plan also drove the spike in wind power.
As China Greentech Initiative argues, however, abundant capacity does not necessarily translate to abundant supply: "...an estimated 30% of wind power was wasted in 2009. There are two main reasons for this: lack of grid connection due to poor coordination between relevant developers and regulators primarily at the county and provincial level, and lack of grid connectivity due to the intermittent nature of wind power." The next phase of wind power in China, then, must shift its focus from building capacity in the wind industry to improving predictability, regional coordination, and technological improvements in the grid.
The Chinese government often cites the need for "rational" development (合理发展). The new solar feed-in tariff will, as it has in the United States and Europe, make investment in solar projects exceedingly attractive to investors. And while driving increased capacity and a diverse portfolio of renewables are important for China's energy goals during the 12th Five Year Plan, perhaps the government would do better to focus on its incentives for utility companies. A change in power purchasing mandates in 2010, for example, drove grid connection. But policies cannot focus merely on attracting investors and building large-scale renewable projects. Policies must work in tandem to incentivize grid companies to connect these projects to the grid, invest in transmission and storage technologies, make thermal power less attractive, and reward large-scale manufacturing operations that purchase renewable energy or generate their own.
