By Haibing Ma and Lini Fu
In 2010, China overtook the United States as the global leader in installed wind power capacity, representing yet another triumph in the much-hyped clean tech race between the world’s two largest economies. Looking beyond the numbers, however, the true nature of China’s wind energy development appears far more bleak.
According to the newest data released by the Chinese Renewable Energy Industry Association (CREIA), by the end of 2010, China had installed a total of 41.8 gigawatts (GW) of wind capacity, just ahead of the U.S. total of 40.2 GW. Even more impressive is the growth of China’s wind sector: while the United States added only about 5 GW of new capacity in 2010, China installed 16 GW. In 2009, China surpassed the U.S. to become the world leader in clean energy investment.
So why aren’t China’s top energy policymakers celebrating the recent wind capacity milestone, given the country’s unprecedented achievements in renewable energy development? Instead, in a January meeting, officials with the National Energy Administration (NEA) lamented the fact that China still trails the U.S. in the amount of wind power connected to the grid—with only an estimated 31.1 GW grid-tied by the end of 2010.
The reality is that a significant share of China’s installed wind capacity is not connected to any grid. This is wasting a significant amount of investment, not to mention energy. The positive side is that the central government is beginning to address this problem in a more rational way, which hints at a more sustainable approach to policymaking as well.
From “Abundant” to “Redundant”
Maybe Zhongdian Wind Power Company can explain what’s really going on. At one of its wind farms in Jiuquan, Gansu Province—one of China’s seven planned 10 GW wind bases nationwide—as many as 80 percent of the turbines were not in operation during a seemingly perfect season for wind generation. In fact, throughout Guazhou County, where the Zhongdian farm shares development space with 20 other wind companies, only about a fifth of the installed wind capacity is even connected to the grid.
This is the case with almost every wind base across the country. In Western Inner Mongolia, abandoned wind power has cost companies billions of Yuan in lost revenue. About half of the installed wind capacity in northeastern China is currently not in use, amounting to as much as 35 billion Yuan (US$5.4 billion) in unrealized investment. Nationwide, according to a rough estimate, one-third of China’s wind power projects have trouble accessing the grid.
China’s grid-connection problem is twofold. For one, many local grids lack the capacity to absorb wind-generated electricity. Meanwhile, there are limitations in the grids’ capacity to transmit power to distant regions. Yet addressing the problem requires more than just a technical fix, and ultimately reveals fundamental challenges in Chinese energy policymaking.
The highest energy demand is in China’s central and southeastern regions, but the country’s most abundant wind resources are located in the north. Yet the less-developed north simply cannot absorb its rapidly growing wind power capacity. In Inner Mongolia, grid-connected wind capacity has roughly doubled each year for the past four years, from a reported 170 megawatts (MW) in 2006 to some 8.7 GW by the end of 2010. The region has seen a shift from no restricted grid access for wind farms in 2006 to restrictions facing nearly every regional wind farm in 2009.
It’s not that regional grid managers are opposed to wind power. The locally owned Inner Mongolia Grid Company has sought to accommodate wind power to the extent possible, despite the fact that the instability of wind-generated electricity can compromise grid safety. Chinese industrial experts have warned that wind power should not exceed 10 percent of local grid capacity to avoid the risk of a grid collapse. Yet in April 2010, the Western Inner Mongolia Grid Company achieved an average of 11 percent wind power—peaking at a record 18.7 percent—and the entire grid continued to run stably.
One reality that has stymied wind power in northern China is the long winter heating season, which can last up to 8 months. The steam turbines used to provide heat to residents must simultaneously generate electricity. With heating being a top winter priority, local grid companies have to restrict the amount of wind power, which is less stable than coal power, to ensure the full capacity of the turbines. Ironically, China’s wind resource is much stronger in winter, which makes the grid-access problem even more frustrating for the wind industry. Wind companies in Inner Mongolia lost some 500 million Yuan (US$77 million) in revenue due to the estimated 900 million kilowatt-hours (kWh) of reduced generation in winter 2010.
From Transmission to “Trespassing”
One obvious solution would be to transmit northern China’s “redundant” wind power to other regions of the country where it is desperately needed. In principle, this electricity would still be competitive with coal-fired electricity at the user end (see Chinese estimates here and here). But the long-distance transmission approach hasn’t worked as smoothly as expected either.
In reality, the existing transmission lines in China’s wind-abundant areas have very limited capacity and can no longer support the region’s rising transmission needs. The Western Inner Mongolia grid, for example, has only two outgoing transmission lines to connect to the Huabei grid. Built more than 20 years ago, these two lines are able to transmit only up to 3.9 GW during the day and 2.5 GW at night, far less than the installed generation capacity of regional wind farms.
So why not just build more transmissions lines? Because when it comes to actual project implementation in China, the “who” normally matters more than the “how.” In the case of Inner Mongolia, the local grid happens to be the only provincial-level network that operates independently of China’s State Grid Corporation. Thus, when an ultra-high voltage (UHV) transmission line is needed to link the Inner Mongolia grid to the adjacent Huabei grid (which belongs to the State Grid), questions arise about who should shoulder the tremendous infrastructure investment. As a small provincial company, the Inner Mongolia Grid simply cannot afford such a project. And while the State Grid has the financial capacity to invest in multiple UHV lines, it lacks sufficient incentive to do so.
As a consequence, grid capacity presents a huge bottleneck to Chinese wind development, and the issue is not likely to be resolved easily considering the interests involved. This reality is no secret to the Chinese people, especially those in the energy industry who are well aware that grid projects usually take much longer to be approved and built than wind farms.
So why is China rushing into wind investment when the grids are not ready?
From Green Incentive to Self Interests
A large part of the problem lies with the incentive structure facing local officials in China’s wind-abundant regions, which are also the country’s least developed. To attract investment and boost GDP, local governments have sought to “lure” as many wind power projects as the land can take. After all, local GDP statistics will capture the economic effect of new wind installations regardless of whether the projects end up generating electricity for the grid—making the issue of grid access little more than an afterthought.
Wind power companies, meanwhile, have their own incentive to “ignore” the potential grid capacity problems when pouring money into wind farm construction. Most of the larger investors are state-owned energy companies who are highly aware of the central government’s drive to improve the share of renewables in China’s energy mix. These companies are happy to report a large number of wind installations to show how aggressive and effective they were at following the government’s call to prioritize renewable energy development. Having done their part as energy producers, they are happy to let the grid companies take the blame for any negative outcomes (such as the grid-access problem.)
It’s likely that the central government is well aware of the “little tricks” that local governments and individual energy companies are playing, but it simply lacks the capacity to micromanage all ground-level developments. China’s central planning administration, the National Development and Reform Commission (NDRC), did make an effort to require approval for all new wind projects prior to construction, but this applies only to projects with planned installed capacity above 50 MW. For smaller projects, local governments are tasked with making the calls. As a result—and perhaps not surprisingly—a survey reports that most wind farms built for China’s northeastern grid have an installed capacity of precisely 49.5 MW.
A New Hope
It is clear that China’s wind power development still faces tremendous problems, despite the impressive growth it has achieved over the past five years. It is also evident that the challenge limiting its further growth is no longer technical, but is rather deeply tied to administrative and policy challenges as well as to imbalances among interest groups.
The good news is that the central government is aware of these issues and has begun to take rational steps toward a healthier development path. In September 2009, the government issued an order to prevent overheated capacity in clean tech manufacturing. Moreover, top NEA official has recently indicated that, for the 12th Five-Year Plan period (2011–15), a major task of the agency will be to invest heavily in grid infrastructure projects as a way to address the grid-access problem. Meanwhile, the NEA is lowering China’s 2015 goal for total wind installation to below 100 GW, to match the State Grid’s goal for wind-access capacity.
Such moves from the Chinese government imply a paradigm shift from focusing primarily on widely touted numbers and rankings to considering issues of quality—not just in wind power but in the economy as a whole. This path is much more compatible with the Green Economy approach promoted by the United Nations Environment Programme and suggests that in the coming years, we may see many more Chinese policies heading in this positive direction.
In the following months, Worldwatch Institute will be releasing a research report exploring China’s green economy potential and green job opportunities. We will be blogging about many of the report’s findings in advance, so please stay tuned.