Government support, subsidies vital for better development of sector

Developing new energy technology, new energy resources, and optimizing the energy structure are necessary for China, as the country requires a huge amount of energy to support its industrialization and modernization.

With growing dependency on foreign oil (55 percent in 2010), China has ample motive to exploit new energy in an effort to guarantee its energy security and to address environmental problems.

China is rich in renewable resources, and its new energy industry has expanded rapidly in recent years, including the wind power sector. It is estimated that China has exploitable wind power resources equaling 2.38 billion kW on land, and about 200 million kW offshore.

With government policy support, China had an installed wind power capacity of 41.8 gW by 2010, surpassing the US to be the largest wind-installation country in the world.

Despite the impressive growth, the industry is still facing some difficulties, such as the technology level, which is not in tune with the market size, and the lack of independent research and development.

Grid connection remains another obstacle constraining the development of wind power in China. In 2010 alone, the newly installed capacity of wind power reached 18 million kW, but grid expansion could not keep up with the rapid development of wind power capacity. Wind power electricity has high requirements for grid stability, grid backup and long-distance transmission.

Therefore, the main problem of wind power development in China is the lack of a developed industrial chain. The lack of independent innovation and the grid connection problems have resulted in serious overcapacity of equipment manufacturing.

China had more than 80 wind power equipment manufacturers by the end of 2010, with a total planned production capacity of 40 million kW.

Developing wind power is important, but the key issue is how to minimize costs. To achieve that and realize an "orderly" development, investment in the wind power sector needs not only resources and markets, but policy support from the government.

Steps should also be taken to prevent the waste of funds and resources. The government should concentrate on research and development, innovation and end-use of products, and leave equipment manufacturing to companies. Such a step is necessary to avoid surplus capacity.

Pricing is another major constraint for the development of the wind power sector. Compared with conventional energy, the cost of wind power generation is much higher. Solving to the pricing problem lies in short-term subsidy commitments and longer-term changes in the energy pricing system to reflect the cost of resources and the environment. These steps will make clean energy more competitive.

If China maintains its rapid economic growth, it would become the largest energy market in the world. The country's economic structure, with relatively low energy efficiency, huge energy consumption and high emissions, is likely to continue until 2020.

China's huge energy market has provided a broad horizon for the development of the wind power industry, and is an important profit channel for companies that are engaged in new technologies.

Wind energy has a bright future in China. The government has set plans for eight 10-million kW wind power bases in seven provinces and autonomous regions. By 2020, China's wind power capacity will reach 150 million kW.

The author is director of the China Center for Energy Economics Research in Xiamen University.

(China Daily 02/24/2012 page7)