Skip to main content
designed for growth

Women wear masks while waiting for bus during a smoggy day in Beijing. China is putting the push on renewable energy in an effort to cut down on air pollution.KIM KYUNG-HOON/Reuters

To reduce carbon emissions and combat air pollution, China rose last year as the world's biggest single investor in renewable energy, according to a June report on renewables by consulting firm McKinsey and Co.

And before panel manufacturers started going bust after growing too fast, solar had been the bright spot.

Now, hopes are riding on wind.

There are good reasons for that. Over the past decade, the wind energy sector has grown hundredfold, both in terms of capacity and production: China boasts the highest expansion rate in the world, even during a global slowdown.

And since 2010, China has been the largest wind power producer, as well. It generates more than 153.4 billion kilowatt-hours, making it the third most popular energy source in the country after coal and hydro.

In 2014, China added just more than 23 gigawatts of new capacity, compared favourably with 16 GW in 2003, the most for any country in history, and it has set its sight on doubling capacity to 200 GW by 2020.

"As most of China's onshore wind resources are secured by domestic developers, more investment opportunity lies in offshore wind development for foreign investors," said Yiyi Zhou, a senior wind analyst for Bloomberg New Energy Finance in Shanghai.

Still, challenges remain in the sector, and even though industry observers remained pleasantly surprised by China's growth track record for the past decade, they're bracing themselves for a slackening of growth next year.

For example, curtailment – meaning suspension of turbine operations because of grid bottlenecks – remains the persistent challenge. China's national energy administration and the State Grid utility are still working to solve the transmission gridlock and other grid-related issues.

In its most recent report in 2014, the Global Wind Energy Council in Brussels said China has a long road ahead in its plan to reform its grid operation and electricity market to replace any substantial amount of coal being burned in Chinese cities with green energy. The report also cited the lack of flexibility in the system and the absence of a real electricity market where trading takes place as the key barriers for higher penetration of renewable energy in China.

Technology is another challenge as Chinese officials seek to develop wind farms in lower wind zones but closer to the energy-hungry areas along the coast. It is far more complex to connect cables to wind turbines offshore and under the sea to the grid than it is to do so with onshore wind.

For example, two big problems are a shortage of skilled installers and lack of quality wind turbines that can withstand tough wind and coastal erosion, according to an October of 2015 report by Washington, D.C.-based Climatewire.

Also, financing development is an issue, as offshore wind is far more costly than onshore parks. And even though most renewable energy projects in China are subsidized by the government to varying degrees, the cost of constructing, operating and maintaining wind turbines offshore is more than double that of onshore.

Last year, the Chinese central government tried to address the financial side by introducing a new pricing mechanism known as feed-in tariffs – a subsidy paid by consumers to green-energy companies producing the power to keep them afloat. It paid developers 12 cents a kilowatt-hour for intertidal wind farms and 13 cents a kwh for near-shore projects. Still, industry analysts believe the pricing still is too low to be economically attractive. And they add that looming cuts to the feed-in tariffs may hamper development further.

At the same time, Bloomberg reported that China plans to reduce tariffs for onshore wind farms by as much as 5.8 per cent in 2016 from current levels and by another 19 per cent in 2020 from the 2016 tariff levels.

As a result, targets 2015 for offshore wind were too optimistic, analysts say. The original offshore wind target set by the National Development and Reform Commission, China's centralized economic planning body, was five GW by 2015. However, by the end of 2014, just 657 megawatts of offshore wind power were installed, based on published figures.

Also, China Wind Energy Association reported that just 164 MW of additional offshore wind capacity was in place through June of this year. All signs pointed to China falling significantly short of its 2015 offshore wind target, say analysts.

"Considering the delay and challenges facing the local industry, China has reduced its 2020 offshore wind target from 30 GW to 10 GW, which is more realistic," said Feng Zhao, director of the clean-tech practice of FTI Consulting in Copenhagen.

Nevertheless, analysts say China has made great strides to plug its prodigious supply of wind power into the grid. A case in point: Unconnected capacity has dropped to 16 per cent in 2014 from 31 per cent in 2008, greatly improving consumption efficiency. Nine new HVDC, or high-voltage direct-current, transmission lines (power super highways) are being built.

Even so, until the efficiency gap can close still further, coal will remain king in China – wind still accounts for less than 3 per cent of all power consumption nationwide.

Still, the Gansu wind farm project under construction in the western interior province is promising. Upon completion, it is expected to become the world's largest collective wind farm.

And analysts say opportunities abound for Western turbine manufacturers, whose R&D China may not be able to surpass in years to come as plans for offshore expansion continue apace.

"The Chinese offshore market desperately needs reliable offshore turbines at present," FTI's Mr. Zhao wrote in an industry analysis published in early November.

China's wind developers are cautiously developing offshore projects to accumulate sufficient experience and wait for domestic offshore products to become technically proficient.

And that presents opportunities for foreign investors and foreign companies, analysts say.

Report an error

Editorial code of conduct

Tickers mentioned in this story