3 Reflections of China's Wind Power Development

After developing for nearly 20 years - and especially with the particularly rapid development over the past 6-8 years - China's wind power industry has entered a new development stage, presenting some issues that require further understanding, and raising some problems which require resolution. Over the past 6-8 years or more, 'large scale' and 'high speed have been the themes of China's wind power development. The conflict between speed and efficiency has not been considered significant until now. Starting in 2011, China's wind power development began the transformation towards more concern with efficiency, with an increasing emphasis on quality than merely quantity. Here are some of the issues identified.

Intensified excess production capacity

By 2011,the production capacity of China's major wind power equipment manufacturing industry had already exceeded 30GW. Meanwhile, in 2011, the domestic market demand was just under 18GW, with development in overseas markets just entering the trial stage. This caused more than 40% of China's production capacity to remain unused. In 2012, excess production capacity of wind power equipment has become even greater, with the total production capacities far exceeding the demands of the domestic market. The first was the need for competition. Only when the production capacity was raised could a company possibly take large orders and realize the benefits of large-scale production, thereby acquiring a definite competitive advantage. The second was the need for acquiring new development sites. Some large enterprises, pressured and attracted by the so-called "Resources-for-Industry" which requires developers to purchase locally, adopted in areas having abundant wind resources, had to build factories locally in order to acquire wind energy resources, then use such resources to acquire orders. The expansion was thus forced and often illogical. This brings the current issues into clearer perspective.

The application of new technologies and concepts without cautious planning process and guidance

China's wind power industry started relatively late compared with foreign industries. Initially most OEMs simply purchased engineering drawings and put them directly into production. True innovation requires that imported technology be absorbed through fundamental research and scientific experimentation, along with the accumulation of knowledge and experience over time. Nevertheless, batch application of some newly developed, immature technologies and concepts, such as large turbines, large blades, and low wind speed and high altitude wind turbine technologies, were made rapidly without giving thorough consideration to possible risks.

Some manufacturers were only interested in results, pursuing large turbines and new models that could be rapidly produced and mass installed, without attaching sufficient importance to the digesting and absorbing of imported technologies, the ability to innovate, and product quality. Their mastery of core technologies, such as integrated design of wind turbines, load optimization calculation, control strategy optimization and grid-connection performance was insufficient, resulting in the unstable quality of some wind turbines a number of severe wind turbine quality incidents, which present a serious danger to wind power development.

Offshore wind power imposes more stringent requirements on the wind turbine's stability and technical conditions. For example, offshore turbines face more complex loads, have higher anti-corrosion requirements, may encounter floating ice in northern sea areas, typhoons in southern sea areas, and are required to be almost maintenance free. Having experimented for several years without really mastering the core technologies involved in onshore wind turbines, Chinese enterprises may very likely pay a high price by rushing hastily into the offshore wind power market.

It is expected that in 2012, the scale of the domestic market will be reduced and that international market development will be fairly slow. Meanwhile, wind power developers will focus more on the quality of wind power equipment, and the efficient output of wind farms. In 2012, the manufacturing industry needs to make continuous efforts to enhance technologies, product quality and services.

Lack of Self-Regulation in the Industry, Lack of Regulated Competition

China's wind turbine manufacturing industry lacks self-regulation and has not formed standards regulate competition in the industry. Most manufacturers use low-pricing strategies, offer low price quotes, and lack a rational attitude, leading to over-competition. In 2011, competition among wind turbine manufacturers became more fierce and chaotic, which was directly reflected by the price competition, with price of complete wind turbines dropping from 6500 yuan/kW in 2008 to below 3700 yuan/kW in 2011.

a wind turbine is under construction

It is generally believed within the industry that it is very difficult to maintain such low prices for wind power equipment and at the same time invest sufficiently in areas such as technology improvement and quality assurance. Price reductions have compressed profit margins and R&D investment of OEMs and component manufacturers, laying the basis for serious problems in the long-term. Such over-competition has also forced Chinese OEMs to enter the offshore wind power market - a higher-risk field -ahead of schedule.

Currently, China's efforts in developing overseas markets are very limited. The chaos resulting from domestic over-competition has not been brought to the international market, although there is oversupply of turbines in the international market as well. It is hard for developers to quantitatively assess this gap, given the complex methods for the inspection and confirmation of generator units and the lack of suitable inspection methods.

Policy loopholes in the "Renewable Energy Law"

The law and policy system related to renewable energy development is far from perfect. The main legislation for China to develop renewable energy is the "Renewable Energy Law of the People's Republic of China". The law was promulgated in 2005 and executed in 2006. It was modified again in 2009. The modified law was executed in April 2010 (referred to as the "New Law" hereinafter). In the modified New Law, the wording of some core clauses is still ambiguous and vague, and the responsibilities, rights and interests of the various parties in renewable energy development are not clearly defined, which has affected its seriousness, impartiality and scientific nature, providing an abundance of legal loopholes.

The so-called "guaranteed acquisition" of wind power by power grid companies as stipulated in the New Law is an example. "Guaranteed" as used in this context can have different interpretations, and the understanding of this word by parties on the power grid side and parties on the power generation side are very different. Since the Implementation Rules have yet to be promulgated, authoritative and lawful interpretations are not available, neither can examination and supervision be conducted. Monopolistic power grid companies are able to conduct wind power acquisitions or require wind power operators to curtail their production without any justification or legal basis. The law has lost its ability to constrain monopoly enterprises. The legitimate rights and interests of the wind power industry are not protected and it is hard to appeal.

In another example, the New Law requires wind power operators to be responsible for assisting in ensuring the safety of the power, but provides no express provisions regarding what this entails. Power grid companies can and do enable or disable connections between wind power projects and their power grids with the excuse of guaranteeing power grid safety without any justification and with no recourse. However, power grid enterprises which have tremendous responsibility on the safety of power generation facilities are neither required to be responsible for protecting power generation enterprises, nor are required to be responsible for providing assistance. As early as 2009, relevant government departments had already discovered and reported on these loopholes, but such reports unfortunately received no attention. These legal loopholes have made enforcement of the law difficult. In fact, some legal responsibilities cannot be determined on the basis of these clauses. The result has been an increasing degree of apparently arbitrary curtailment of wind power generation, and all areas of our community have requested that the Standing Committee of the National People's Congress to urgently interpret the law or revise the "Renewable Energy Law of the People's Republic of China".

Problems in wind power standards, norms and public facilities, and the technical service industry

Requirements for grid connections for wind power are more stringent than those for all other generation technologies. The wind power grid connection standard was issued in 2011. However, this law only represents the interests of the power grid companies. During the drafting of the standard there was no dialogue or consultation with the wind power operators. The grid code for wind power grid-connection is more rigorous than those for thermal power and hydro-power, and some of the requirements are unnecessary. These excessive requirements have wasted resources and restricted the effective development of wind power, as will be seen in the coming months and years.

Wind power generator inspection agencies and monitoring standards are one-sided, and not transparent.The inspection of either wind power equipment or other renewable energy equipment, especially mandatory inspections, should be conducted by independent and fair third party or public agencies. This should be true in any industry. Currently, however, the inspection agency that drafts China's low-voltage ride through inspection standard and implements inspections is a subsidiary of the State Grid Corporation of China, which is hardly impartial, and the rules that guide them are not transparent. In additiona, there are few wind power plant inspection agencies and fees are too expensive. In 2011, the central government mandated that low-voltage ride through technical inspections must be conducted on every model of wind turbine generator system equipment, but there are not enough agencies and inspectors. Currently, for LVRT inspection there is only one inspection agency, the inspection process is very tedious and time-consuming, and the waiting period for equipment to be inspected is too long - oftentimes several months. In addition, after replacing parts and components as per the inspection, further waiting is required for re-inspection and the fees are very expensive; and the machines lie idle while waiting.

Errors of the existing wind power prediction and forecast system for wind farm projects are significant. In 2011, the central government required the establishment of wind power forecast systems by June 2012, part of which has already been completed. However, the accuracy and effectiveness of these systems is is low, with errors usually around 20%.

The role of wind power related parties is not clearly defined

Local governments are highly enthusiastic, but are short-sighted in seeking political achievementsrior to July 2011, there were basically no restrictions, with all regions enthusiastically driving project approvals, and the direct result was that more than 90% of all wind farm projects were approved by local governments. Some local governments have little knowledge or understanding of the industry, and its relation to the grid companies, leading to difficulties with completing and connecting projects to the grid. Since the short-term direct contribution wind power project construction to the local economy was not extensive, by 2011, passion for developing such projects had fallen somewhat. In order to increase the local GDP and local employment rate, local governments were instead turning their enthusiasm to bringing in related equipment manufacturing industries with the purpose of increasing local tax revenue and employment rates and attracting the equipment manufacturing industry to build local factories and requiring developers to use local equipment. This iss the so-called "Resources-for-Industry" phenomenon.ower grid and scheduling companies pursuing conomic benefits while avoiding social responsibilities. In 2011, by taking advantage of the modification of the Renewable Energy Law and utilizing the low-voltage ride through technical inspection and rigorous wind power grid-connecting technical standard,to raise the wind power grid entry thresholds. Although slowed downthe development of renewable energy, the power grid companies obtained a temporary stability, which suited their demand for economic benefits. This situation, however, does not suit the requirement that state-owned enterprises, especially large-scale monopolistic ones, should focus on social benefits as well as their profits.

Wind power equipment enterprises expand by establishing local manufacturing in good wind resource locations, exacerbating the problem of excess production capacity. The equipment manufacturing industry relies on the market to sell their equipment. Project development resources are the basic condition necessary for equipment manufacturers to gain their market share, and their market will be guaranteed once such resources are acquired. Therefore, to obtain resources, they must build factories locally and are forced to pursue large scale development, without considering whether or not the local area is really best suited to the building of factories. This resulted in the production capacities of China's renewable energy equipment manufacturing industry continuing to increase, despite production capacities already being in excess in 2011.

To solve the all of the issues mentioned above, it isnecessary to start by clearly defining responsibilities and providing a impartial third parties to promulgate, especially the government, to implement and enforce the rules.

Technology-enhanced, but still in urgent need of innovation

Currently, wind power operation and construction management, and the reliability of wind power equipment are still the most pressing issues facing China's wind power industry. Moreover, the percentage of directly imported high-added-value critical parts and components such as converters, main shaft bearings and control system is still more than 50%.

Wind power technologies are also seeing new changes. On the one hand, development of low-wind-speed wind turbines has emerged because of wind curtailment issues, as well as the central government's efforts to promote decentralized development. Wind turbine manufacturers are bringing out matching products in quick succession. Goldwind's low-wind-speed turbines are already in production; both Sinovel and United Power have released 1.5MW low-wind-speed turbines, and Sany Electric has launched its 2MW low-speed turbines. On the other hand, OEMs - in order to display their strength - are beginning to make large-scale wind turbines and have developed 5MW and 6MW wind turbines in quick succession. Quite a few enterprises, including Sinovel, have indicated that they have already started R&D on 10MW wind turbines.

Compared to onshore wind power, offshore wind power development is far more difficult. The foreign wind turbine technologies that most Chinese wind turbine manufacturers purchased directly had not been completely mastered, but nevertheless, the wind turbines were directly moved out to sea. In addition, the number of engineering ships and availability of construction equipment designed and developed for use in offshore wind power construction is very limited. Although China is working on relevant offshore wind power standards, only a few, such as the Premilimary Guidance for Offshore Wind Power Development and Construction, are available today. In the meantime, several strong Chinese cable manufacturers have been developing 220kV submarine cables suitable for offshore coastal wind power, but they are not yet ready for deployment. By the same token, offshore wind power requires urgent technological innovation, which is also the key to the development of the wind power industry.

Wind Power Incidents in 2011 presenting a fast increasing trend

In recent years, the disadvantages related to high-speed development began to reveal themselves. Starting from the second half of 2009, a series of incidents happened in succession, including tower collapses, blade ruptures, nacelle fires, personal electric shocks and engineering accidents, leading to more than ten casualties and damage to more than ten sets of generator equipment.

Since 2011, an increasing number of incidents of turbines tripped off the grid have occurred with wind turbine generator systems. There were 193 incidents of this kind across the whole country during January-August 2011 alone. The State Electricity Regulatory Commission has analyzed these several of these incidences and identified four major issues: a) most wind turbines have no low-voltage ride through capability; b) there are many quality problems in wind farm construction; c) connection of a large-scale wind farms could threaten the stability and safety of the power grid; d) and wind farm operation management is weak.

Relevant government agencies have attached very high importance to the phenomenon of thedramatic increase of wind power incidents in 2011. The State Electricity Regulatory Commission issued wind power safety regulations, the National Energy Bureau issued rules for low-voltage ride through inspection, and the State Grid Corporation of China released the national standard on technical requirements for wind power grid-connection. The successive promulgation of a series of policies, regulations and technical standards has imposed higher requirements on wind power grid-connection than all other power supplies. In order to guarantee power grid safety, in 2011, individual wind farms started large-scale grid-related technological upgrades, conducting low-voltage ride through technological upgrades on their generator units and adding high-standard SVG reactive power compensation devices to wind farms. Wind power enterprises have additionally invested approximately 10 billion yuan RMB for this, thus increasing their financial burden. However, merely adopting these measures rather than enhancing the quality level of conventional electric power equipment and facilities can not truly solve the wind power grid disconnection issues.

Occurrences of large-scale wind curtailment in 2011

The apparent occurrences of the wind curtailment in China began in 2010. In 2011, the curtailment also reached an unprecedented scale, especially in northeast and northwest regions of China, where the phenomenon became increasingly frequent. No explanation was provided for these occurrences, with grid companies carrying out curtailment in an increasingly arbitrary fashion. According to incomplete statistics, the quantity of wind generated electricity curtailment nationwide during the whole of 2011 exceeded 10 billion kWh, which is equivalent to a loss of 3.3 million tons of standard coal and the emission of 10 million tons of carbon dioxide into the atmosphere. In 2011, wind power equipment utilization hours were significantly reduced. The average utilization hours of grid-connected wind power installations nationwide dropped from 2047 hours in 2010 to 1903 hours in 2011, a reduction of 144 hours. Because of curtailment, wind power enterprises incurred a loss (excluding revenues from carbon trade) in excess of 5 billion yuan RMB, accounting approximately for 50% of the total profit of the wind power industry. In 2011, there seemed to no longer be any benefit to the development of wind power.