Investors scramble to harness fickle wind

PUBLISHED : Tuesday, 03 July, 2007, 12:00am
UPDATED : Tuesday, 03 July, 2007, 12:00am

Turbine capacity set to double for fourth year

Big potential profits, government incentives and eco-friendly credentials are electrifying the wind-power industry on the mainland, but those advances could be undermined by fundamental factors such as a reliance on imported technology, industry analysts have cautioned.

A Chinese Wind Energy Association official said yesterday that technology brought in from overseas, mainly Europe, might not hold up well under the mainland's diverse and extreme conditions. The association says the capacity of new wind-power installations on the mainland has doubled for the three consecutive years since 2004, and is set to do the same this year.

Some analysts estimate that more than 3,000MW of capacity from new wind turbines will be installed this year, and most of their production will be pre-purchased months before they roll out of the factory.

Zhao Bin , of the Chinese Academy of Science's Institute of Electrical Engineering, said most of the expansion was inspired by promising profits, government support and increasing environmental awareness among mainland entrepreneurs. For those seeking investment opportunities, the risk was low and profit margins attractive, he said. The purchase price of wind-generated power was about 0.5yuan/kWh, compared with the power industry average of just 0.3 yuan/kWh, he said.

At the same time, the cost of generating wind power had decreased significantly in recent years because many state-owned enterprises in the sector had been replaced by privately owned companies operating at greater efficiency and with a better market sense, the professor said.

The central government has invested millions of yuan in wind-energy research and development in recent years, providing not only financial subsidies but also technological support for the emerging industry.

Beijing passed the Renewable Energy Act in 2006, requiring state-owned power companies to meet environmental targets by increasing the proportion of renewable energy in the total amount of power they produced.

As living standards and environmental ethics improved, many private investors were increasingly inclined to put their money into profitable sectors that were also green, Professor Zhao said.

But while the stock prices of listed wind-power companies are surging, experts have warned of turbulence ahead. The Chinese Wind Energy Association official said most of the equipment manufactured was based on imported technology that had not been fully tested on the mainland.

Wind turbines that worked perfectly in Europe might not last long on hot southern islands, dusty northern wastelands and sandy western deserts, where most of the mainland's wind resources were located, he said.

He said quality problems had been found in various finished projects over the past few years, resulting in at least 25MW of power-generating capacity wasted last year. Because wind-power stations are often built in remote locations far from power networks, this required billions of yuan in investment to link the projects to the electricity grid, he said.

Assessments of wind resources were also a problem. Some county officials are so eager to have wind-power projects built in their area that they will endorse projects based only on the feeling that 'the wind blows here year-round', the expert said.

Rising power

The number of wind turbine manufacturers coming on stream on the mainland this year 20