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Wind farms flounder on low utilisation rates

Many mainland wind farms suffer low profitability, even losses, due to insufficient wind in particular areas, inadequate power grid connections, poor wind turbine layout and outdated equipment, according to an industry regulator.

The report came as a reminder of the risks associated with wind farms at a time when investors are bidding up the share prices of wind farm developers.

Most wind farms surveyed in the study posted lower utilisation rates than their designed values, the State Electricity Regulatory Commission said in the report. It cited plant utilisation data on seven wind farms from the biggest wind power producing regions of Inner Mongolia, Gansu, Xinjiang, Jiangsu, Jilin and Liaoning.

Six of the seven showed actual utilisation hours, time spent producing wind-generated power, of 8.1 per cent to 30 per cent below their designed utilisation.

One wind farm had utilisation of 30 per cent above its target. Utilisation hours is a key determinant of output and profitability.

The low utilisation rate 'has resulted in operating difficulties of wind farms and even losses', the report said. 'In addition, low power prices from projects tendered by central government were also a contributing factor.'

The commission said the large-scale development of wind farms had reduced the quality and stability of power dispatched on to grids.

Poor planning and the slow pace of expansion of power distribution infrastructure compared to the pace of wind farm construction, as well as conflicts with hydro and coal-fired power, were also blamed for low utilisation.

'For example, during the Lunar New Year, all wind farms in Inner Mongolia and some in Jilin province were forced to stop operation so as to give dispatch priority to power plants that supply home heating,' it said.

Chan Ka-keung, the chief executive of clean energy private equity firm Nature Elements Capital, said the utilisation figures cited should be read with caution.

He said wind farm developers had likely under-reported them in order to 'bargain for higher tariffs, or at least to maintain current levels'.

He also noted that at least one wind farm cited, in Liaoning, used old-fashioned generators and was not representative of the region's projects. He added that many projects did not complete a full year of operation last year and hence could see utilisation improvement.

The report recommended that large-scale wind farm development be mixed with more hydro pump storage and natural gas-fired power plants in order to smooth out generation fluctuations and reduce instability to power grids.

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