Long Yuan sees winds of change filling its sales
China Long Yuan Electric Power Group, the country's biggest wind power generator, could not be in a better position.
The firm has adopted a strategy under which its long-term core profit will come from wind power generation, even though the bulk of earnings now come from traditional coal-fired plants.
This full-blown shift in direction happily coincides with the central government's demand for diversification of energy sources, better utilisation of resources and a cleaner environment.
Yet, even though wind power generation has a 20-year history in China, it still accounts for only 0.14 per cent of annual power output. Nationwide, there are only 40 wind farms, many of which are small or pilot projects.
The sector really only began to emerge in recent years with the entry of the Big Five power producers - Long Yuan' parent China Guodian, China Datang, China Huaneng, China Huadian and China Power Investment - spurred forward by a drive for cleaner energy sources. Polluting coal-fired plants now provide more than 70 per cent of mainland energy.
On the world wind-power map, Germany tops the list, generating 16,000 megawatts, followed by Spain with 8,200 MW and the United States with 6,744 MW. In Asia, India leads with 3,000 MW, against China's 760 MW.
Long Yuan president Xie Changjun blames high investment costs from imported equipment and technology and inadequate government support policies for the sluggish effort to embrace wind power.
He said investment and construction costs of a wind farm were usually two to three times more than for a coal-fired plant.
'Because of our higher costs, every kilowatt-hour of electricity costs 20 fen more than that for coal-fired power plants,' Mr Xie said.
The irony is the best locations in the mainland for wind farms are in the poorest western regions, such as Xinjiang province, and the rust-belt northeastern provinces.
Power from these wind farms can only be consumed by local residents as a lack of infrastructure limits wider transmission.
Long Yuan said its capacity would reach 420 MW by the end of this year, accounting for about 43 per cent of the country's total. By 2010, output could reach 6,000 MW and more than double again to 15,000 MW by 2020.
Nevertheless, wind power will remain a small energy contributor despite predictions of an annual 30 per cent capacity increase.
According to official estimates, China has the potential to generate 250,000 MW of wind power onshore and a further one million MW by the coast.
But the potential will remain just that until investment costs become lower for wind power companies through local production of equipment and tax concessions from the government.
Mr Xie said he was optimistic equipment localisation could be achieved within three years, which would lower costs that now included a 15 per cent import tariff.
