RENEWABLE ENERGY:

China's wind and solar programs expand at world-beating pace, but grid connection remains a problem

SHANGHAI -- Despite a slowdown in growth and investments, China still installed more wind turbines than any other nation last year, according to a report issued today by Bloomberg New Energy Finance.

China installed 15.9 gigawatts of onshore wind turbines in 2012 -- equal to more than one-third of all new capacity worldwide, the report says. This was the fourth successive year China has led the field since overtaking the United States in 2009. The United States, which hit a record of adding 13.2 GW last year, installed 14 percent fewer wind turbines than China.

In 2012, wind power also became China's third-largest energy source, behind coal and hydropower. The nation now has 61 GW of wind turbines hooked up on grids, making up 5.3 percent of its power mix and accounting for 2 percent of its electricity generation, the report cites government statistics as saying.

Domestic manufacturers provided most of the wind turbines China installed last year, with Xinjiang Goldwind Science & Technology Co., Guodian United Power Technology Co. and Sinovel Wind Group being the top three suppliers. Windy northern Chinese regions -- such as Inner Mongolia, Shandong and Hebei -- are home to many of the newly built wind projects.

Bloomberg New Energy Finance expects another 16.6 GW of wind turbines to be installed in China this year, followed by an annual installation of 17 to 18 GW for the next two years. That means China would meet its end-of-2015 goal of 100 GW of grid-connected wind power capacity one year ahead of time.

As encouraging as this may sound, "the industry faced many problems including a reluctance by the grid operator to buy all the intermittent electricity produced by wind farms, plus stricter permitting requirements, unpaid subsidies and vigorous government efforts to cool down the industry's rate of expansion," said Zhu Demin, wind analyst at Bloomberg New Energy Finance, in the report.

Due to project buildup delay, China last year installed 18 percent fewer wind turbines compared with an installation of 19.3 GW in 2011, leaving many companies in the supply chain suffering from late payments and subsidies, the report notes. It attributes the project delay to difficulties of connecting wind farms to electric grids, adding that one-fifth of China's wind power capacity remains unconnected so far.

Meanwhile, Chinese wind farm developers also face a problem of system efficiency. The report notes that 1 megawatt of wind turbines installed in China produces 70 percent of the amount of energy the same wind turbines would produce if installed in the United States.

Those troubles have led to a 12 percent year-on-year decline in financial investment, with $27.2 billion being spent in wind power in China last year, according to the report. But this decline was partly offset by falling costs of wind turbines, it adds.

Zhu, the wind analyst, expects a recovery of China's wind power sector this year in both financing activity and project construction. As he explained, "the fact that China wind overtook nuclear as a generation source even in its most challenging year of recent times is a testament to the massive scale and momentum of the industry in this country."

Similar surge in China's solar power

Besides wind, market potential for solar energy has also ramped up in China.

"The Chinese market didn't even account for 10 percent of the global solar energy demand two years ago, but in the fourth quarter of 2012, one-third of solar panels the world produced were installed in China," U.S.-based consultancy Solarbuzz said in its recent report.

China last year installed 4.7 GW of solar panels -- almost double its newly added solar power capacity in 2011, said Steven Han, analyst at SolarBuzz. He also expects the figure to further grow, hitting 7 GW this year.

Such rapid growth was driven by supportive government policy, Han said. Chinese policymakers in 2011 introduced China's first nationwide feed-in tariff scheme for solar energy, allowing project developers here to sell electricity generated from the sun to utilities at a price of about 15 cents per kilowatt-hour (the price was cut to be 10 cents in 2012 along with declining solar panel costs). The policymakers also raised the scale of China-based government-subsidized solar projects from 690 MW in 2011 to 4,544 MW in 2012.

But as China's solar energy capacity has increased, so has the pain of delivering it. Han said that the construction of the electricity transmission network in China often lags behind the buildup of solar farms, leaving a large amount of sun-generated electricity with no place to go.

So instead of focusing on sun-rich western China, Chinese solar project developers are now starting to install more solar panels in eastern China, which has weaker sun resources but stronger energy demand, in a move to sell electricity the panels generate to nearby consumers instead of feeding it into long-distance electric grids. And in western China, more energy-intensive industries are being built next to solar farms in order to let electricity demand and supply go hand in hand.

Han said there is little possibility that Chinese solar project developers will run into the same huge grid connection problem that the wind farm developers did. "They [project developers] are not stupid," he said. "They wouldn't fall for the same trick twice."

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