Blown away: China is set to become world's biggest wind power
Before 2009 draws to a close, China will already match or surpass the U.S. in terms of total amount of wind-power generation capacity installed, says Wiser, one of the top authorities on alternative energy development and planning. By 2011, it will definitely have surged ahead, he adds. And China's ambitions are growing. This year, the Chinese government will likely significantly expand its targets for wind-generation energy, with a goal of generating up to 150 gigawatts of wind-generated power by 2020.
I've posted before on how China is assuming leadership in the rush to green the world. China showed it was serious earlier this week when it announced plans for a pilot carbon exchange, or what is basically a platform that allows parties to trade permits to pollute. But for a better view on what is happening in China in the alternative energy space, I hung out with Wiser at this week's REFF West Conference in San Francisco.
As a point of comparison, total wind power installed in the U.S. at the end of the second quarter of 2009 was 2.9 gigawatts. Today, the U.S. is roughly on par with China. China's goals mean the country is aiming for a 50-fold increase in wind power over a mere 10 years.
And China is prepared to pay for it. In August 2009, the Chinese central government set up a national feed-in tariff for wind power. That means anyone building a wind farm can count on selling the power that the farm generates back to utilities at a set price, which is likely to be higher than the market price for power.
This made it much easier to build wind-power farms by setting a power price that can be used to calculate whether or a not a project will be profitable. To date, the U.S. has not established a national feed-in tariff for wind.
Wiser said China has done a number of things right. "China's recent leadership in wind has been driven by a number of things," said Wiser. The country has an ability and willingness to aggressively pursue manufacturing-cost advantages to drive down the cost of wind equipment. This results from a targeted industrial policy that encourages wind turbine manufacturing in China. By law, 70 percent of the materials used in China's wind farms must be manufactured in country.
This has resulted in complaints of protectionism by foreign suppliers. But China has fostered the growth of its own wind-technology sector sufficiently to allow homegrown companies not only a chance to compete with foreign suppliers, but even to break into the export market for wind gear.
The government has also been willing to require the electric transmission needed to bring wind to market. Due to its command economy, China's ability to develop sufficient electric transmission is an area where it has an inherent advantage. It has also invested in that transmission on an accelerated time scale.
By comparison, building high-capacity power transmission lines in the U.S. is a nightmare that requires huge environmental impact studies, approvals of right-of-ways by private owners, buy-in by states and regional power organizations, and sundry other approvals. The net result, says Wiser, is that it can take 10 years or more for a transmission line to be built in this country.
China faces no regulatory approval logjams. It is in the process of building out a new power grid that would make a utility engineer in the U.S. green with envy. Over the longer term, a much better grid will prove to be a powerful economic-growth driver, as the growth in an economy is closely related to power generation and electricity demand.
What's more, its pricing and regulatory system encourages the country's major, state-owned enterprises to aggressively pursue wind-energy development opportunities. Included in this system are the feed-in tariffs, tax breaks and subsidies designed to encourage utilities to build wind farms.
China has been particularly aggressive in rolling these things out, to the point of underwriting 50 percent or more of project costs and making it nearly impossible to lose money by building an alternative-energy power generation facility. The feed-in tariffs, too, make a huge difference because it makes it possible to build an economic model for a power-plant project, something that is difficult to do with fluctuating wholesale energy costs.
These steps that China has taken all go against some powerful political or business element in the more chaotic environment of the U.S. Manufacturing subsidies, while given out in many industries, are generally fought by potential competitors and are taboo in the minds of conservative politicians.
Big transmission projects inevitably draw huge fire from environmentalists, homeowners, counties and states. Feed-in tariffs are unpopular with powerful utilities, who prefer not to pay extra for power. And subsidies for construction of power plants inevitably meet resistance from competing energy lobbies for coal, natural gas, and oil.
In that light, it's no surprise China is rushing ahead and will soon blow by the U.S. in wind energy.