Tristan Edmondson
Tristan Edmondson is founding partner at Mint Research, a business intelligence firm concentrating on China's clean technology sector.
Who will plug in China's giant wind farms?
China
has announced it is to construct seven 10GW mega wind farms, each with a
capacity half of the controversial Three Gorges Dam. Just one of these mammouth
installations will be 13 times the capacity of the world's current largest wind
farm in California.
The
announcement comes as China revises its wind power capacity target to 100 GW by
2020; eight times its current level, ahead of the Copenhagen climate talks in
December. And construction of the first of these behemoths will apparently
start this week, in Jiuquan, Gansu province. The
other proposed farms are in Xinjiang province, Hebei province, Jilin province,
eastern Inner Mongolia, western Inner Mongolia, and Jiangsu province. The
state-controlled China Daily ran a triumphant article on this turbine-building
frenzy today, including an afterthought that grid connections have not even
been started for the Xinjiang project, an inconvenient 2,000 miles from China's
energy-hungry eastern seaboard. It
is also worth noting that even now, between 25 and 50 percent of China's
current 12GW wind capacity isn't actually yet plugged into the grid. But
the distances involved in connecting these wind farms is not the only problem
missed in the article, for China does not yet have a 'smart grid' capable of
distributing irregular power supply from China's windy North and West to its
industrial East. It
is not simply a matter of laying cables between wind farms, but of integrating
a continental high-voltage system that minimises the back-up capacity from traditional,
contstant power generation that unreliable inconstant wind power requires; a
challenge that neither Europe or the US has acheived or even attempted. Using
the most optimal smart-grid technology, wind power still requires at least 60
percent of its power to be backed up, which in China means coal plants, as yet
unmentioned by government officials in connection to their giant wind farms. A
Chinese smart grid is in fact on the cards. State
Grid Corp of China (SGCC), China's largest power distributor, has announced
plans to construct a 'Strong & Smart Grid' by 2020. The project plan
consists of three stages: during 2009-2010, detailed layouts and pilot projects
will test standards and technologies. Full scale deployment of ultra-high voltage (UHV) power lines and the
reconstruction of distribution grids in urban and rural areas is expected to
take place between 2011 to 2015. From
2016 to 2020, SGCC plans to knit
the new electricity lines together to form it's 'Strong & Smart Grid'. By
some estimates this could cost as much as RMB4 trillion ($550 million) over the
next 11 years. Ironically this is exactly the same amount of money as China's
entire economic stimulus package annouced in November. China's
stimulus package includes spending on improving the power grid, but exactly how
much has not been made clear. The money to build such an ambitious smart grid
could come from listings of China's two main power distribution companies, SGCC
and China Southern Power Grid, but
for that to happen China's electricity pricing system must be overhauled and
laws regarding foreign ownership of power infrastructure redesigned. Regardless
of where the money to upgrade the gird comes from, a smart grid must be built
if China really is to build seven mega-sized wind farms. Spending by the grid
companies will help heavy electrical equipment manufacturers such as
transformers, substation equipment and system operation software companies. Worth looking at include: Shanghai
Electric Group Company Ltd (HK:2727), TEBA Co., Ltd (SH:600089) - which is
based in China's remote Xinjiang province where one of the giant wind farms is
planned to be built, Northeast Electric Development Ltd (HK:0042) and Sieyuan Electric
Co., Ltd. (SZ:002028). Now
even if China's turbines were connected, there are more problems. China is
likely to insist that Chinese firms to provide equipment for the projects. But
the current turbine technology in China is unlikely to reach the projected
electricity generation capacity. A
recent industry report by New Energy Finance revealed low operating capacities
for wind farm projects in China, saying the average capacity factor of all
projects in China was 23 percent, compared to the U.S. at 32 percent. Many Chinese turbines can also take
four to five months before a 10 percent capacity is reached, while U.S.
turbines can reach a normal generation capacity the day are switched on. Any
turbine used in China must contain at least 70 percent Chinese components. If
China is planning to use foreign turbines in its giant wind farms, the
following companies already operating in China are well placed. Nordex
AG (ETR:NDX1) plans to grow annual production capacity of in China to 800MW by
2011. Vestas AS (CPH:VWS) plans to invest US$350 million in its Tianjin
subsidiary. Gamesa (MCE:GAM), Spanish world number-two wind energy manufacturer
employs 1,000 people at its Tianjin operation. General Electric (NYSE:GE) has
several manufacturing operations in China, including a joint-venture between GE
Drivetrain Technologies and A-Power Energy Generation Systems (NASDAQ: APWR).
Siemens (NYSE:SI) started construction in May of a new wind turbine production
facility in Shanghai with an annual capacity of 500MW. Suzlon (NYSE:SUZLON) has
already signed up projects in China totaling 825MW (almost 600 wind turbines).
