Cost Analysis and Pricing Policy of Wind Power in China

Abstract

China has made great achievements in wind power generation. By the end of 2009, the installed capacity of wind power totaled 25.8053 GW, 13.8032 GW of which was added in 2009. Although the industry has developed at an impressive rate, its scale is still comparatively small, not fully matching the country’s economic size and great demand for green power. It is widely believed that the wind power market in China can develop at an even faster rate over the next decade. A stable market for wind power investment relies on both the cost of wind power and an effective pricing policy to motivate growth in the wind industry. This paper presents corresponding analysis of the costs of wind power generation and the current pricing policies implemented in China. The composition of wind power costs is elaborated through comparing it with that of conventional power resources. The localization of wind turbine manufacturing, which aims to decrease the wind generation costs and promote the development of the local wind power industry, is introduced. Two current pricing systems applied in China are examined: the price committed by the wind power concession bidding projects and the price authorized by the provincial governments. An inflation-adapted model is proposed to analyze the risk of concession prices. Finally, the paper concludes with discussions on the potential benefits and the future strategies for the development of wind power in China.