The China wind paradox: The role of state-owned enterprises in wind power investment versus wind curtailment

Abstract

China has seen a surge in wind power installation over the past decade, and is now the world leader in installed capacity. However, wind curtailment – i.e., when the power grid frequently interrupts the power connection of installed wind capacity – has become an increasingly serious problem. But despite wind curtailment significantly jeopardizing wind power developers’ profitability in China, companies have continued to invest. This study, based on extensive interviews with decision-makers in China's Central State-Owned Enterprises (CSOEs), attempts to explain this seeming paradox. Since the majority of wind power investment in China has been made by CSOEs, previous findings of SOE studies assume that this continued investment abjures “economic rationality” due to political/policy burdens. However, this study shows that this is not necessarily accurate. CSOEs’ investment behavior also accords with market logic, as they competed fiercely over wind power sites, increasing investment scale as a rational long-term strategy of profitability. We also find that the embrace of market logic by CSOEs has resulted from recent economic and power sector reforms. For a more efficient market, policy-makers must pay greater attention to the quality of competition among CSOEs.