The Economics of Wind Power in China and Policy Implications

Zifa Liu,Changhong Zhao,Jiahai Yuan,Wenhua Zhang

doi:10.3390/en8021529

Abstract

In 2009, the implementation of feed-in tariff (FIT) and attractive public subsidies for onshore wind farms aroused great investment enthusiasm and spurred remarkable development of wind power in China. Meanwhile, rapid learning-by-doing has significantly cut down the cost of wind turbines and the capital cost of wind farms as well. Therefore, it is the right time to examine the appropriateness of the existing FIT policy for wind power in China. In this paper, we employ the analytical framework for levelized cost of electricity (LCOE) to model the generation cost of wind power. Results show that the existing FIT policy is attractive to investors, but serious curtailment and turbine quality issues could make wind power unprofitable. Meanwhile, rapid substantial decreases in the cost of wind power have made it competitive to coal power in 2013, implying that it is possible and necessary to reform the FIT policy for new wind farms. In the future, energy policies for onshore wind power in China could be concentrated on reducing the integration cost, so as to reduce the overall system cost.

Highlights

Since the promulgation of the Renewable Energy Law in 2006, wind power has reached a stage of rapid expansion in China
Levels under the existing feed-in tariff (FIT) policy and find that under expected annual operation hours without curtailment, the wind farm commissioned in 2009 can enjoy an internal return rate (IRR) ranging between 22% and 13%
For the wind farm commissioned in 2013, the IRR reaches as high as 89%–73%, which is very extravagant given the scarcity of public funds to promote renewable energy in China (Table 7)

Summary

Introduction

Since the promulgation of the Renewable Energy Law in 2006, wind power has reached a stage of rapid expansion in China. During 2006–2009, the cumulative installation of wind power doubled for four consecutive years [1]. In 2009, the newly-added capacity in China was 13.8 GW, which exceeded the total of China’s capacity installation in the past twenty years and outpaced the scale of the U.S in the same year. By 2010, the cumulative installation amounted to 44.73 GW and the growth was strong. Wind power has moved into large-scale deployment in China. At the end of 2012, the total installation had reached 75.3 GW [2]

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Discussion

Conclusion