Strong Winds

Deciphering China’s booming wind industry

As per the Global Wind Energy Coun­cil, a total of 93.6 GW of wind turbine capacity was deployed in the world in 2021, bringing the cumulative global wind energy capacity to 837 GW. Over half of the new capacity added can be att­ri­buted to China. The country’s wind ma­rket has witnessed greater Political push in the recent times, encouraging gr­ea­ter innovation and investment in the sector. Certain advantages with regard to manufacturing of wind turbines have also contributed to China’s leading position in the segment. Further­more, China has a su­b­stantial amount of installed wind capacity, which can provide tremendous opportunity for repowering in the future. Given ade­qua­te policy and regulatory support, re­po­we­ring activities can play a significant role in China’s wind market.

Given the current trajectory, the country is likely to continue dominating the global wind energy market. However, to truly un­derstand the outlook and potential of the global wind energy market over the co­mi­ng years, it is essential to decipher the differentiating factors associated with Chi­na’s swift growth in the segment.

Factors affecting China’s growth

While nations such as India have lagged behind in meeting their intended wind en­ergy targets, China’s wind industry has grown swiftly, despite challenges posed by the Covid pandemic. Several factors are responsible for this outcome. The Chi­ne­se government’s call for an energy revolution to move away from heavy dependence on coal has created a robust wind energy policy environment in the country. A tariff policy for onshore wind passed in 2014 also made the segment more attractive than coal-based projects, thereby leading to greater deployment of onshore wind projects. The country’s ambitious 2030 clean energy targets, five-year plans and annual renewable portfolio standard targets have further boosted the sector. Several Chinese provinces have also set ambitious wind energy targets, leading to increasing investments in the sector. For instance, Jiangsu has set a target of 15 GW of wind energy by 2030, while Zhe­jiang aims to install 6.5 GW during the same period. Overall, China has created a comprehensive policy base covering different aspects of clean energy development across various sectors.

Moreover, China is a manufacturing hub for wind turbine components such as blades, generators and gearboxes. Inten­se price competition within the domestic market has led to greater innovation am­ong Chinese wind turbine developers, who are rapidly launching improved turbines with better technology. As a result, these turbines have high power ratings, giving them a competitive advantage in the global market. The country is also do­mi­nant in the processing and refining of minerals such as copper, nickel and rare earth elements, which play a crucial role in wind turbine development. Access to su­ch minerals is a major hurdle for many oth­er countries. With such strong advantages, Chinese wind manufacturers are att­racting greater foreign investments, crea­ting immense competition for their co­un­terparts in Europe and the Asia-Paci­fic. As long as China continues to provide greater confidence to investors with its robust policy environment and constant improvements in manufacturing and technology, other nations may continue to lag behind, if not supported by equally strong policies and incentives.

Recent developments

According to Wood Mackenzie’s report titled “China Wind Power Outlook 2021-2030”, China is expected to account for over 67 per cent of the total global share in wind capacity, with roughly 690 GW of wind capacity installed by 2030. The country has pledged to install at least 1,200 GW of renewable energy capacity by 2030 and is well on its way to meeting the target, possibly much before 2030. The Chinese government has also expressed its intent to construct 450 GW of renewable energy projects in the Gobi Arid and other desert regions to meet its climate targets.

In December 2021, Orient Cable completed the world’s first pilot anti-typhoon floating wind turbine in China which is a dynamic subsea cable project for China Three Gorges Corporation at the 400 MW Yangxi Shapa 3 floating offshore wind farm off the coast of China. The project is expected to generate 5,500 kWh of clean energy catering to over 30,000 households in the region. In the same month, the 802 MW Jiangsu Qidong offshore wind farm in China was also connected to the grid at full capacity. With an investment outlay of $2.26 billion, the wind energy farm contains three projects, each of which has an offshore booster station.

Individual provinces in China have also taken steps to boost the sector. In June last year, Guangdong, a province in southern China, announced its plans to provide subsidies for offshore wind power projects. The subsidies range between $78.16 and $234.47 per kW of installed capacity, depending upon the timeline of grid connection. This was a crucial step not only towards boosting wind energy but also towards reducing carbon emissions in China, as the Guangdong region is the largest consumer of oil and gas in the country. Wind farms in China are also being connected to the state grid, and state-owned enterprises are increasingly investing in such wind farms. These de­velopments indicate that the wind energy sector in China is likely to continue bo­o­ming over the coming months.

Chinese turbine manufacturers are quite popular in other Asian markets, amassing large contracts for supply. For instance, the Envision Group, a Chinese energy company, signed a letter of intent with Impact Energy Asia Development to supply wind turbines for the 600 MW Monsoon Wind Project in Laos. Once operational, the project will generate over 1,700 GWh of clean energy per year. In October 2021, Ming­Yang Smart Energy, a Chinese turbine ma­nufacturer, was also awarded a supply contract by the PowerChina International Group for the 375 MW Ca Mau offshore wind project in Vietnam. The manufacturer plans to complete 1 GW of projects in the adjacent areas as well. Recently, several Chinese wind projects and partnerships were announced, based both within the country and abroad. In April 2022, Vestas, a Danish wind turbine manufacturer, was awarded a 295 MW order for the Zhong Neng offshore wind project in Changhua county, Taiwan. The China Steel Co­rpor­a­tion and Copenhagen Infrastruc­ture Part­ners have collaborated on the project.

Comparison with other regions

In 2021, China’s installation of onshore wind alone surpassed the total wind po­wer installed in the UK, Spain and France. The country also added 17 GW of offshore wind capacity in 2021, overtaking the UK as the world’s largest offshore wind ma­rket. Even though China’s share of renewables in its total electricity portfolio remains relatively lower than that of the Eu­ropean Union (EU), the country’s total renewable capacity far exceeds that of any other country in the world.

To meet its net zero emissions target un­der the European Green Deal, the EU is putting greater emphasis on the development of wind farms. Germany is expected to take the lead in Europe and become its largest wind market over the coming ye­ars. The UK, Sweden and France are also ra­pidly building new wind installations. How­­ever, as per Bloomberg, European co­­­­untries are expected to face stiff competition from China, primarily due to the slow speed of approvals in these countri­es. Supply chain limitations and competition from China’s robust manufacturing capabilities has also led to Chinese manufacturers rapidly entering European wind markets. With several Chinese manufacturers winning projects to build wind farms in various countries across Europe, the Chinese presence in the continent’s wind sector is likely to increase over the coming years unless urgent action is taken to simplify the approval process and boost local manufacturing capacity in these countries.

In terms of new capacity addition, the US takes the second place after China. While the country is boosting its wind energy market, certain uncertainties with respect to extension, procedures and eligibility un­der production tax credits remain. Su­p­ply chain issues are also a major concern. As a result, the gap bet­we­en the US and China in wind capacity is quite large. Ho­wever, the notion of “building back better” post Covid is likely to set the country’s renewable energy sector on track, as market dynamics continue to im­prove in the coming months.  As per Wood Macken­zie, the US is expected to witness a year-on-year growth of wind power capacity at an average of roughly 18 GW per year, starting from the year 2027.

Over the past few years, the wind energy sector in India has seen much slower gr­owth compared to countries such as Chi­na, Germany and the UK. In fiscal year 2021-22, the country added about 1.1 GW of wind energy capacity, all of which is onshore. Originally, the capacity addition for the year was expected to reach about 3 GW. The offshore market, on the other hand, has not yet taken off in India. How­ever, the industry and government have shown rising interest in the offshore sector. A key factor impeding investment in offshore wind projects in India is the lack of seabed rights under maritime leasing rules. Such projects are still considered to be economically unviable due to the high initial cost of investment and lack of government policy support. For onshore wind, land acquisition and approvals pose a ma­jor challenge. The shift to an auction-based route, which seeks the lowest per unit cost, has also not worked in favour of the segment. Overall, fiscal support and incentives for risk sharing are insufficient at present. Encouraging hybrid projects and repowering of wind assets will be crucial. Finally, enhancing the coordination bet­we­en state governments and also with the central government will also play a significant role in the success of wind energy in India.

Outlook

In recent years, government priorities across the world have signalled a movement towards clean energy transition. The ongoing war in Ukraine has also reiterated the integral role of energy policies in na­tio­nal security. Thus, emphasis on re­ne­wable sources of energy such as wind is likely to deepen in the coming years. As China continues to rapidly expand its wind segment, countries such as the US, India, Germany and other EU nations can learn from Chi­na’s best practices to keep up with its gr­owing pace. While the intent of these na­tions to establish wind power is on par with that of China, translating such intent into robust policies for faster implementation of projects will likely be the greatest challenge in the coming months.

By Kasvi Singh

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