Sceptre Group Limited – Push from Local Governments

The Sceptre Group blog reports on the latest industry news.  For more information, visit Sceptre Group’s website at www.sceptreinternational.com.

Unexpected growth in wind power seems to have two causes: the increased pressure on the international oil market and the active encouragement of local governments. China’s economic growth has exerted a great demand for energy, and unpredictable oil prices and diminishing oil reserves have forced the government to seek alternatives. Wind, solar and biomass energy research has experienced a stampede of Chinese scientists in recent years.

Yang Xuhua, head of the Changma Wind Farm, is optimistic about its profitability. China is rich with exploitable wind power potential estimated at 1 billion kW, and its utilization is less complicated than the hydropower resources that currently dominate the green energy supply of the country. China’s wind resources are mostly found on its desolate Gobi deserts and offshore areas, so development does not involve population relocation or farmland requisition. By comparison, the Three Gorges project submerged 20 districts, cities or counties in Hubei and Chongqing, necessitating the relocation of 1.13 million residents.

Local governments have certainly leapt on the wind power bandwagon. The Yumen municipal government has switched the pivot for its future growth to this sector from its previous economic backbone, oil. The city was born and grew out of the Yumen Oilfield – cradle of China’s oil industry. After 70 years of exploitation, Yumen was listed by the state as an “energy-exhausted” city. Agriculture is Yumen’s second largest industry. Though the Hexi Corridor is fertile, and local farmers’ incomes are higher than the national average, arable land on this strip of the valley is limited. Where will Yumen find its next bonanza? This question troubled Zhan Shunzhou, secretary of the CPC Yumen Municipal Committee, for many years.

In 1996, Yumen imported four 300-kW wind turbines from Denmark and set up its first wind farm as a trial. The city’s theoretical wind resources exceed 30 million kW, with 20 million kW exploitable. So far Yumen has installed a total of 510,000 kW generation capacity, making it the largest wind energy base in Gansu and the fifth largest in China.

Chicken-Egg Enigma

To attract wind power enterprises, Yumen offers free land for construction projects. The 30-square-kilometer land for the 200,000-kW Changma farm means a significant proportion of the capitalization has been accomplished for CECIC-HKC (Gansu). Following behind generation enterprises are turbine manufacturers. The transportation cost of aerogenerators is high, accounting for 7-9 percent of the total. Manufacturing such equipment near wind bases proposes to be lucrative. So far Yumen has introduced 10 wind turbine and related equipment manufacturers. A thermal power plant is also needed to balance the output of a wind farm, as well as big power consumers that can absorb surplus output that the local grid is incapable of transmitting. These enterprises will lead to an employment and economic boom whose process poses questions no less complicated than “What comes first – the chicken or the egg?”

Wu Shengxue, deputy director of the Jiuquan Municipal Development and Reform Commission and director of the Energy Development Office, elaborated on the process using facts and figures. The construction of wind farms and the arrival of related manufacturers have brought capital, logistics and human resources to Jiuquan. The municipal government estimates that its 2009 fiscal allotment will be more than double the 2008 figure of RMB 2.2 billion. Service industry growth has erupted: all the hotels are at full capacity; train tickets to Jiuquan are in chronically short supply; and discounted airfares are hard to get. Locals prosper; the average wage has seen an increase of 12 percent annually.

Within its domain of 10 square kilometers, Gansu Jiuquan Industrial Park has 19 wind power generation equipment manufacturers, including the country’s top three. They produce turbines, blades, shafts, cables and all the other equipment that a wind farm needs. The total investment of the park is RMB 5.7 billion, and next year it will reach a production capacity of 1,700 aerogenerators valued at RMB 10 billion. By 2015, its production capacity is expected to double, reaching an output value of RMB 25 billion that translates into a total installed capacity of 1.5 million kW. This output capacity will meet the needs of wind farms within 500 kilometers of the park. Currently, the park employs 8,600 people, and that figure is expected to reach 12,000 next year.

Development Discrepancies

The rapid growth of wind farms has produced some problems that have caught the attention of relevant departments. For example, most wind farms are located in unpopulated grasslands, wastelands and deserts, far away from existing power grids. Even if a wind farm can be built, power transmission is a problem.

According to Wang Jun, director of the New and Renewable Energy Department of the National Energy Bureau, China currently faces four problems in wind power development: technical weaknesses in aerogenerator design and key components production, absence of a wind power service system, lack of wind power experts and technicians, and discrepancies between grid construction planning and wind farm building. At the moment, China’s grid equipment is relatively backward, and technical standards for connecting wind power into the existing grids do not exist. As long as these technology alignment problems persist, wind power development is hobbled.

As beneficiaries of this new industry, local governments have been active in solving such problems. Since the output of wind electricity is unstable and channeling the full output is a problem, Yumen has introduced some high energy-consuming enterprises to absorb the surplus. In view of its generous water resources, the city plans to build a hydropower station as a power supply adjustor, by using surplus wind power to lift water then release it to generate hydroelectricity when wind power output is weak.

Jiuquan has worked out a similar complementary scheme by making use of its rich photovoltaic resources during the day, when wind is weaker than at night. On August 28, 2009 the cornerstone was laid for a 10,000-kW photovoltaic project in Dunhuang, another city under the jurisdiction of Jiuquan. By 2010, Jiuquan’s photovoltaic output will reach 200,000 kW, which will increase to 2.5 million kW by 2015 and 10 million kW by 2020.

CECIC has also planned a concurrent photovoltaic project for the second stage of Changma. By then, glistening photovoltaic equipment will be set between those towering wind turbines.

Source:  chinatoday.com.cn

Sceptre Group Limited is a specialist investment firm focused in low carbon financial investments such as sustainable biofuel plantations, agricultural farmland and green technologies.  For more information on Biofuel Investments, please visit Sceptre Group’s website at www.sceptreinternational.com.

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