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Wind Energy in China, an Emerging Market with Great Challenges

Wind Energy in China, an Emerging Market with Great Challenges. European Wind Energy Conference & Exhibition 2006 Athens, Greece, February 27 - March 2, 2006.

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Wind Energy in China, an Emerging Market with Great Challenges

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  1. Wind Energy in China, an Emerging Market with Great Challenges European Wind Energy Conference & Exhibition 2006 Athens, Greece, February 27 - March 2, 2006

  2. The interesting question about the advent of $50-a-barrel oil is whether it signals a new era in the economics and politics of energy. To sharpen the question: Have we entered a period when, owing to consistently strong demand and chronically scarce supplies, prices have moved permanently higher? We don't know, but the answer could be "yes" for at least one reason: China. • -- Washington Post EWEC 2006, Athens, February 27-March 2, 2006

  3. Wake up in Santa Barbara, Calif., one morning to a sky that looks as though it is painted a shiny white. The morning's newspaper reports that the sunlight is playing tricks on something known as the Asian Brown Cloud, a mass of dust that has drifted over the Pacific from China. The cloud contains particles of loose earth from deforested land mixed with arsenic and other industrial pollutants from the country's factories. • -- Yahoo Global Business Outlook EWEC 2006, Athens, February 27-March 2, 2006

  4. Wind energy development is accelerating in China • In 2004, China installed 197 MW new wind power capacity, with 35 percent growth over 2003. • Near 500 MW wind power capacity was further added in 2005, an even higher increase of 65 percent. EWEC 2006, Athens, February 27-March 2, 2006

  5. EWEC 2006, Athens, February 27-March 2, 2006

  6. EWEC 2006, Athens, February 27-March 2, 2006

  7. Major forces driving renewable energy development in China • Sustained energy demand growth; • Growing energy supply security concerns with high oil import dependence; • Rapid environment degrading; • Relatively untapped large renewable energy resources; • New investment and development opportunity. EWEC 2006, Athens, February 27-March 2, 2006

  8. China is endowed with large wind energy resources (total of 5.3 billion kw, or 1,000 gw developable - 10 meters above the ground plus offshore) EWEC 2006, Athens, February 27-March 2, 2006

  9. Three key elements in China’s long-term energy strategy • Clean coal technologies; • Energy conservation and efficiency improvement; • Renewable energy development EWEC 2006, Athens, February 27-March 2, 2006

  10. EWEC 2006, Athens, February 27-March 2, 2006

  11. EWEC 2006, Athens, February 27-March 2, 2006

  12. National Renewable Energy Law was promulgated in February 2005, and went into effect in January 2006 • The government lists renewable energy as preferential development and utilization. • The government encourages and supports grid-connected renewable power generation. • Renewable energy projects listed in the national industrial development guidance catalogue may receive preferential loans and tax benefits. EWEC 2006, Athens, February 27-March 2, 2006

  13. Grid enterprises shall enter into grid connection agreements with renewable power generation enterprises, buy grid-connected renewable power, and provide grid connecting service to renewable power generation. • Grid-connected renewable power prices will be determined by feed-in tariffs or tender. EWEC 2006, Athens, February 27-March 2, 2006

  14. The excess between the expenses that a grid enterprise purchases renewable power and conventional power prices shall be shared in the selling price. • Grid connection expenses by a grid enterprise for renewable power shall be included into the grid enterprise power transmission cost and recovered from the selling price. EWEC 2006, Athens, February 27-March 2, 2006

  15. More recently, two detailed regulations on renewable power cost and expense sharing, and wind farm land use and environmental protection have been issued. • Renewable power feed-in price follows government guiding pricing mechanism, and is determined through tender. • Excess renewable power costs and expenses are shared through price surcharge to end users. EWEC 2006, Athens, February 27-March 2, 2006

  16. Concession Wind Projects in China EWEC 2006, Athens, February 27-March 2, 2006

  17. Wind power development in China is, however, confronted with many challenges such as legal regime, government policy, power pricing mechanism, market liberalization, industrial structures, financing vehicles, and etc. EWEC 2006, Athens, February 27-March 2, 2006

  18. Diversified motives developing wind energy • Driven by energy: the East Coast; • Driven by emission: the South; • Driven by economic development needs: the North and the West regions; • Driven by opportunity: the other places. EWEC 2006, Athens, February 27-March 2, 2006

  19. Taking advantage of globalization vs. protecting domestic enterprises • Open to foreign investment, but encouraging domestic manufacturing; • Imported wind power equipment may not receive tariff benefit. EWEC 2006, Athens, February 27-March 2, 2006

  20. Rationalizing power sector to accommodate wind energy development • The power sector remains strictly state control, in spite of years of reform and restructuring; • Wind power feed-in price tender vs. state controlled electric power pricing. EWEC 2006, Athens, February 27-March 2, 2006

  21. Incomplete and insufficient legal framework and government policies • Market operation transparency; • Guidelines vs. executable rules and policies; • Integrated incentives and support; • Regulation implementations. EWEC 2006, Athens, February 27-March 2, 2006

  22. Main Conclusions • China’s wind power development is moving into a fast track with huge long-term potentials; • The government has established initial legal framework and guidelines, but more supportive and integrated policies / measures are needed; • Further energy sector reform and market liberalization are required to allow healthy renewable energy development; • China is in an early stage of wind energy development, and may well take advantage of the globalization, borrowing more matured technologies and experience of other developed wind energy markets. EWEC 2006, Athens, February 27-March 2, 2006

  23. 3E is the first independent consulting firm set up in China on energy and environment, providing strategic analysis and services for international players interested in the Chinese market, and Chinese enterprises seeking global opportunities. • For active international renewable energy players, 3E • Keeps updated of market dynamics and insights of Chinese renewable energy • Provides professional analysis and outlooks on industrial trends and policies • Offers assistance in identifying investment opportunities, uncertainties and partners EWEC 2006, Athens, February 27-March 2, 2006

  24. Thanks • 3E Information Development & consultants • 703 Qiyang Business Center, 18 Yinghua Street West, Beijing 100029 • Tel: 86-10-64446211 Fax: 86-10-64446212 • Email: 3e@3-eee.net Website: www.3-eee.net • The US Office: 40 Whitman Road, Suite 1-2, Waltham, MA 02453 • Tel: 1-781-5410550 Fax: 1-781-2098284 EWEC 2006, Athens, February 27-March 2, 2006

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