Reality may finally be catching up with China’s frenzied wind power industry. The country’s largest turbine-maker was forced to call off its billion-dollar share offering last week, and the main electric grid company is trying to put the brakes on new wind projects.
Officially, Xinjiang Goldwind Science & Technology’s Hong Kong IPO was abandoned due to worries about a “deterioration in market conditions and recent unexpected and excessive market volatility”. No doubt that’s true enough, as companies in other industries have been pulling their listings. But it is also a sign that investors are wary of the major bottlenecks facing new ventures in the wind sector.
It’s a confusing state of affairs – especially as the industry’s challenges don’t stem from any lack of government commitment. Officials plan to raise wind capacity by a factor of six over the next decade – from 25,000 MW to 150,000 MW (around 9% of the country’s electricity needs). Recently, several provinces have joined the push to build offshore wind farms, which are expected to generate 30,000 MW by 2020.
But there is a problem. Turbines have been built at such a frenetic pace that a third aren’t even hooked up to the electric grid. Even Goldwind’s own (and now redundant) prospectus highlights those dangers. “The lack of grid infrastructure may restrict… the development of wind farms,” it notes under its ‘Risks’ section.
Wind farms continue to be built without consideration for how their power will be distributed. It has become a major headache for the State Grid Corporation, which is required by law to provide grid connection and buy the electricity generated.
The problem is that wind-power companies don’t want to go through the lengthy process of getting central government approvals, as well as acquiring land on which to connect to the grid.
So they use a loophole: projects under 50 MW only need local government approval, and no green light from the National Development and Reform Commission or State Grid itself. “Everybody says grid interconnection with wind farms is difficult, but in fact, grids are not difficult to build… the difficult part lies in management,” Shu Yinbiao, vice-president of State Grid, told the Shanghai Securities News.
So State Grid is lobbying for rules that would oblige new wind farms to submit their plans for connecting to the grid before they can break ground on new projects.
It also wants new projects to incorporate technologies that ensure smooth transmission of power. One such technique – ‘low voltage ride-through capability’ – is a switch that prevents a short circuit from shutting off turbines when there’s a change in voltage. Currently, most of China’s wind farms don’t have it and the State Grid argues that this sort of equipment is essential if wind power is to be integrated safely.
Hu Xuehao, a State Grid engineer, thinks problems with short circuiting could become a real threat if the government’s ambitions for wind power are reached.
“At the moment, wind generating capacity accounts for only 1-2% of total generating capacity in Jilin [a north eastern province], so such an incident would only be a local problem and not a threat to the stability of the regional grid,” he explained recently, “but as our wind power capacity is rapidly developing, it will become a bigger problem.”
If the State Grid’s proposals are successful, new projects are bound to take longer to reach operating maturity. This, at least in the short term, will hit the wider industry, for turbines and ancillary equipment. It’s a bitter pill, but it would go some way making wind a reliable way to generate electricity.
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