Are China's wind farms profitable?

CHINA - China's wind farms are facing difficulties earning a profit due to insufficient wind resources, weak grid infrastructure and low tariffs.

The China Electricity Council said China's wind power capacity doubled to 12.8 gigawatts in 2008 from 6 gigawatts the year before.

Yet the industry is encountering problems keeping up with the government's aggressive plan to increase China's wind power capacity.

Although wind energy accounted for 1.1 percent of China's overall power generation capacity last year, it produced just 0.3 percent of the country's total electricity output, CEC reports.

Some of China's wind farms are facing inadequate wind resources, while a number are registering lower utilization hours than those set by feasibility studies, a report by the State Electricity Regulatory Commission said, the Guardian reported.

He Dexin, president of the association, told the South China Morning Post newspaper in early July that "the problem is that the regions where wind resources are the most abundant tend to have the weakest grid infrastructure development."

In addition, low tariffs paid to wind farms by grid operators also affects their profitability, the SERC report said. Because there are no fixed tariffs, wind power projects of 50 megawatts and more are forced to sell their power at the lowest price.

There is also a backlog in connections, due to the steep increase in wind power projects. Getting equipment hooked up can now involve a wait four months. The state-run China Wind Energy Association said more than 20 percent of China's wind power farms are non-operational because they aren't connected to the grid.

"Many farms are having operational difficulties because of inappropriate geographical locations or inadequate links to the nation's grid network," noted China's Ministry of Environmental Protection this month, Bloomberg News reported.

In early July, the ministry recommended that China increase spending on energy-saving ventures by 25 percent this year because some policies and projects aren't effectively implemented.

China still has ambitious plans for wind power and this year could become the world's largest growth market for wind-power generating capacity, as the recession has dampened such expansion in the United States. Recently China announced it plans to invest more than $14.6 billion to increase by more than 50 percent its wind-power capacity from last year by 2010, as well as a $140 billion plan to build seven giant wind farms by 2020.

By 2008, Global Wind Energy Council data indicate, China had the largest wind turbines fleet in Asia, with a total power-generating capacity of 12.21 million kilowatts, which ranked the fourth in the world.