By John Addison (3/7/11)
The world has reached a major milestone in clean energy with wind power capacity now at 200 GW. That’s enough to power 200 million condos and apartments like the one that we live in.
According to the Global Wind Energy Council (GWEC) , wind energy capacity grew 22.5% last year, even though it was a tough year for project financing, and even though coal and natural gas remain cheap in leading power consuming nations.
Half of the added wind capacity took place in one country – China. Now the leaders of that nation convene to architect a new five-year plan. Wind power growth supported by a super grid will be part of that plan. “China now has 42.3 GW of wind power, and has surpassed the US in terms of total installed capacity,” said Li Junfeng, Secretary General of the Chinese Renewable Energy Industry Association (CREIA). “This puts China firmly on a path to reach 200 GW of installed wind power by 2020. At the same time, China has become the world’s largest producer of wind energy equipment.”
China has surpassed the United States as the world leader in wind power because China is committed to grow its energy capacity while reducing its energy and carbon intensity by at least 40 percent. In the United States, NIMBY opposition, powerful fossil-fuel political power, and long-term financing challenges caused installation of wind power to drop from 10 GW in 2009 to only 5 GW in 2010. “Our industry continues to endure a boom-bust cycle because of the lack of long-term, predictable federal policies, in contrast to the permanent entitlements that fossil fuels have enjoyed for 90 years or more,” said Denise Bode, CEO of the American Wind Energy Association.
China not only leads the world in installed wind energy, it now leads in the manufacturing of wind turbines. Fueled by local demand, China has grown to 86 wind turbine manufacturers, stated Mitchell Silk, Partner, ALLEN & OVERY during a recent Infocast webinar. China’s can build wind turbines for 33 percent less cost than global competitors such as GE and Vestas. China benefits from low labor cost, low capital cost, government support, and preferred access to rare earth materials such as neodymium and dysprosium.
Although U.S. federal support for clean energy support is weakened with congressional threats to shutdown our government unless both the EPA and DOE are crippled, state level support is strong. Twenty-nine states have renewable portfolio standards (RPS) in place. By 2030, 300 GW of wind power could be installed in the U.S. stated Mitchell Silk.
Chinese turbine manufacturers would like to be a major supplier to the U.S. by lowering the cost of wind energy. So far, the cost advantage has been of little help as China has secured only three demonstration sites in the U.S.
During the Infocast webinar, David Halligan, Chief Financial Officer, GOLDWIND USA identified project risk as a key to success in the United States. Billion dollar wind energy projects are only developed and financed when these risks can be minimized:
- Interconnection to Grid
- Political policy
- Land
- Technology
- Financing
- Insurance
Currently China’s technology is viewed as unproven in the U.S. This perception may not last long due to China’s global installed leadership. 300 MW combined cycle technology from China was classified as unproven a few years ago. Today this technology is accepted and it is far more complex than wind turbines.
China is likely to have an advantage when project financing is uncertain. Chinese wind makers have the cash to take equity in wind farms and they have large credit lines, for example:
- Sinovel $6.5 billion from China Development Bank (CDB)
- Goldwind $6 billion from CDB
- Ming Yang $737 million ICBC Guangdong
- (Disclosure: author owns stock in Goldwind and Ming Yang)
In the past, Chinese wind energy success has benefitted U.S. suppliers, such as American Superconductor. In the future, it may also benefit states that host new manufacturing sites owned by China and benefit from the addition of thousands of new jobs in developing and managing wind power and grid upgrades.
As costs drop and the global supply chain becomes more efficient, wind energy will grow to exceed one trillion watts. In this decade it is likely to exceed $100 billion in annual revenue with significant opportunity for partners and competitors from China, the United States, and countries around the world.
