World Energy Outlook 2007

phase of a wind project must be made in China, with, in the later phases, the
domestic manufacturing share increased to 70%. This discrimination against
foreign manufacturers and developers is compounded by the prospects of low
returns on investment, given low electricity prices and a lack of supportive
pricing mechanisms such as feed-in tariffs, and by a lack of flexibility in
implementing wind power projects (e.g. site selection and wind farm size are
determined by the government). Furthermore, there is a lack of information
and maps about wind resources.
By the end of 2005, China’s installed capacity of photovoltaic systems was about
70 MW, of which approximately 50% was used to supply electricity in remote
rural areas without grid connection. Since 2000, China’s domestic PV industry
has grown rapidly, achieving annual PV module production capacity of
approximately 300 MW at the end of 2006.
The future potential is very large, as most areas benefit from high solar
radiation. The national targets are 300 MW installed by 2010 and 1.8 GW by
2020. PV technology can be expected to make significant advances beyond
2020 along with cost reductions. In the Reference Scenario, China’s PV
capacity is expected to reach 9 GW in 2030.
China is the world leader in solar thermal systems for heating and hot water
supply. About 75 million m 2 of solar collectors are installed in China at present,
about half the world total (IEA SHC, 2007). This technology is already
cost-effective. The success of the past is likely to continue. The national target
for 2010 is 150 million m 2 and 300 million m 2 for 2020 (NDRC, 2007c). In the
Reference Scenario, the target is expected to be met around 2025.
Policy Framework
In order to encourage the development of renewable energy, China introduced
the Renewable Energy Law, which came into effect on 1 January 2006. The law
provides for the compulsory connection to the grid of power plants producing
electricity from renewables. It stipulates that all energy offered, which is
generated from renewable sources, must be purchased and that utilities must
provide grid-connection services and related technical support. The law
provides a subsidy of yuan 0.25 ($0.032)/kWh for biomass-fired projects, but
does not have preferential pricing policies for wind power projects. Instead,
the standard price for wind power is determined through competitive
tendering. There is no minimum wind power price: each wind project receives
an individual on-grid price which varies significantly; from yuan 0.382
($0.051)/kWh to yuan 0.79 ($0.105)/kWh. There are two types of tendering
procedures, one through the central government and another one through the
provincial/local government. The law also stipulates that an element to
covering construction costs of related power grid facilities may be included in
the electricity price.
356 World Energy Outlook 2007 - CHINA’S ENERGY PROSPECTS