China is the world’s second-largest energy consumer and is targeting 100 gigawatts of wind-power capacity by 2020. Wind turbine maker Suzlon Energy (Tianjin), the China subsidiary of India’s Suzlon Energy, has supplied wind turbines to several key state-owned power giants, including Huaneng, Guohua and Datang. But, says Paulo Soares, Suzlon’s China CEO, it is not all plain sailing in an industry tied to government tenders.
Q: What do you hope to see come out of the upcoming Copenhagen climate summit?
A: I hope the Copenhagen talks will not lead to a gridlock that will affect issues related to renewable energy. Trade barriers are an important issue. If I lose a bid, I want it to be because I wasn’t competitive enough, not because of government restrictions.
Q: What role does private enterprise play in China’s wind sector compared with India?
A: In India we have a different financial system and a different grid system, but India’s infrastructure is nowhere near China’s and private companies are needed to push development of the industry. In China, it is mostly the big state-owned utility firms that operate wind farms. The government does not need private companies to force the development of wind power.
Q: With so many state-owned players, what brought Suzlon to China?
A: The reason is very simple – the market is big and promising. Suzlon was already coming from a low-cost base in India, so it wasn’t a matter of cost. By now, China has overtaken India in terms of attractiveness. The Indian market lacks high-wind sites and high wind speeds so revenue would be lower. China’s potential is much higher and is a very important part of Suzlon’s global strategy.
Q: What are the difficulties for a foreign company like Suzlon operating in China’s wind energy sector?
A: Building wind farms is not a big deal and the government has placed many orders with companies to produce wind turbines. One problem is the grid. By the end of 2008, about 20% of wind energy created was not connected to the grid and this gap is only widening. There is a massive backlog of wind farms built and ready to be hooked up. For wind you have to build grids and transfer lines to often very remote locations. It is hard to say how far away we are from having a grid here that can effectively harness wind energy, but I will say that the need is immediate.
Q: What about government involvement in China’s wind sector?
A: The government could make things easier for itself by not interfering as much as it does. Beijing can’t complain that there is not enough investment. Suzlon has invested more in China than anywhere else outside of India, and this is similarly true for our international competitors. But if we see the government leaving out international companies from the bidding process and using biased evaluation criteria to select turbine suppliers, then of course we’re going to think twice about investment.
Q: How does wind energy compete in terms of cost with more traditional forms of energy, like coal?
A: If you put on top of coal prices the costs for China to reach acceptable standards of emissions in coal-fired power plants, the logistic costs of moving coal across the country, the cost of coal exploration standard requirements, then you’ll see that cheap coal in China is a fallacy. Wind energy is also heavily subsidized, but many believe these subsidies should be higher still.
Q: How do you see the future of wind energy in China?
A: Wind energy cannot fall into a trap where it gets used as a fashion accessory or a nice advertisement. There is a need to ensure that wind farms work efficiently and for all governments to provide grid connectivity and maintain their promises on climate change. That said, we are not naïve enough to think that wind energy will become a major strategically important asset in the near term. But, policies for renewable energy must be long, loud and legal, to borrow a phrase. Regulations cannot be changing all the time. They must be loud in that policies must be discussed and made aware to everyone. Grandfathering rules must be set, guidelines provided, and it must all be legal and binding – we cannot breach agreements on climate change that were made in the past.