Prices for wind power in China are decided in two main ways. If a project’s installed capacity is below 50 megawatts, it is subject to provincial or municipal government approval and oversight. Larger projects go to the central government and may be part of a National Reform and Development Commission-led (NDRC) concession program.
The vast majority of China’s wind farms were locally approved, but regulations among provinces differ. Most adopt a bidding system along the lines of the national concession program, although Guangdong has a feed-in tariff, or fixed price, for wind power. Policies like this are seen as being key to wind power’s success in countries like Germany.
Under the annual concession program, which began in 2003, developers submit bids to the NDRC, which chooses several projects each year. According to the Chinese Wind Energy Association (CWEA), 11 projects were approved between 2003 and 2006, with a total installed capacity of 2.45 gigawatts.
Industry observers had criticized the concession program because approval was granted to bids with the lowest price. These often came from companies linked to the big five power generation companies, which could cope with slim margins or losses on wind power if it meant they could meet their government-mandated renewable energy quota.
The NDRC responded by modifying the program. As it stands now, firms that bid closest to the average bidding price are selected for projects.
“The evaluation criteria based on the lowest price caused abnormal on-grid prices, which were bad for the sector,” said Hu Runqing, an associate research professor at the NDRC’s Center for Renewable Energy Development. “The important change happened in the fifth round in March 2007. Such a regulation guided bidders to offer a reasonable price.”
Observers say the concession program has been changed for the better.
“It’s a dramatic shift,” said Justin Wu of research firm New Energy Finance. “The NDRC has reformed the system.”