Update on the wind resource concession approach in China

Summary form only given as follows. China is the world\´s largest producer of coal, and this fuel accounts for fully 75% of energy production and consumption in the country. While use of this fuel has been declining in most industrialized countries, it has been increasing in China-and it is expected that the country\´s global share might increase from about 30% to almost 50% by the year 2020. Increased reliance on this fuel will only exacerbate an environmental situation that is already difficult. Faced with such a situation, China is seeking to increase its utilization of renewable energy technologies, including wind power. One policy mechanism designed to increase capacity of this renewable energy source is the wind resource concession (WRC). Wind energy is a geographically constrained resource, and certain areas are likely to be more "lucrative" for resource development than others. It is therefore possible for governments to grant access to these resource-rich areas, under competitive bidding procedures, as is similarly done for natural gas and oil reserves. The basic idea behind the WRC is thus that private sector entities would be willing to bid for exclusive access to such areas, and would then develop the resource within that area. As with oil and natural gas, firms should be willing to invest in both exploration and resource mapping as part of their development efforts, in order to identify the best potential siting arrangements. WRC would thus encourage private sector firms to put very, very large wind units in exactly the best locations. By doing so, it will enable them to drive down costs, and thus make this type of renewable energy investment a viable alternative to coal-based production. Previous work performed in this project has determined that such an approach is feasible. However, a number of problems associated with wind power development in China have been identified. These include: (1) the high price. China\´s wind power is even more expensive than that in foreign countries, since much of the equipment is imported, and a lack of adequate personnel for management and maintenance has increased O&M costs; (2) availability of capital. Virtually all financing is coordinated through the power corporations, and, there are very few sourc- es of capital not associated with either the government or international donors; (3) manufacturing and service capabilities. Low levels of demand for domestic turbines and poor response from domestic R&D have hampered the industry\´s development; (4) institutional arrangements. A "balkanized," decentralized governmental responsibility for wind power hinders its development; and (5) lack of private-sector competition. The above factors, and equipment selection dictated by donors, has limited private sector competition in this industry. An on-going project is addressing these factors, and this paper will provide an update about WRC activities within the country.