China - Policy takes the wind out of investors' sails

China needs to change from a wind-power auction pricing system to a feed-in tariff to protect investors in developing renewable energy, the chairman of the Global Wind Energy Council said at a recent conference in Beijing. "The price volatility and uncertainty caused by the current regulation harms foreign and domestic private manufacturers and developers, who are discouraged by a pricing pressure they cannot sustain," Arthouros Zervo said.

"China is faced with a great opportunity for developing wind power, but the development relies heavily on an enabling pricing system," said Steve Sawyer, climate and energy policy adviser for Greenpeace International. Investors in wind power development in China fear that their investment will vanish because they just experienced a roller-coaster ride in the wind power pricing policy amendment. They went from the expectation of a high price supported by preferential policies to a low price, which resulted from bidding. Their dream began in January 2006, when the Renewable Energy Law took effect and provided a legal framework for the development of renewable energies in China.

The law stated that the price management department of the State Council, China's cabinet, would determine the feed-in-tariffs for renewable energy generation projects. Insiders and investors in the wind power industry said the feed-in-tariff set by the government would be fixed at 0.25 Yuan (3.2 US cents) per kilowatt-hour more than the coal-fired power price. However, also in January, the National Development and Reform Commission (NDRC) released the implementation rules of the Renewable Energy Law, stating that bidding, which has been in effect since 2002, should determine the grid feed-in rates of wind-sourced power.

And it is also said that to encourage a domestic turbine manufacturing industry, more than half of the equipment in the first phase of construction must be made in China. And in the later phases, the domestic manufacturing percentage should be increased to 70.