www.shcri.com - On July 20th of 2009, China Development and Reform Commission published the Notice on Wind Power on the Pricing Policy. It stipulates that the whole country will be divided into four categories of wind power resource areas according to the situation of wind power resources and engineering construction conditions, and then the corresponding wind power electricity price benchmark will be fixed. Since August 1st of 2009, the wind power electricity price benchmark in Chinese four resource areas will be 0.51 RMB (0.074 USD) Kw/h, 0.54 RMB (0.079 USD) Kw/h, 0.58 RMB (0.085 USD) Kw/h, and 0.61 RMB (0.089 USD) Kw/h separately. In the future, Chinese newly-constructed continental wind power projects will carry out uniformly the wind power on-grid electricity price benchmark in their own wind power resource areas. The on-grid electricity price of the maritime wind power will be fixed separately according to the construction process in the future. It also stipulates that the apportion system of wind power charges will be carried out continuously. The part of the on-grid electricity price of wind power that is within the local on-grid electricity price of the fuel coal and desulfurization equipment benchmark is afforded by the local provincial electricity network. The amount above the benchmark is solved by apportion of the extra electricity price of the renewable energy which is collected by the country. After the adjustment of the on-grid electricity price of the fuel coal and desulfurization equipment benchmark, the part that is afforded by the local electricity network in the on-grid electricity price of wind power will be accordingly adjusted.
At present, the investment for the construction of Chinese wind power farms is generally 8,000 RMB to 1,000 RMB per kilowatt. Based on the 30% of the self-owned capital investment and 1,800 utilization hours of equivalent full capacity, it can be calculated that the electricity cost of the wind power farm with 50,000 kilowatts is 0.43 RMB to 0.53 RMB Kw/h, which is lower than the benchmark electricity price that was issued by China Development and Reform Commission. If considering the rich wind power resources in Hebei and Inner Mongolia, the utilization hours of equivalent full capacity can reach 2,500 hours and the electricity cost can be reduced to 0.32 RMB. Plus the CDM revenue of about 0.1 RMB per Kw/h in the wind power farm, the profitability of Chinese wind power farms is already on a high level.
For those investors, the benchmark electricity price method is conductive to regulate the mechanisms of market and price. With no vicious competition of low electricity prices, it is beneficial for the investors. In the five sessions of bids for wind power concession in China from 2003 to 2007, the on-grid electricity price has been an important judgment standard. Though the proportion of the on-grid electricity price has been reduced from the lowest electricity price as the bid price in the first two sessions to only 25% of the bid price in the fourth and fifth sessions, the vicious competitions on the on-grid electricity price among bidders still emerged. After the regulation of the benchmark electricity price this time, the localization schemes of wind power equipment of bidders, technical schemes, financing capacities and financial schemes for projects of bidders will be the determine factors, which is more conductive to the regulation of the market and the healthy development of the wind power industry.
For wind power equipment dealers, based on the fixed revenues of investors, controlling the investment costs will be the key factor to improve the profits. The competition on the price and quality of products among equipment dealers will become fiercer. The equipment investment accounts for 60% of the total investment of the wind power farms. Therefore, the cost control will be mainly focused on the controls of equipment purchase costs and maintenance costs in the future, which will put up higher demands for the quality and price of the products of equipment dealers.
The support policies will greatly promote the development of Chinese wind power industry. The regulation of the benchmark electricity price will stimulate significantly the enthusiasm of investors of wind power farms and operator electricity network companies. It will also promote the healthy and continuous development of the wind power industry. For equipment dealers, on one hand, the stimulation of the enthusiasm of investors can better promote the increase of the industry and enhance the equipment demands. On the other hand, the fiercer competition will reconstruct the industry and is conductive to the industry in the long term.
Source: China Research and Intelligence
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China Research and Intelligence