Chinese wind power developers to speed up capacity addition ahead of subsidy phase-out

Beijing plans to end subsidies for new onshore wind schemes from the beginning of 2021

Solar energy has outpaced the wind sector in terms of growth in China. EPA  

Chinese developers are expected to speed up addition of wind power capacity to grid this year, ahead of planned easing of subsidies in 2021.

China, which is one of the top drivers for wind power globally, could add 251 Gigawatts of capacity to grid between 2020 and 2029, according to Wood Mackenzie. The wind power market in China could reach a cumulative grid connected capacity of 461GW by the end of the decade, the consultancy said.

“The combined impact from coronavirus and the rush to install new wind capacity before the end of subsidies, could cause the LCOE [levelised cost of electricity] for wind to rise 8 per cent to 472 RMB per megawatt-hour in 2020 compared to 2019," said senior consultant Xiaoyang Li.

"This will prevent onshore wind from meeting the government’s target for grid parity in 2021.”

China plans to end subsidies for new onshore wind schemes from the beginning of 2021 in an effort to allow it to compete with conventional power projects like coal and gas. The move comes as cost of generating power through solar or wind sources falls significantly.

More than 100GW of capacity spread across 25 wind bases is already planned and under construction in China.

The coronavirus pandemic, which began in China, affected 10 per cent of new capacity additions in 2020. However, developers are also racing to get projects off the ground before wind subsides begin to ease, Ms Xiaoyang said.

Wood Mackenzie forecasts new onshore wind capacity to decrease 21 per cent year-on-year in 2021 as subsidies reduce.

"The termination of subsidies could depress the market and hurt developer profitability in the short term,” said Ms Xiaoyang.

Wind is also expected to compete with solar power, which has outpaced the former in terms of growth.

Competition between the two renewable energy sources is set to intensify after 2026, when costs of both are expected to fall even below coal in regions with abundant wind currents and solar irradiation.