India's Suzlon catches wind in China
By Pallavi Aiyar
TIANJIN, China - Forty-meter long, sparkling-white rotor blades lie stacked
against each other as far as the eye can see. Icarus himself would have coveted
these elegant wings, had he found himself in this 22,500-square-meter site in
Tianjin, a port city that serves Beijing, an hour's drive to the northwest.
This substantial facility is in fact the largest manufacturing site run by
Indian wind energy major Suzlon, capable of producing wind turbines with an
annual capacity of 600 megawatts (MW). The facility, set up with an investment
of US$60 million, came on line in April 2007, making it the first investment by
an Indian company in China's rapidly expanding energy sector.
India and China are usually associated as competitors in the
energy business, particularly for hydrocarbon resources. Given soaring oil
prices coupled with the threat of climate change and pollution, the development
of renewable energy resources has emerged as a matter of priority for both
countries. Thus, as was repeatedly stressed during Indian Prime Minister
Manmohan Singh's recent visit to Beijing, renewable energy holds the potential
to be an area of collaboration between two of the world's fastest-growing
economies.
Although only a newcomer, Suzlon already accounts for 8% of the lucrative wind
energy sector in China, having made and sold turbines of 220 MW capacity in
2007. Nine wind farms across the country are supplied by Suzlon, most in the
wind-blown northern province of Inner Mongolia. According to Paulo Soares,
chief executive of Suzlon's China branch, the goal for 2008 is to generate
turbines with a 600 MW capacity, a target he is confident will be reached. A
megawatt, or a million watts, is sufficient power to provide daily electricity
for up to 1,000 households.
Use of wind energy has risen steeply in China in recent years. In 2004, the
country had a mere 194 MW of new installed capacity. That rose to 488 MW the
following year and by 2007 3,031 MW of wind power was installed in the country,
second in the world to only the United States. India, which formerly led China
in the sector, trailed both countries in terms of new installed capacity last
year with less than 2,000 MW.
This change in the fortune of China's wind market is the result of a government
push for renewable energy, according to Soares.
The demands of China's double-digit economic growth has helped the mainland
overtake Japan to become the world's second-largest energy consumer, after the
United States. Coal provides around 70% of China's energy, and with pollution a
major drain on the economy, Beijing is keen to reduce the share of the fuel in
the country's energy mix.
According to a World Bank report, 16 of the world's 20 most polluted cities are
in Beijing. Another of the bank's reports found that the health costs related
with outdoor air pollution in urban China in 2003 amounted to between 157
billion yuan (US$21 billion) and 520 billion yuan - depending on the method of
calculation used - or between 1.2% and 3.8% of the country's gross domestic
product (GDP).
China's energy production has for many years failed to keep pace with its GDP
growth rate. The Ministry of Electric Power has estimated that 15% to 20% of
the country's present energy demand cannot be met. Faced with a combination of
energy shortages, rocketing oil prices, endemic air pollution and the threat of
climate change, Beijing has thus made it a priority to aggressively develop
renewable energy technologies.
As a result, in January 2006, a Law on Renewable Resources came into effect
aimed at ensuring that by 2020, 10% to 12% of the country's total energy mix
will come from renewable resources.
The law obliges grids to purchase the more expensive renewable energy at prices
fixed by the government. The extra costs are borne by consumers as a result of
slightly higher prices for power. The law also offers financial incentives such
as preferential loans and tax breaks to boost renewable projects.
The result for wind energy is growth beyond expectations, with a government
target to reach five gigawatts (GW) of installed capacity by 2010 met more than
two years in advance - total installed capacity stands at 5.6 GW. The next
target is 30 GW of installed capacity for wind by 2020, a goal Soares says
should be comfortably attained.
Soares argues that a key driver for wind energy in China is a regulation that
stipulates that the share of non-hydro renewables should reach 1% of total
power generation by 2010 and 3% by 2020. Wind at present accounts for only
0.29% of China's power generation but 0.8% of its total installed power
capacity.
China to blow ahead
Wind is one of the few sectors in which India is ahead of its Himalayan
neighbor, though that is unlikely to last. India's total cumulative installed
capacity in wind is around 8 GW compared with China's 5.6 GW. Soares predicts
that China will overtake India in terms of total installed capacity within the
next two years.
Ultimately China has a much larger potential for wind than India: the country's
onshore potential for wind energy is estimated at a 250 GW. China's one-party
system can also push through land acquisitions for wind farms much more easily
than is possible in India.
For the moment though, India has much to teach China as is evident at Suzlon's
Tianjin plant where dozens of Indian engineers scurry around in the sub-zero
temperatures giving instructions and training to Chinese colleagues. No
domestic Chinese company can at present match the might of Suzlon, the world's
fifth-largest producer of wind turbines. Around 50% of China's wind energy
market is currently serviced by foreign investors.
How Suzlon fairs in China in the long-term will be an important development,
since investments in renewable resources across the border are a viable and
mutually beneficial way to boost cross-Himalayan investments more generally.
During Manmohan's China visit, the Chinese side expressed a strong interest in
investing in India's hydro-power sector, an area in which China is a clear
world leader. Should collaboration in renewables between the two countries
really take off, it could lead to warm winds of change thawing even further the
once frosty ties between the neighbors.
Pallavi Aiyar is the China correspondent for The Hindu.
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