IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v8y2015i2p1529-1546d46053.html
   My bibliography  Save this article

The Economics of Wind Power in China and Policy Implications

Author

Listed:
  • Zifa Liu

    (School of Electrical & Electronic Engineering, North China Electric Power University, Chang Ping District, Beijing 102206, China)

  • Wenhua Zhang

    (School of Economics and Management, North China Electric Power University, Chang Ping District, Beijing 102206, China
    These authors contributed equally to this work.)

  • Changhong Zhao

    (School of Economics and Management, North China Electric Power University, Chang Ping District, Beijing 102206, China
    These authors contributed equally to this work.)

  • Jiahai Yuan

    (School of Economics and Management, North China Electric Power University, Chang Ping District, Beijing 102206, China)

Abstract

In 2009, the implementation of feed-in tariff (FIT) and attractive public subsidies for onshore wind farms aroused great investment enthusiasm and spurred remarkable development of wind power in China. Meanwhile, rapid learning-by-doing has significantly cut down the cost of wind turbines and the capital cost of wind farms as well. Therefore, it is the right time to examine the appropriateness of the existing FIT policy for wind power in China. In this paper, we employ the analytical framework for levelized cost of electricity (LCOE) to model the generation cost of wind power. Results show that the existing FIT policy is attractive to investors, but serious curtailment and turbine quality issues could make wind power unprofitable. Meanwhile, rapid substantial decreases in the cost of wind power have made it competitive to coal power in 2013, implying that it is possible and necessary to reform the FIT policy for new wind farms. In the future, energy policies for onshore wind power in China could be concentrated on reducing the integration cost, so as to reduce the overall system cost.

Suggested Citation

  • Zifa Liu & Wenhua Zhang & Changhong Zhao & Jiahai Yuan, 2015. "The Economics of Wind Power in China and Policy Implications," Energies, MDPI, vol. 8(2), pages 1-18, February.
  • Handle: RePEc:gam:jeners:v:8:y:2015:i:2:p:1529-1546:d:46053
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/8/2/1529/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/1996-1073/8/2/1529/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hu, Zheng & Wang, Jianhui & Byrne, John & Kurdgelashvili, Lado, 2013. "Review of wind power tariff policies in China," Energy Policy, Elsevier, vol. 53(C), pages 41-50.
    2. Liu, Yingqi & Kokko, Ari, 2010. "Wind power in China: Policy and development challenges," Energy Policy, Elsevier, vol. 38(10), pages 5520-5529, October.
    3. Zhao, Xiaoli & Zhang, Sufang & Yang, Rui & Wang, Mei, 2012. "Constraints on the effective utilization of wind power in China: An illustration from the northeast China grid," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(7), pages 4508-4514.
    4. Qiu, Yueming & Anadon, Laura D., 2012. "The price of wind power in China during its expansion: Technology adoption, learning-by-doing, economies of scale, and manufacturing localization," Energy Economics, Elsevier, vol. 34(3), pages 772-785.
    5. Ueckerdt, Falko & Hirth, Lion & Luderer, Gunnar & Edenhofer, Ottmar, 2013. "System LCOE: What are the costs of variable renewables?," Energy, Elsevier, vol. 63(C), pages 61-75.
    6. Liao, Cuiping & Jochem, Eberhard & Zhang, Yi & Farid, Nida R., 2010. "Wind power development and policies in China," Renewable Energy, Elsevier, vol. 35(9), pages 1879-1886.
    7. Zhao, Zhen Yu & Hu, Ji & Zuo, Jian, 2009. "Performance of wind power industry development in China: A DiamondModel study," Renewable Energy, Elsevier, vol. 34(12), pages 2883-2891.
    8. Yang, Mian & Patiño-Echeverri, Dalia & Yang, Fuxia, 2012. "Wind power generation in China: Understanding the mismatch between capacity and generation," Renewable Energy, Elsevier, vol. 41(C), pages 145-151.
    9. Paul L. Joskow, 2011. "Comparing the Costs of Intermittent and Dispatchable Electricity Generating Technologies," American Economic Review, American Economic Association, vol. 101(3), pages 238-241, May.
    10. Luo, Guo-liang & Zhi, Fei & Zhang, Xinying, 2012. "Inconsistencies between China's wind power development and grid planning: An institutional perspective," Renewable Energy, Elsevier, vol. 48(C), pages 52-56.
    11. Katzenstein, Warren & Apt, Jay, 2012. "The cost of wind power variability," Energy Policy, Elsevier, vol. 51(C), pages 233-243.
    12. Stokes, Leah C., 2013. "The politics of renewable energy policies: The case of feed-in tariffs in Ontario, Canada," Energy Policy, Elsevier, vol. 56(C), pages 490-500.
    13. Kang, Junjie & Yuan, Jiahai & Hu, Zhaoguang & Xu, Yan, 2012. "Review on wind power development and relevant policies in China during the 11th Five-Year-Plan period," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(4), pages 1907-1915.
    14. Levitt, Andrew C. & Kempton, Willett & Smith, Aaron P. & Musial, Walt & Firestone, Jeremy, 2011. "Pricing offshore wind power," Energy Policy, Elsevier, vol. 39(10), pages 6408-6421, October.
    15. Zhang, Sufang & Andrews-Speed, Philip & Zhao, Xiaoli, 2013. "Political and institutional analysis of the successes and failures of China’s wind power policy," Energy Policy, Elsevier, vol. 56(C), pages 331-340.
    16. Wu, Zhongqun & Sun, Hongxia & Du, Yihang, 2014. "A large amount of idle capacity under rapid expansion: Policy analysis on the dilemma of wind power utilization in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 32(C), pages 271-277.
    17. Lam, J.C.K. & Woo, C.K. & Kahrl, F. & Yu, W.K., 2013. "What moves wind energy development in China? Show me the money!," Applied Energy, Elsevier, vol. 105(C), pages 423-429.
    18. Peña, Ivonne & Lima Azevedo, Inês & Ferreira, Luís António Fialho Marcelino, 2014. "Economic analysis of the profitability of existing wind parks in Portugal," Energy Economics, Elsevier, vol. 45(C), pages 353-363.
    19. Katzenstein, Warren & Fertig, Emily & Apt, Jay, 2010. "The variability of interconnected wind plants," Energy Policy, Elsevier, vol. 38(8), pages 4400-4410, August.
    20. Branker, K. & Pathak, M.J.M. & Pearce, J.M., 2011. "A review of solar photovoltaic levelized cost of electricity," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4470-4482.
    21. Hong, Lixuan & Möller, Bernd, 2012. "Feasibility study of China’s offshore wind target by 2020," Energy, Elsevier, vol. 48(1), pages 268-277.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wu, Jie & Albrecht, Johan & Fan, Ying & Xia, Yan, 2016. "The design of renewable support schemes and CO2 emissions in China," Energy Policy, Elsevier, vol. 99(C), pages 4-11.
    2. Tu, Qiang & Betz, Regina & Mo, Jianlei & Fan, Ying & Liu, Yu, 2019. "Achieving grid parity of wind power in China – Present levelized cost of electricity and future evolution," Applied Energy, Elsevier, vol. 250(C), pages 1053-1064.
    3. Federica Cucchiella & Idiano D’Adamo & Paolo Rosa, 2015. "Industrial Photovoltaic Systems: An Economic Analysis in Non-Subsidized Electricity Markets," Energies, MDPI, vol. 8(11), pages 1-16, November.
    4. Ruhang Xu & Zhilin Liu & Zhuangzhuang Yu, 2019. "Exploring the Profitability and Efficiency of Variable Renewable Energy in Spot Electricity Market: Uncovering the Locational Price Disadvantages," Energies, MDPI, vol. 12(14), pages 1-30, July.
    5. Chen, Hao & Gao, Xin-Ya & Liu, Jian-Yu & Zhang, Qian & Yu, Shiwei & Kang, Jia-Ning & Yan, Rui & Wei, Yi-Ming, 2020. "The grid parity analysis of onshore wind power in China: A system cost perspective," Renewable Energy, Elsevier, vol. 148(C), pages 22-30.
    6. Tu, Qiang & Betz, Regina & Mo, Jianlei & Fan, Ying, 2019. "The profitability of onshore wind and solar PV power projects in China - A comparative study," Energy Policy, Elsevier, vol. 132(C), pages 404-417.
    7. Minh Ha-Duong & Sven Teske & Dimitri Pescia & Mentari Pujantoro, 2021. "Planning, policy and integration for sustainable development of offshore wind energy in Vietnam 2022 - 2030," Working Papers hal-02329698, HAL.
    8. Izabela Godyń & Anna Dubel, 2021. "Evolution of Hydropower Support Schemes in Poland and Their Assessment Using the LCOE Method," Energies, MDPI, vol. 14(24), pages 1-23, December.
    9. Nguyen, Thi Anh Tuyet & Chou, Shuo-Yan, 2018. "Impact of government subsidies on economic feasibility of offshore wind system: Implications for Taiwan energy policies," Applied Energy, Elsevier, vol. 217(C), pages 336-345.
    10. Liu, Weiwei & Song, Yifan & Bi, Kexin, 2021. "Exploring the patent collaboration network of China's wind energy industry: A study based on patent data from CNIPA," Renewable and Sustainable Energy Reviews, Elsevier, vol. 144(C).
    11. Xia, Fang & Song, Feng, 2017. "The uneven development of wind power in China: Determinants and the role of supporting policies," Energy Economics, Elsevier, vol. 67(C), pages 278-286.
    12. Chenxing Yang & Xu Yang & Yuri A. W. Shardt, 2018. "An ADRC-Based Control Strategy for FRT Improvement of Wind Power Generation with a Doubly-Fed Induction Generator," Energies, MDPI, vol. 11(5), pages 1-19, May.
    13. Xia, Fang & Lu, Xi & Song, Feng, 2020. "The role of feed-in tariff in the curtailment of wind power in China," Energy Economics, Elsevier, vol. 86(C).
    14. Kai Zhou & Min Ai & Yancheng Sun & Xiaogang Wu & Ran Li, 2019. "PMSM Vector Control Strategy Based on Active Disturbance Rejection Controller," Energies, MDPI, vol. 12(20), pages 1-19, October.
    15. Sen Guo & Huiru Zhao & Haoran Zhao, 2017. "The Most Economical Mode of Power Supply for Remote and Less Developed Areas in China: Power Grid Extension or Micro-Grid?," Sustainability, MDPI, vol. 9(6), pages 1-18, May.
    16. Yuan, Jiahai & Lei, Qi & Xiong, Minpeng & Guo, Jingsheng & Hu, Zheng, 2016. "The prospective of coal power in China: Will it reach a plateau in the coming decade?," Energy Policy, Elsevier, vol. 98(C), pages 495-504.
    17. Xia, Fang & Song, Feng, 2017. "Evaluating the economic impact of wind power development on local economies in China," Energy Policy, Elsevier, vol. 110(C), pages 263-270.
    18. Thomas Poulsen & Charlotte Bay Hasager, 2016. "How Expensive Is Expensive Enough? Opportunities for Cost Reductions in Offshore Wind Energy Logistics," Energies, MDPI, vol. 9(6), pages 1-23, June.
    19. Ali, Ghaffar & Bashir, Muhammad Khalid & Ali, Hassan & Bashir, Muhammad Hamid, 2016. "Utilization of rice husk and poultry wastes for renewable energy potential in Pakistan: An economic perspective," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 25-29.
    20. Liu, Yuanxin & Zheng, Ruijin & Chen, Sisi & Yuan, Jiahai, 2019. "The economy of wind-integrated-energy-storage projects in China's upcoming power market: A real options approach," Resources Policy, Elsevier, vol. 63(C), pages 1-1.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yuan, Jiahai & Sun, Shenghui & Shen, Jiakun & Xu, Yan & Zhao, Changhong, 2014. "Wind power supply chain in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 356-369.
    2. Lam, J.C.K. & Woo, C.K. & Kahrl, F. & Yu, W.K., 2013. "What moves wind energy development in China? Show me the money!," Applied Energy, Elsevier, vol. 105(C), pages 423-429.
    3. Zhao, Zhen-yu & Sun, Guang-zheng & Zuo, Jian & Zillante, George, 2013. "The impact of international forces on the Chinese wind power industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 24(C), pages 131-141.
    4. Li, Cun-bin & Li, Peng & Feng, Xia, 2014. "Analysis of wind power generation operation management risk in China," Renewable Energy, Elsevier, vol. 64(C), pages 266-275.
    5. Gosens, Jorrit & Lu, Yonglong, 2014. "Prospects for global market expansion of China’s wind turbine manufacturing industry," Energy Policy, Elsevier, vol. 67(C), pages 301-318.
    6. Fan, Xiao-chao & Wang, Wei-qing, 2016. "Spatial patterns and influencing factors of China׳s wind turbine manufacturing industry: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 482-496.
    7. Zhao, Zhen-Yu & Chen, Yu-Long & Chang, Rui-Dong, 2016. "How to stimulate renewable energy power generation effectively? – China's incentive approaches and lessons," Renewable Energy, Elsevier, vol. 92(C), pages 147-156.
    8. Li, Mingquan & Patiño-Echeverri, Dalia & Zhang, Junfeng (Jim), 2019. "Policies to promote energy efficiency and air emissions reductions in China's electric power generation sector during the 11th and 12th five-year plan periods: Achievements, remaining challenges, and ," Energy Policy, Elsevier, vol. 125(C), pages 429-444.
    9. Zhang, Sufang & Andrews-Speed, Philip & Zhao, Xiaoli, 2013. "Political and institutional analysis of the successes and failures of China’s wind power policy," Energy Policy, Elsevier, vol. 56(C), pages 331-340.
    10. Nissen, Ulrich & Harfst, Nathanael, 2019. "Shortcomings of the traditional “levelized cost of energy” [LCOE] for the determination of grid parity," Energy, Elsevier, vol. 171(C), pages 1009-1016.
    11. Dong, Changgui & Qi, Ye & Dong, Wenjuan & Lu, Xi & Liu, Tianle & Qian, Shuai, 2018. "Decomposing driving factors for wind curtailment under economic new normal in China," Applied Energy, Elsevier, vol. 217(C), pages 178-188.
    12. Xuemei Liu, 2016. "Why Has Wind Power Capacity Been Overinvested Under Uncertainty in China?," Review of Economics & Finance, Better Advances Press, Canada, vol. 6, pages 1-12, February.
    13. Pei, Wei & Chen, Yanning & Sheng, Kun & Deng, Wei & Du, Yan & Qi, Zhiping & Kong, Li, 2015. "Temporal-spatial analysis and improvement measures of Chinese power system for wind power curtailment problem," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 148-168.
    14. Xia, Fang & Song, Feng, 2017. "The uneven development of wind power in China: Determinants and the role of supporting policies," Energy Economics, Elsevier, vol. 67(C), pages 278-286.
    15. Gosens, Jorrit & Lu, Yonglong, 2013. "From lagging to leading? Technological innovation systems in emerging economies and the case of Chinese wind power," Energy Policy, Elsevier, vol. 60(C), pages 234-250.
    16. Zhao, Zhen-yu & Tian, Yu-xi & Zillante, George, 2014. "Modeling and evaluation of the wind power industry chain: A China study," Renewable and Sustainable Energy Reviews, Elsevier, vol. 31(C), pages 397-406.
    17. Valentine, Scott Victor, 2014. "The socio-political economy of electricity generation in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 32(C), pages 416-429.
    18. Hayashi, Daisuke & Huenteler, Joern & Lewis, Joanna I., 2018. "Gone with the wind: A learning curve analysis of China's wind power industry," Energy Policy, Elsevier, vol. 120(C), pages 38-51.
    19. Mo, Jian-Lei & Agnolucci, Paolo & Jiang, Mao-Rong & Fan, Ying, 2016. "The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment," Energy Policy, Elsevier, vol. 89(C), pages 271-283.
    20. Chen, Hao & Gao, Xin-Ya & Liu, Jian-Yu & Zhang, Qian & Yu, Shiwei & Kang, Jia-Ning & Yan, Rui & Wei, Yi-Ming, 2020. "The grid parity analysis of onshore wind power in China: A system cost perspective," Renewable Energy, Elsevier, vol. 148(C), pages 22-30.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:8:y:2015:i:2:p:1529-1546:d:46053. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.