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Cablegate: Gone with the Wind - Guangdong Advances Wind Sector

VZCZCXRO2425
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0425/01 2030815
ZNR UUUUU ZZH
R 210815Z JUL 08
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 7424
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 02 GUANGZHOU 000425

SENSITIVE
SIPDIS

EMB BEIJING FOR DOE
USDOE FOR OFFICE OF THE SECRETARY
USDOE FOR INTERNATIONAL AFFAIRS
USDOE FOR FOSSIL POLICY AND ENERGY
STATE FOR EAP/CM, EB/TRA, AND EB
STATE ALSO PASS USTR FOR CHINA OFFICE

E.O. 12958: N/A
TAGS: ENRG ECON EMIN SENV PGOV TRGY CH
SUBJECT: Gone with the Wind - Guangdong Advances Wind Sector
Development

1. (U) Summary: As Guangdong's power crunch worsens, and the
province faces brownouts and blackouts in the years ahead, local
officials are looking at new ways to generate energy, including the
use of wind and the construction of China's largest off-shore wind
farm. Scarce land resources and difficulty in acquiring equipment
and technology could inhibit this effort, which would, in any case,
be but a small fraction of Guangdong's overall energy mix, with coal
continuing to remain the dominant source for power generation. End
summary.

--------------------------------------------- -----
Investing in Wind: Guangdong's Wind Farms Mushroom
--------------------------------------------- -----

2. (U) With an average annual electricity consumption rate of 14.5%
between 2000 and 2006, Guangdong province is looking hard for ways
to solve its growing power crunch. While coal continues to dominate
the region's power generation, rising prices, transportation
challenges and mounting air pollution have pushed government and
enterprise alike to seek alternative solutions.

3. (U) Guangdong is nationally ranked fifth in wind power
generation, behind Inner Mongolia (3 million kwh), Hebei (3 million
kwh), Jilin (500,000 kwh) and Liaoning (500,000 kwh). In 2006,
Guangdong had an installed wind power capacity of 211,140 kwh, which
is already edging toward 300,000kwh. There are currently three
operating wind farm sites in Guangdong province - Nan'ao, Huilai,
and Shanwei cities. Guangdong has begun construction on additional
wind farms in Zhuhai (24,600 kwh capacity), Xuwen (120,000 kwh
capacity), and Taishan (200,000 kwh capacity) cities, which will
dramatically increase the province's wind generating capacity. The
first phase of the Taishan Chuan Dao project, a venture by the China
Guangdong Nuclear Power Holding Company (CGNPC), is expected to be
complete by year's end. A facility spread across two islands, Phase
I of the project has a 48,500 kwh capacity, tapping area wind
resources with a total potential output of 180,500 kwh. The entire
project will be connected to the larger power grid via undersea
transmission cables.

4. (U) Guangdong is also set to construct China's largest off-shore
wind farm. A joint effort between the Guangdong Baolihua New Energy
Stock Co. and the Lufeng municipal government, the facility will
cover 240 kilometers of sea area. With a projected wind power
capacity of 1.25 million kwh and the planned construction of an 8
million kwh supercritical power plant, which will have heightened
energy-efficiency compared to standard subcritical plants, the wind
farm by itself will far surpass Guangdong's initial 2006 wind
capacity goal of 700,000 kilowatts (note: this goal was raised to
880,000 kwh in the later half of 2006). Greenpeace estimates that
by 2020, Guangdong will have a wind power capacity of 20 million
kwh. In addition, wind farms are planned for Yangdong, Yangxi and
Hailing, which are located in Yangjiang municipality. Together, the
farms will add generating capacity equal to 1 million kwh.

-------------------------------------
Major Challenges - Finding Land, ...
-------------------------------------

5. (SBU) Wind power development faces a variety of challenges, one
of which is land resources and acquisition. Most of south China's
wind resources are located along the coastline, often rough terrain
with the seasonal threat of typhoons and other severe weather.
Also, coastal areas in Guangdong are densely populated and wind
power development there must compete with other development
priorities including other power plants. In addition, linking wind
farms to larger power grids can be difficult. CGNPC's Niu pointed
out that because wind farms are often located far away from the
power grid's reach, construction of transmission lines can stall
project completion.

6. (SBU) Niu also claims that power grid companies are unhappy about
increasing reliance on wind power because its supply is unstable.
According to Niu, Guangdong has several high elevation-areas, where,
even if the wind is strong, the area's low air density weakens and
slows wind capacity. In addition, wind power is a seasonal source
of energy, with the highest generation occurring during winter

GUANGZHOU 00000425 002 OF 002


month, leaving a decreased capacity from April to October. On
average, nuclear power plants run up to 8,000 hours a year and wind
power plants run 3,000 hours a year. However, due to Guangdong's
varied terrain and seasonality of wind generation, plants in
Guangdong run 1,500 to 2,000 hours.

-----------------------
...and Getting Turbines
-----------------------

7. (SBU) Xie Biao, General Manager of the Guangdong Yudean
Shibeishan Wind Power Development Company, also cites the shortage
of turbine supplies as an obstacle to wind power development. In
the past, foreign turbines manufacturers, such as Danish-owned
Vestas, dominated the market. According to Lin Shaokun, Vice Chief
Financial Officer of China Resources Wind Power Development Company,
developers are currently shifting toward domestically produced
turbines as Chinese manufacturing capacity has grown with lower
prices. Lin explained, however, that for large megawatt-level
turbines, developers still prefer imported ones because they are
more reliable. Regardless, CGNPC's Niu emphasized that turbine
supply was falling short of demand in all categories due to the
recent 'mushrooming' of wind farms.

------------------
Government Support
------------------

8. (SBU) According to Lin Minghui, Chief of the Shantou Development
and Reform Commission's Energy Section, the Guangdong government has
remained highly supportive of wind power development through both
policy and investment. Between 2005 and 2010, the provincial
government is expected to invest USD 726 million in developing the
wind power sector. In addition, the provincial government raised
the wind power tariff as a financial incentive for wind power
generating companies. According to Article 20 of the Renewable
Energy Law of the PRC, power grids that purchase alternative energy
sources at a higher cost that conventional energy, such as
coal-fired, are able to pass the cost along to the consumer at the
retail level. In January, the set wind power feed-in tariff was
raised from RMB 0.528 to RMB 0.689 per kilowatt-hour, which is
higher than the average coal-power feed-in tariff of RMB 0.42 kwh.
In addition, wind power companies receive subsidies of RMB 0.01 per
kwh if the wind farm is located more than 50 kilometers from the
power grid and a RMB 0.02 per kwh subsidy if the farm is more than
100 kilometers from the grid.

--------------------------------------
How Viable is Wind Power in Guangdong?
--------------------------------------

9. (SBU) While Guangdong is rapidly increasing the development of
its capacity, wind power remains a tiny portion of the overall
energy mix. According to Niu Zhiping, Guangdong's current wind
power capacity of less than 300,000 kwh accounts for less than 1% of
the province's power supply. In Guangdong's Shantou city, one of
the first areas in the country to develop wind power and the site of
the Nan'ao wind farm, wind power only accounts for approximately 10%
of the city's power consumption. According to Liao Xiaoping, Deputy
Director General of the Shantou Development and Reform Commission,
coal will remain the dominant power source in the foreseeable
future.

GOLDBERG

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