China Backs Market Price for Wind Power

By AARON BACK BEIJING -- A Chinese energy-policy official said the price for wind power and other renewable energy should be set by market forces, rejecting calls for fixed prices, a system used in some countries to promote the use of renewable energy. As China looks to renewable sources to fill more of its energy needs, many Chinese power companies are considering wind energy but are worried about profitability and thus looking for price guarantees. "Calls to set renewable-energy prices at a high level through a fixed government price are mainly coming from investors," said Zhang Guobao, vice minister of the National Development and Reform Commission, at a media briefing Friday. "But the result, if prices are fixed too high, would be to impact the widespread use of renewable energy." Renewable-energy prices, and in particular wind-power prices, should be set through a competitive market, said Mr. Zhang, who is also the chief of the National Energy Administration. Current prices for wind power, at about 0.5 yuan to 0.6 yuan per kilowatt hour, are "reasonable," and are higher than coal power prices, Mr. Zhang said. He also referred to incentives for renewable energy already in place in China, such as reduced taxes. Under policies used in some European countries, regional and national utilities are obligated to buy electricity from renewable sources at higher prices. Last week, the NDRC said on-grid tariffs of 0.51 yuan, 0.54 yuan, 0.58 yuan and 0.61 yuan per kilowatt-hour will be set as benchmarks for wind projects across the nation. The rates are in line with tariffs that the NDRC has approved in the past and mainly within the range of what Mr. Zhang called reasonable. In the solar sector, the Ministry of Finance offers subsidies for half the total construction costs of an on-grid solar plant, and as much as 70% for off-grid installations. China is also considering a system of guaranteed minimum tariffs for solar power to be supplied to power grids. Currently, solar-power tariffs are set on a case-by-case basis, leading to uncertainty on the part of investors. Asked about a recent statement from China's State Council, or cabinet, which warned of overcapacity in the wind-power equipment sector, Mr. Zhang stressed that Beijing's concern is over equipment specifically, and not the overall wind power sector. "No one has said that China has too much wind power and needs less," he said. Rather, the government's concern is that the Chinese wind-power equipment sector is too fragmented among many small companies, putting it at a disadvantage to major international companies such as Vestas Wind Systems A/S of Denmark and General Electric Co. of the U.S., Mr. Zhang said. Write to Aaron Back at aaron.back@dowjones.com