Tapping into China’s 3 Terawatt Wind Power Market

Chinese wind power market is heading towards 3 Terawatt size by the end of 2060, according to a recent statement presented by the wind industry.  

The bullish view and the “targets” are the most shocking news in this year’s China Wind Power Summit in Beijing (the CWP2020). 

The Chinese energy market never lacks aggressive targets and development plans. Many of these have failed in the past, on which seasoned analysts would advise a cautious approach.  

However, the country also had achieved several unthinkable market expansions, beating the odds. In fact, Beijing’s willingness to support these a target is the key decisive factor of the feasibility.  

With all these in mind, how likely would the wind market march to 3000GW era? And what are the implications to foreign suppliers?  

China’s Wind Power Market Targets 2025/2030/2060

Some 400 industry delegates signed off a statement, or “Beijing Wind Energy Declaration,” during the largest wind event in China. 

In the statement, the wind industry vowed for the following development targets: 

  • 250GW Incremental Capacity (2021-2025): the statement calls for adding 50GW new wind power capacity annually from now to 2025
  • 300GW Incremental Capacity (2026-2030): the industry hopes to see at least 60GW new power capacity annually from 2026 to 2030 
  • 2.5 TW Market Growth (2021-2060): the industry pledged to achieve a cumulative wind capacity of 3,000 GW (3 Terawatt) by the end of 2060. 

If the targets turn out to be possible. The gradual build-up of China’s wind market in the next ten years would be: 

  • 2020: 240-250 GW 
  • 2025: 500 GW
  • 2030: 800 GW 

These targets are highly ambitious. 

Are These “Great-Leap-Forward” Targets? 

As we mentioned in this week’s syndicate, there are divergent responses regarding the targets. 

China has No Previous Track Record to Install 50GW Per Year

So far, China has never had any history of putting up 50GW wind turbine in a year. The record-making year was 2015 when the policy-driven installation rush led to just 30.753 GW installed. And 2020 has the potential to make a new record, but the figure is most likely to be between 30GW-40GW.  

Higher than Expectation

It is important to note that these targets are more of policy advise (or appeal) to Beijing’s decision-maker—rather than authority’s five-year plan targets. 

In China, energy policymaking follows a strict sequence where the overall energy and power five-year plan targets determine the goals of renewables and other sub-sectors. The decision-making sequence for renewable targets is as followed: 

Several policymaking bodies previously predict a smaller growth space for the wind market—at least for the next ten years. 

For instance, EPPEI—a critical policy research think tank for National Energy Administration—put the 2025 renewable capacity target at 800GW, of which wind should be at lower than 400GW.

Is the Supply Chain Ready? 

One of the underlining intention of the “Beijing Wind Energy Declaration” is to show confidence to the energy regulator regarding the supply capacity. 

However, the existing supply chain already struggled to deal with the current wind project dash (~30GW annual incremental). It would be even more challenging to meet with an +65% demand jump (to 50GW). 

At least, the supply chain capacity build-up would take some time. That means the short-term 2025 target is questionable. 

Then, sudden demand jump often leads to safety issues, as we have witnessed in the frequent construction accidents this year. The safety concern would be a factor for the energy regulator to keep a modest target.

Zero-Subsidy & Economics Concerns

From 2021 and 2022 onward, Beijing will not provide subsidy to the wind industry.  

That means that Beijing would have less reason to cap wind construction. But, on the other hand, the industry faces short-term pressure to meet with economic requirments. 

If supply chain struggles to meet with the market demand, then the price increase would limit the growth space. 

The 2060 Wind Ambition: Supporting Voices

Nevertheless, not all voices doubt the feasibility of the target. 

State Grid’s Prediction 

Some critical market predictions, in fact, are in line with the wind industry’s ambition. 

State Grid—another critical decision-maker in Beijing’s electricity planning—currently predicts 536GW cumulative wind capacity by 2025. This prediction is higher than the 2025 goal suggested by the “Wind Declaration.”State Grid’s estimation on the wind market build-up: 

  • 2025: 536 GW 
  • 2035: 1100 GW 
  • 2050: 1970 GW 

With that pace, 3000 GW by the end of 2060 does not look like a frenetic target. 

Wind Resources Feasibility 

China’s wind resource is capable of supporting the 3000GW capacity ambition. China Wind Energy Association estimated at least 5000 GW (5 Terawatt) wind capacity is possible in current technical condition: 

  •  “Three Northern” Regions onshore: 4000 GW
  • Mid & East China Regions onshore: 1000 GW

This estimation has not yet included offshore resources. 

2030/2060 China’s Carbon Target 

China’s recent political commitment to peak emission by 2030 and reach carbon neutrality by 2060—a commitment now referred to as the “30*60” target—is the backbone of the “Beijing Wind Energy Declaration.” 

Green Opportunities in China

 Energy Iceberg came to the below interim conclusions: 

  • 500GW/2025 Target—Supply Chain Capability the Key Determinator: one of the determining factors is whether the industry could quickly expand its supply capacity and, thus, bring down the construction cost. In that direction, solar appears to be one step ahead than wind. 
  • 3TW/2060 Target—Beijing’s Policy Decision the Key Driver: although Beijing verbally committed to carbon neutrality by 2060. The detailed roadmap toward that target remains unclear. And 40 years is a long time, where new emerging technology could emerge and change the game plan. Nevertheless, the target should provide ample space for renewable power’s development. 
  • Grids are Changing Their Attitude: while previously, the grid operators were often criticized for their “lagging performance” to support wind and solar connection. We observe changes in grid’s attitude towards renewable energy in China. In fact, the higher the renewable capacities are required, more investment opportunities for the grid regarding new infrastructure construction.  
  • Opportunity for Investors & Suppliers: the lagging of supply chain capacity provides ample opportunities for investors and suppliers (both in China and abroad)—especially in areas like Balsa Wood supply, composite materials, bearings, and IGBT. International suppliers with leading technology in IGBT, blade, materials as well as other areas would face a golden time. 
  • Localization Remains the Top Priority: While we point out the ample opportunities for the global supply chain leaders. The Chinese wind industry will no doubt seek to localize those technology and supply chain “chock points.” In the longer run, foreign suppliers (in the low-barrier market) would face more competition from the Chinese players, who would massively increase production in the next decade.