Is China’s Distributed Wind Development About to Enter Warp Speed?
Read Time:11 Minute, 37 Second
By: Christopher Hankin
Edited By: Jeremy Smith
For visitors to China returning after a few years of pandemic-enforced distance, taking the train through eastern seaboard provinces provides a new architectural shock. Solar panels, glimmering in the sunshine, dot seemingly every second house in the rural hamlets that whiz by outside the window. These panels, largely a product of a 2021 policy to encourage so-called “distributed renewable energy” in rural areas, now play a significant role in how China is pursuing carbon neutrality.
Distributed renewable energy refers to energy produced at a small scale, closer to its point of consumption, rather than produced at utility-scale in a concentrated renewable energy plant for sale to the grid. Since the 2021 policy, distributed solar, often located on rooftops, has exploded. Following a subsequent policy update, we might be about to witness a similar growth curve for distributed wind.
In late March, China’s National Development and Reform Commission (NDRC), National Energy Administration (NEA), and the Ministry of Agriculture and Rural Affairs (MARA) jointly published a notice titled “thousands of townships and tens of thousands of villages harnessing wind power”. The notice aims to: develop distributed wind energy capacity, especially outside of northern provinces like Inner Mongolia where it has been concentrated so far; modernize rural power grids; and stimulate rural economic development. Specifically, the notice calls for provincial leaders to work with officials at the local level to select 1,000 villages to each install 20,000 KW of distributed wind capacity per year, which would represent annual growth of 20 gigawatts (GW) of total capacity and RMB 100 billion in investment.
Figure 1: A 20 KW wind turbine on a farm, similar to what the notice calls for. Source.
In terms of ownership structure, the notice calls for “village-enterprise cooperation”, which is a framework for partnerships between private sector firms and rural village associations for facilitating land transfers and equitably sharing profits. If the model used for distributed solar is any indicator, villages will transfer land (the notice indicates that idle, non-cultivated land should be targeted) to developers who will build wind turbines and then sell the electricity back to the village at a discount, with any excess electricity going to the local grid.
Figure 2: Comparison of different wind turbine sizes. Source.
An increase in distributed wind would build on the already impressive foundation that China has built in wind electricity generation. In late 2023, China’s total installed wind energy capacity broke 400 GW. For contrast, at the end of 2023, America’s total installed wind capacity hovered around 150 GW. Up until this point, though, China’s wind generation has been concentrated in a few provinces and has been totally dominated by enormous so-called “utility-scale” wind farms – typically with 0.5-1 GW of capacity each. The “three north” regions – i.e., northwestern, northern, and northeastern China – make up more than 80% of China’s total wind resources. In 2023, Inner Mongolia alone accounted for nearly ⅓ of total national wind power installations.
The reason is that historically, developers have screened for locations with reliable high speed wind to build turbines. The Inner Mongolian Steppe is ideal because it has ample wind resources (roughly 40% of China’s total), as well as countless acres of sparsely populated land on which to build gigantic wind farms.
So far, distributed wind has played only a tiny role in China’s overall wind capacity development. As of 2020, distributed wind capacity – typically in the form of turbines ranging from 10-500 kW (0.01-0.5 MW) – had yet to exceed 2 GW, a tiny fraction of total wind installations, and insignificant compared to the over 200 GW of distributed solar. The explanation is simple: finding an unoccupied location with adequate wind speeds and a regional grid capable of purchasing all of the generated electricity is difficult.
Recently, however, more developers have been focusing on building turbines that can generate electricity at lower wind speeds. The March notice explicitly mentions these “low-speed turbine technologies,” and suggests they might help enable China to meet its installation goals.
Low-speed Turbines of the Future
Low-speed turbines are designed to generate electricity in locations where building 140 meter behemoths like the one below is unfeasible. Utility-scale turbines have longer blades which can reach faster wind and generate electricity more efficiently. Low-speed turbines, by contrast, are crafted to make do with lower wind speeds – and efficiencies – while remaining economical. For provinces on China’s Eastern seaboard, where wind speeds are low and density is high, that makes them a perfect fit.
Figure 3: The article’s editor, Jeremy Smith, pictured with an HNC classmate approaching a utility-scale wind turbine.
Low-speed turbines are able to generate electricity with lower wind speeds because they have different proportions. The first difference is that the rotor – the cylindrical rotating part of the wind turbine that connects the blades to the body of the turbine – is bigger. They also rotate at slower speeds, and as a proportion of the total turbine, the blades are typically larger and heavier than conventional turbines. All of these differences mean that they start producing electricity at lower speeds, as shown in Figure 4.
Figure 4: Diagram of how low-speed and convention turbines perform at different wind speeds. Source.
Low-speed turbines have a number of beneficial effects on grid stability, which refers to the extent to which an electrical grid can consistently match electrical supply and demand, a major problem as renewable sources come online. The first is that, because low-speed turbines both start and stop producing electricity at lower speeds compared with conventional turbines, they can help produce a more consistent electricity supply less vulnerable to unpredictable spikes in wind speed. Phrased differently, as figure 4 shows, low-speed turbines are “on” when traditional turbines are “off” and vice versa, leading to a more consistent electricity supply with lower risks of massive oversupply or long periods without electricity.
Another benefit is that as utility-scale wind continues to develop, it becomes harder to find large, unused plots of land with access to high wind speeds. Low-speed turbines don’t need to compete for that prime real estate, so they are easier to locate. In China, this means that they are easier to build in the center of the country and even the eastern seaboard, which benefits grid stability by reducing the need for additional grid infrastructure investments.
As China builds out renewable capacity in the sun- and wind-rich northern and western provinces, a simultaneous and wildly expensive infrastructure boom is happening in ultra high-voltage (UHV) transmission lines. These transmission lines carry electricity across vast distances which lower-voltage lines are unable to do without significant electricity loss. Unfortunately, the costs are high and UHV lines are difficult to build. The economics of UHV are further complicated because wind-generated electricity is “intermittent”, meaning that sometimes the turbines are generating electricity, and sometimes they aren’t. In order to be profitable, UHV lines need to be transmitting electricity practically all the time, which is a problem when the source of the electricity isn’t generating constantly. The result is that the UHV lines often rely on building “dispatchable” sources like coal which can generate electricity on demand. Low speed turbines solve that problem because they can be located closer to demand centers where the electricity is consumed.
Along with the new policy framework, these technology changes mean that in theory, China is poised to rapidly expand its distributed wind capacity. The development history of distributed solar, which accounted for nearly 60% of total growth in solar capacity in 2022 and is projected to grow by another 200% between 2023 and 2028, is further cause for hope and provides a blueprint for how China can roll out distributed wind.
The Story of China’s Distributed Solar Boom
China’s June 2021 “Whole County PV” program has dramatically expanded the production and consumption of solar powered renewable energy in rural parts of China, especially in the eastern seaboard where demand is higher. By September 2021, 676 counties –- with a lower average urbanization rate than the country as a whole –- had applied to participate in the program, which required government buildings, public buildings like schools and hospitals, power generators, and residences to cover 50%, 40%, 30%, and 20% of their respective roof areas with solar panels.
In spite of the explosive growth, the program has also faced its share of obstacles. The first is that developers have struggled to consistently turn a profit. Installations need to be customized to every rooftop which slows down development and increases costs. In contrast to utility-scale renewables, which are dominated by state-owned enterprises (SOEs), the distributed solar expansion has been led by the private sector, which means that profitability matters.
Another obstacle that impacts the bottom line is that, in areas where distributed solar growth is already robust, developers are starting to confront oversupply. In Shandong, China’s leader in distributed solar development, this has resulted in lower prices at peak hours from 11am-2pm. This came to a head during the May holiday in 2023, when electricity prices dropped below zero during peak hours. In other words, as electricity demand crashed due to the holiday and spiked due to high sun hours between 11am-2pm, the marginal price for electricity went negative, meaning that generators needed to pay money to offload onto the grid if they could not stop generating electricity outright.
Additionally, there are fundamental differences between the associated technologies and land use issues that distributed wind and solar developers must confront. The first and most fundamental is that while the distributed solar boom has occurred on rooftops where opportunity costs are low, distributed wind needs ground-level land. The notice calls for developing on unused and idle plots, but land use conflicts are inevitable. The notice emphasizes that land transfers are not permanent, and tries to walk a fine line by making use of idle land for renewable development without hurting China’s food security – a real issue given China’s low ratio of arable land to population –- but it seems clear that policymakers are anticipating issues that weren’t present for distributed solar.
The second difference is how the goals are measured: while the distributed solar policy framework took the percentage of rooftop area covered as the central key performance indicator (KPI), the distributed wind framework includes generation capacity targets. It isn’t clear how this difference will influence development, but in a KPI-driven governance system like China’s, metrics matter.
Another difference is the capital costs required to install a low-speed turbine compared with a solar panel. Though the cost of energy measured per megawatt-hour (MWh, the default unit of electricity consumption) is actually lower for utility-scale wind than it is for utility-scale solar, those cost differences don’t translate directly to distributed generation. Lazard, the definitive source for the all-important “levelized cost of energy” metric, which measures the price per MWh for different energy sources, estimates that residential rooftop solar is 3-5 times more expensive than utility-scale solar. For evidence about how far distributed wind still has to go, look no further than the fact that as of the most recent update, Lazard doesn’t even track its LCOE.
The Upshot
Odds are, China will meet the goals laid out in the notice and install 20 GW of distributed wind whenever the policy is officially implemented. If there is one thing that the Chinese governance system excels at, it is meeting discrete, measurable development targets in the renewable energy sector. China’s clean tech sector –- from domestic supply chains, to project financing, to development –is the most robust in the world and it isn’t even close. Finally, the experience with distributed solar is a valuable blueprint which makes the goals for distributed wind seem achievable.
This will make a significant contribution to grid security and decarbonization. An additional 20 GW of annual renewable energy is significant, and the generation profile is further cause for celebration. Rural areas with a mixture of preexisting distributed solar and newly installed distributed wind can enjoy more stable and reliable access to clean energy. Finally, locating the turbines so close to the point of consumption and their likely concentrated in power-hungry eastern provinces represents a further boon because it reduces line losses and the infrastructure burden of transporting the electricity long distances.
Distributed wind will also bolster China’s rural revitalization efforts. One tangible benefit for rural industries and residents is the discounted electricity and employment opportunities specified in the notice stemming from development. A 2020 article from Nature Communications that analyzed solar poverty alleviation efforts –- wherein local governments target money-poor but sun-rich areas to install solar arrays –- found that, between 2013 and 2016, per-capita disposable incomes rose 7-8% in studied counties.
More onsite renewable energy also means that rural residents will be less dependent on coal for heating and cooking, which has a variety of direct positive effects on health and quality of life, as well as indirect economic benefits. There are also valuable grid stability benefits because more onsite energy insulates these rural areas in the event of a power blackout, such as China experienced in the summers of 2021 and 2022.
What remains to be seen is how exactly the next steps will unfold. For all the details about how much capacity each village is expected to install under the plan, there is no timeline. The development will start with pilot projects and then expand from there, so for now, we await the announcement of where pilot projects will be located and what sorts of installations we can expect.
