Chinese wind energy operators are being hung out to dry in markets. The revelation of plans to introduce competitive bidding rules for wind farms knocked the share price of operators such as Huaneng Renewables and China Longyuan Power by nearly a tenth at the end of last week. This is a buying opportunity. China has become the world’s top wind power, accounting for one-third of global renewables investment, according to research by Brookings. Eleven per cent of energy consumed in China is from renewables. The new bidding rules seem to contradict the country’s decisive push towards clean energy and increased wind capacity and are likely to reduce returns. But they do not affect existing and fully approved projects. Admittedly these projects face some troubling problems of their own. Grid inefficiencies force the sites to shut down frequently. Wind operators expect subsidies, paid for by end-user surcharges. But less than three-quarters of these are being collected, leading to shortfalls and bloated receivables on operator balance sheets. Competitive bidding would at least lower wind energy prices and help to address this mismatch. Prices must come down in the long term if wind farms are to compete with other energy sources such as coal.
FT 29th May 2018 read more »