Industry Trend Analysis - Transitioning Wind Power Sector To Slow - OCT 2017

BMI View: High wind generation wastage rates in the provinces with the best wind conditions will mean that China's aim to drive sector growth with less subsidy support will face hurdles . Realising cost reduction s is contingent on access to these provinces to develop projects , but T&D upgrades and market reform will need to outperform our expectations for the wind sector to sustain historic growth rates with less subsidy support.

According to China's 13 th Five Year Plan, financial support for the onshore wind power sector is to be phased out by 2020. The government's aim to reduce subsidies is driven by its ambitions to make the wind sector cost-competitive against the conventional power sector - by forcing wind developers to cut costs and improve efficiency. This would in turn also improve the long-term economic sustainability of the sector.

However, we believe there are several structural challenges that must be dealt with in order to unlock these substantial cost reductions while maintaining robust growth rates, including reducing wastage rates - and in doing so, upgrading transmission and distribution (T&D) capacity and implementing market reform. We are cautious on China's ability to address these challenges, and therefore we forecast wind capacity growth to average 6% between 2017 and 2021, down from the equivalent 40% growth rate registered between 2010 and 2016.

Wind Sector Set To Slow
China - Wind Capacity Additions, MW
f = BMI forecast. Source: EIA, NEA, BMI.

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