China’s first ever competitive onshore wind allocation process produced a price drop of about 10% from the previous feed-in tariff rate – but still well above the grid-parity the Chinese government is pitching for.

Ningxia, a province in China’s windy north, awarded 1.97GW to 20 projects at an average price of 440 yuan/MWh ($63.8/MWh) – a 10% discount on the feed-in tariff of 490 yuan/MWh that previously applied.

The allocation followed an edict from energy officials in Beijing that provinces should swiftly move away from FIT-based support and launch competitive mechanisms for all renewables development in the world's largest wind and solar market.

Under the new rules, provincial governments are responsible for designing their scoring methods for allocation, apart from one condition that power price should be weighted at least 40% of the total score.

Guangdong and Ningxia unveiled their regional plans in early December, with the latter swiftly announcing the result of the first allocation this week.

Among the winners, China National Nuclear Corp bid-in a 100MW project with the lowest price of 370 yuan/MWh.

However, most other bidders offered only moderate price discounts, confirming expectations by analysts that the shift is likely to result in less spectacular reductions than seen in some other parts of the world when competition replaces tariffs.

The Ningxia allocation is expected to set an example for other provinces to develop and organise their own wind auctions, which will apply to all new onshore procurement in the country from the beginning of 2019.

Chinese energy regulator the National Energy Administration (NEA) hopes the change will propel onshore wind to grid parity as soon as 2020.

But in Ningxia’s case, grid parity is currently set at 259.6 yuan/MWh, based on the coal-fired power price in the province, and therefore much lower than the rates of the first allocation, equity research analysts from China’s Sherwan Security pointed out.

“[The] onshore wind power price is likely to decline much further if [the energy regulator] could push down non-technical costs such as that of grid connection,” Sherwan Security added.

Wind

China's first wind contest drives price down – but not enough