Climate change drives wind turbines in China: case study of market based wind power development

This paper aims at quantifying the impact of government policy and clean development mechanism (CDM) on wind power development in China. Firstly we review the background of Chinese wind power development and policy, as well as literature of climate change and CDM. We then present methodology, scenarios and data of a case study for the development of a large-scale grid-connected wind farm. We undertake project financial analysis under three scenarios. Our analysis results show that the project FIRR is 8.31% if CDM benefit is not taken into account, 8.72% if CDM benefit is considered with the price of the certified emission reduction (CER) at US$4, and 10.28% if both the CDM benefit and government policy on cutting value added tax (VAT) by 50% are taken into account. This paper concludes that CDM and government preferential policy on value added tax will make wind power development financially viable in China.

Keywords: clean development mechanism, GHG abatement, renewable energy policy, China, government policy, wind power, wind farms, value added tax, VAT, certified emission reduction