The far western Chinese province of Inner Mongolia finished 2012 with a China-leading 21.45 gigawatts of installed wind capacity, according to the new GTM Research/Azure International  China Wind Market Quarterly: 4th Quarter 2012. The province of Hebei was a distant second with 8.53 gigawatts.

Because of a lack of demand in the immediate region of Inner Mongolia and a lack of transmission to deliver the wind-generated electricity to the central China and Pacific coast population centers, 45 percent of the wind curtailment in China was in Inner Mongolia.

Texas finished 2012 with a U.S.-leading 12,212 megawatts of installed wind capacity. California was second with 5.549 megawatts. Texas was also the state most troubled by curtailment of its wind projects, thanks to a lack of transmission available to deliver electricity generated by wind in the thinly populated Panhandle and West Texas regions to load centers such as Dallas-Fort Worth and Houston.

Curtailment, whether in Texas or Inner Mongolia, threatens the precarious financial proposition of wind.

In 2008, the Texas wind industry and the Electric Reliability Council of Texas (ERCOT), the Texas grid operator, collaborated on a Competitive Renewable Energy Zone (CREZ) plan that identified five wind-rich regions in the state and laid out a plan to streamline the building of 3,500 miles of new transmission from those zones to load centers.

That system is nearly completed. It will add over five gigawatts of carrying capacity to the Texas system and increase Texas consumable wind capacity to 18,456 megawatts. Its impact may be best measured not by numbers but by Exelon (NYSE:EXC) CEO Christopher Crane’s suggestion that the new availability of wind may necessitate the shuttering of his company’s Texas nuclear plants.

Inner Mongolia’s announced pipeline of wind projects through 2015 is 18 gigawatts, according to the China Market report, and this is “despite the wind power curtailment problems that have emerged in these early growth regions.”

But, as in Texas, new transmission may soon eliminate Inner Mongolia’s curtailment troubles and unleash its wind potential.

Source: China Wind Market Quarterly: 4th Quarter 2012

“China has planned the world’s most ambitious power line upgrade to handle the twin problems of rising load growth in population centers and increasing supplies of energy -- both coal and wind -- from remote regions in the north and west of China,” according to the report.

China’s 750,000-kilometer grid is the world’s biggest. The U.S. grid is second at 600,000 kilometers. Eleven of the planned nineteen new ultra high voltage (UHV) AC and DC lines, scheduled for completion in 2014, are designed to relieve curtailment in the northern wind power bases. The new additions would give China the world’s longest UHV DC system.

State Grid, the grid operator planning China’s new transmission infrastructure, has invested RMB 45.8 billion to install 25,300 kilometers of lines and 420 substations since 2008.  Yet the obstacles it faces with the new plan are at least as great as those faced by ERCOT.

Some argue that investing in rail lines to deliver coal, pipelines to deliver natural gas, or grid-scale storage technologies for renewables would be wiser.

Transmission planning is complicated in China, the report observed, “and many of these projects could face significant delays.”

Because there are still power struggles over how the grid will be developed, incentives are lacking where they are needed.  State Grid has little incentive to install new local lines for wind farms, especially because low wind prices cut into its sales revenues. The Inner Mongolia grid operator’s returns would be limited for power transferred outside the province.

Much wind curtailment is due not to the backbone system but to distribution and interconnection issues. A wind project may take less than a year while transmission can take three to five years so planners are always falling behind.

Finally, the National Reform and Development Commission (NRDC) is dubious about the cost and safety of the project. “The UHV projects are massively expensive,” the Quarterly quoted Hong Kong-based energy analyst and former head of global cleantech research for HSBC Joseph Jacobelli as saying. “Together with many observers, I am not convinced of the projects’ economics and not convinced the projects make sense from an energy supply security perspective.”

Tags: azure international, china, china wind market quarterly, competitive renewable energy zones, crez, curtailment, demand, electric reliability council of texas, ercot, exelon, gtm research, inner mongolia, load centers, national reform and development commission, nrdc