Presentation Outline

1. The World BankStrategic Implementation Perspectives –Developing Offshore Windfarms and Large-scale Windbases in China BeijingJanuary 15, 2009

2. Presentation Outline • China’s Wind Development Strategy & Challenges • The Four Pillars of Efficient Wind Power Scale-up • Implementation Suggestions • World Bank Support for Demonstration Projects 2

3. China’s Wind Strategy in the 11th five year plan is sound….. Heilongjiang Xinjiang Inner Mongolia Jilin Liaoning Shanxi Hebei Qinghai Gansu Shandong Shanxi Henan Tibet Jiangsu Hubei Sichuan Anhui Chongqing Hunan Zhejiang Jiangxi Huizhou Yunnan Guangxi Fujian Guangdong Baicheng Dabancheng Yumen Zhangbei Huitengxile BEIJING Inter Tidal Offshore Medium-Deep Offshore 3

4. Distinguishing the three main resource types is important 4

5. Wind Power Development – A Global Comparison • Second largest installed global wind power capacity by 2012 – Highest past and planned global growth rate in capacity addition • Lower capacity factor in China – generally believed to stem from inadequate site investigation studies and wind farm operation practices. • A one percent (1%) improvement in capacity factor from current 20% national average –leads to 5% increase in electricity output – savings of ~ 5%+ of investment cost for same output. Lower wind power prices. 5

6. Elements of GoC Strategy (2005-2008) & Achievements 6

7. The Four Pillars for Efficient Wind Power Scale-up Low per kWh cost Grid Planning & Development Efficient Portfolio of Projects Proper Resource Assessment Project Design & Proven Turbines Regulatory Clarity & Incentives Adequately Trained Manpower Strategic Resource Mapping and Load Pace of scale up should not be rushed at the expense of efficiency

8. Pillar 1 – Proper Resource Assessment • Systematic site specific wind data collection is vital for the scale and pace of wind power development in China • Engineering problems can be corrected through additional expenditure – POOR RESOURCE ASSESSMENTS & ESTIMATES CANNOT! • Wind Speed matters greatly – its importance cannot be overemphasized • A turbine produces twice the energy at 9.0 m/s as at 6.5 m/s. • Good assessments are cheap – insignificant when compared to the benefits • One measurement mast costs merely 10-15 % of a 2 MW turbine! • A disciplined national measurement program is required: • Government should support comprehensive wind database development backed by a credible protocol and measurement verification. (Use available meteorlogical data but check with certified equipment) • Extrapolations of existing data from meteorological data, off-shore platforms, etc. is a good start – use this to identify locations for detailed site specific measurements • Assemble data in a national GIS system

9. Pillar 2 – Project Design and Proven Turbines • Utilizing proven and certified turbines is essential – particularly for offshore applications • Dealing with even minor problems offshore can be expensive. • Use of unproven turbines have derailed offshore programs. • Detailed layout planning with wind tunnel studies important to maximize the output of wind farms • Getting Chinese Turbines to rise to the scale-up challenge • China’s wind manufacturing industry is not fully mature yet … some competitive pressure will be extremely beneficial. • Encourage technical innovation… R&D is essential! Leapfrog to the cutting edge do not wait for western development. Cost per turbine: design $5 million and prototype $15 million. Scientific investigation of the behavior of prototypes is necessary; • Develop turbine specifications based on Chinese wind regime. This could reduce cost of development. • Upgrade and/or design new turbines to make them more grid friendly (Turbines should be able to control power factor and provide-fault-ride-through capability) • Provide government support to develop domestic turbines with a capacity of more than 4MW for eventual offshore deployment;

10. Photo from www.uni-fly.dk Layout Design – Minimizing losses due to “wake effects” • Power output can drop by 30-50% from first row of wind turbines to subsequent rows • Potential for wake effect losses are greater in simple or low roughness areas (sea, rolling hills or plateaus as found in NW China)

11. Pillar 3 – Regulatory Clarity & Incentives • Regulatory clarity very important to scale-up offshoregiven the higher financial risks faced by developers. • Higher level of incentives and government support are required at early stage of development. • Regulation change and weak government support can damage the confidence of investors. • An offshore specific regulatory framework would be importantto develop • Fitting offshore wind program within existing legislation has not been successful • Consider a single “one-stop-shop” authority to issue permits and provide licenses. • For additional incentives – consider: • Grid connection free of charge for all offshore demonstration projects • Allow return on investments commensurate with the risks of offshore projects • No major regulatory issues for onshore wind base scale-up… • … it may be timely to evaluate and fine tune the concession system based on the experience of the past three years

12. Pillar 4 – Adequately Trained Manpower • Poor O&M reduces wind resource utilization – owing to reduced availability of turbines • Lack of qualified personnel leads to the poor O&M practices; • GHP estimates that 2% of energy is lost in US windfarms because of lack of well trained staff and poor O&M practices. • China’s “wind-power man-power” needs are very, very large – to build, operate and maintain wind farms at the scale and pace planned. China needs to: • Undertake a strategic assessment of manpower skills and prepare capacity building and training program to upgrade skills. • Review O&M practices in existing farms and prepare and implement programs to improve O&M procedures and practices; • Leverage available skills by using technology and management systems wisely • Use SCADA systems and turbine condition monitoring systems to support predictive maintenance; • Centralized operations for several windfarms

13. Grid Planning and Development is Critical • Grid connection issues have delayed projects – increasing commercial risks for developers • This has been the case in many countries • Problem is unclear technical requirements and responsibilities for network financing and construction. • A new Grid Code on wind power development is necessary – which should… • …be prepared by State Grid Corporation in consultation with industry – clarify the technical connection requirements for onshore and offshore wind farms. • Grid connection and stability issues for GW level scale wind bases has no precedent globally. China is bound to take the lead on this issue. • Comprehensive connection studies involving all stakeholders necessary – with special attention to the optimum connection size and connection circuit layout. • Initiate short-term operational forecasting studies. International experience has been good in planning wind farm operational integration. • For offshore windfarms – consideration should be given to: • Giving grid connections free of charge to approved demonstration projects – at wind farm voltage • Building an offshore wind energy grid by a new agency (or alternatively extend existing grid corporations’ responsibilities to offshore)

14. Large Wind-bases – Towards successful scale-up Build upon the large amount of on-shore experience in China – recognizing the specific technical risks 14

15. Going to Medium-to-Deep Offshore – Managing the Risk Costs and Risks are highest here – careful planning and piloting will reap huge gains for China 15

16. Piloting Intertidal Offshore – Pioneering uncharted territory Costs are expected to be lower than medium-to-deep offshore – however, China will be a pioneer Approach similar to the initiation of offshore – key issues include: • Geotechnical Foundation Data needs to be systematically collected and assessed – as foundation construction on muddy tidal flats and turbine erection can be very expensive: • Evaluating the choice of foundation typein conjunction with the most efficient construction approach. Do you build an access road and use onshore construction methods – or dredge a channel for floating platform access? • Initiate pilot/demonstration projects • Identify 2-3 intertidal wind farm sites based on adequate geotechnical studies and at site specific measurements for at least 12-24 months. • Develop the site efficientlyin 100 MW scale – with qualified project developers with agreed incentive package. 16

17. Learning through Offshore Demonstration Projects • Aim of Initial Demonstration – gain experience in offshore specific techniques and approach NOT to demonstrate turbine technology. • Use proven turbines if Chinese manufacturers do not meet specified technical requirements; • Focus on rapid learning of techniques in construction/erection, maintenance practices and cabling. • Obtain information to improve design methodology. • Aim of Commercial Scale Demonstration –to build “industrial capabilities” to implement large scale projects and operate then efficiently • Focus on committed and qualified wind developers with proven track record • Develop prototype vessels for construction and installation of offshore wind turbines • Develop supporting industry for foundation construction • Maintenance practices and the development of vessels necessary for regular and reliable access. 17

18. The Strategic Outcomes Desired 18

19. World Bank Support for Offshore Demonstration Projects • CRESP and ASTAE Grant Support for Project Related Studies • TA on Grid integration and stability studies, • Project preparation support • IBRD (World Bank) Loans for Projects….. • Terms – Maturity – 30 years (max); 18 years (average) • IBRD Rate – LIBOR Base + 75bps • .. combined with Concessional Loan from WB-managed Clean Technology Fund (CTF) • Expected Maturity – 30+ years maturity • Interest Rate – 0.5-0.75% • Project Identification Timelines • Discuss demonstration project choice with NEA and NDRC • Project Proposal submitted to NDRC Foreign Capital Utilization Department by February 2009 for project incorporation in pipeline 19

20. World Bank Beijing Contacts • Song Yanqin Telephone 5861-7755 Cell 136-0124-1055 Email: ysong3@worldbank.org • Peng Ximing Telephone 5861-7752 Cell 139-0136-8683 Email xpeng1@worldbank.org 20