Daily Archives: October 25, 2011

Gone with the wind

Written by Paul Adkins

With all the flak China gets from the RoW about various political, social and environmental issues, there is one thing no one can debate – China knows how to get a message across to the masses. Although predominately known for being opaque in many ways, China speaks quite loudly and frequently whenever they undertake projects that should improve their image (as any good country’s PR team should do). The message of late is that China is serious about using wind power to make electricity.

According to the Energy Research Institute and noted by a Caixin article here, wind power is going to meet 17 percent of China’s electricity demand by 2050. This would mean an installed wind power capacity of 1 billion kilowatts. A friend recently noted that China truly is walking the talk when it comes to using wind energy as evidenced by the multitudes of turbine blades being trucked out west near Gansu. Most other countries promote their clean energy in words only, shying away from the high capital cost (a single 1.5-megawatt turbine costs 12 million yuan – US$1.8 million) and rather shifty wind supply in favor of more dependable and traditional means of power generation.  Some estimate over 35,000 turbines already call China home. And China, never one to build with hesitation when it comes to infrastructure projects, will invest another 12 trillion yuan in capturing even more wind over the next forty years. But this supply isn’t being driven by market demand; it’s entirely propped up on government subsidies.

As reporter Lu Zhenhua noted in an article on the same topic “limitless winds do not translate into limitless profits”.  Countless Chinese wind farms have yet to turn a profit, but who needs profits when the majority of China’s wind-power capacity is funded and operated by state-owned power companies. The only thing these companies worry about is meeting the government’s renewable-energy capacity targets. What does all this have to do with aluminium? For now, nothing. Wind variability makes it a completely unacceptable option for powering aluminium smelters. Although, back in January, Alcoa and China Power stated they would invest $7.5 billion of clean-energy and smelting projects to develop wind- and solar-energy projects in the next few years. Sounds good to those of us who are tree-huggers, but until the inconsistent supply of wind can be managed, smelters will continue using more reliable sources.

The wind energy industry has a ways to go in terms of development and efficiency, but this is contrary to what we’re hearing in China. Funny how no one is ever too keen to nay-say a national priority. Thus, for the time being, it’s everyone on the turbine bandwagon. And why not – as long as the government continues to subsidize the entire industry. China is confident that wind power can achieve commercial viability within 8 years. At that magical moment in 2020, the costs of wind-generated electricity at prime sites (side note: onshore prime sites appear to be dwindling) will instantly become on par with costs for coal-fired power. Nothing wrong with optimism, but thousands of turbines have yet to be connected to the grid due to limited system flexibility.  

Just how long will it take China to replace the old system with a smarter electricity grid while at the same time minimizing west-to-east energy transportation costs? The answer lies in the successful implementation of cross-country ultra-high-voltage transmission lines. A large chunk of China’s upcoming grid investments will be made in these transmission lines (a fine time to invest in China’s power equipment manufacturers!) which use aluminium alloy as the primary conductor material. When it’s all said and done, developments in any of the energy industries have a varying degree of affect on the aluminium industry making even hot air a topic of interest for us. 

Asian Bauxite & Alumina Conference ’11

Written by Paul Adkins

AZ China will be speaking at the Metal Bulletin Bauxite and Alumina conference in Singapore tomorrow afternoon. Paul will cover the following topics:  

  • Understanding China’s efforts to limit excess investment and the implication on its bauxite/alumina market
  • Statistical analysis of China’s aluminium industry – production and output capacity of electrolytic aluminum, equipment utilization rates and the profitability of China’s aluminium smelting industry
  • Understanding new issued measures to stop overcapacity in new aluminium projects
  • Addressing government requirements of energy-saving to control high energy consumption and pollution
  • How are aluminium production restrictions affecting alumina production and bauxite/alumina imports?

 For those of you also attending, stop by and say hello!