AES taps into China s rush to wind power

In Huanghua, about a three-hour drive southeast from Beijing, the concrete foundations for 30 more turbines have been laid and the project partners are eyeing possible expansion into the shallow waters offshore, where an oil-drilling rig now stands a short distance away.

 
Like many wind projects in China, this wind farm -- which started generating power last month -- is the product of U.S. and Chinese investment, featuring Chinese-made wind turbines and tapping Chinese subsidies for the electricity sold. Europe will play a role, too. If all goes according to according to plan, the venture will qualify to sell carbon offsets to traders or directly to European companies that are exceeding their emission quotas under Europe's cap-and-trade system.

China's push into wind energy is part of a broader effort to change its energy mix in an effort to reduce carbon emissions that contribute to climate change. It has set a goal of getting 15 percent of its power from renewable sources by 2020.

The experience of AES -- which generates electricity in 29 countries -- reflects the changing trends in China's energy sector. In the 1990s, AES focused on coal plants in China and it still operates three big ones, whose 2,400 megawatts of output dwarfs the company's Chinese wind farms.

Last year AES sold two inefficient fossil fuel power plants. One, an oil-fired plant, was bought and dismantled by the Chinese government. The other, coal-fired, was bought and may be refurbished by an aluminum maker; for now the plant is operating at only partial capacity.

"The Chinese are very much focused on things we would regard as environmentally sound practices," says Hanrahan, who was based in China for AES during the 1990s. "They are shutting down old coal plants and building new plants that are incredibly more efficient."

Joining the crowd

AES has joined the rush to build wind turbines in China, mostly in Inner Mongolia, where the wind blows stronger than it does near the Bohai Sea. The other AES wind projects are in Hulunbeier in northeast China.

The work could reshape AES. Sources say China Investment Corp., China's sovereign wealth fund, has been considering an investment in AES in return for a substantial equity stake. The deal would give AES more capital and greater access in China.