Barriers

Barriers to Chinese wind development do exist, however, and are generally similar to barriers encountered in other countries: technical, regulatory, and commercial.  Indeed, wind power is still, in relative terms, more expensive than power produced by fossil fuels, as well as being accompanied by various technical problems.  One hypothesis discussed is the suggestion that China would be well-served developing its own high-quality turbine facility to supply its domestic market.  While that is not presently the case, a reassessment of tax structure and the implementation of tax breaks and competitive bidding might well prove the catalysts necessary for the rapid growth of wind power in China.
CATHERINE - cut, shorten, mention competitors, make a snappy market assessment integrating new research, put other details in the appendix-  REDUCE TO 2 pages

Brazil

Brazil offers a similar opportunity.  In its desire to diversify its portfolio, Brazil offers myriad opportunities for the development of a strong wind turbine industry, and presently is not dominated by any one producer.  The government's response to the 2000 energy crisis was to pass legislation to spur investment in wind energy. Researchers have mapped out ample wind resources with the Wind Atlas that estimate countrywide development potential of 60,000 MW of wind power generation. Brazil is quickly shaping up as an extremely attractive market for wind power.  French, Spanish, German, and Brazilian companies have all begun efforts to tap this potential, and the licensing of the WTC technology would again show amazing potential for returns.  Given that Brazil, like China, has a weaker economy than developed countries, the introduction of a cheaper turbine could prove an outstanding catalyst for exponential industry growth.

Potential

Brazil's energy crisis has caused it to search for alternatives in order to stabilize its energy matrix and diminish its dependence on hydropower.  Demand is projected to rise at a rate of about 4 GW per year.  The installed capacity May 2002 was a total of 21,200 kW (What kind of energy- Total? Renewable? Wind?), and there are currently plans to consider the installation of 4,100 MW by ANEEL, the Ministry of Mines and Energy.  This would help to accomplish the goal of covering 10% of the total power production with alternative energy sources. 

Table 1- Wind power potential for generating electricity in Brazil.

In the future, investments in the Brazilian energy sector will move away from large hydro plants towards gas, nuclear and small renewable energy source projects.  The overall percentage that wind will occupy in the future will depend on competitive pricing, legislation, the Clean Development Mechanism (CDM) under the Kyoto Protocol, and developments in the off-grid sector of the market.  
 
Without the international support under the CDM, the Brazilian wind power market has little competitive edge over existing hydropower (new hydropower would be more expensive), and thermoelectric generation from natural gas and imported coal. In a comparison of energy source costs, Table 1 illustrates the competitiveness of the sector.

Table 1: Comparison of Energy Sources Costs

Energy Source                                      Generation Cost [US$/MWh]
Biomass                                               38 to 78
Wind                                                    39 to 84
Coal                                                     50 to 65
Natural Gas                                          38
Imported Coal                                      49
Imported Natural Gas                           47
Source: Electrobrás - Electric Sector Plan for 2015

The positive externalities of wind left out of this cost comparison involve savings regarding the transportation costs of imported fuels, the fact that the area occupied by wind farms can still be used for other purposes (cattle breeding, agriculture, natural habitat preservation, etc.), and the potential for solving the problem of water usage conflicts between irrigation and electricity generation.  In the Northeastern region of Brazil, the highest wind speeds occur when the river water flow is at its lowest levels, so wind power generation would be complimentary, allowing the energy producer to avoid hydroelectric production during this time.  By this logic, one could argue that the wind power production sector is currently undervalued in terms of its importance to the national electricity generation system run by Electrobrás.

Buying factors for energy in Brazil correspond to the reference price for the competitive energy source.  The reference price was set at US $43/MWh in 2001 with the enactment of the Emergency Program of Wind Energy (PROEOLICA), yet in May 2002 the National Agency of Electric Energy (ANEEL) set a new reference price of US $28/MWh.  This price is too low to make wind energy competitive, so the government responded with a stimulus program that has put 53 new wind parks on the drawing board for the Northeast of Brazil.  Buying factors for wind power currently relate to costs of connectivity with the grid, location (influencing transmission losses), and the demand within urban centers, which hold 81% of Brazil's population.  Many companies in the sugar and alcohol industry in Brazil are self-sufficient in power due to the reliance on bioenergy in the agricultural sector industries.
 

The Brazilian government has prioritized facilitating the change process in the electricity market by privatizing the distribution and transmission sectors.  Electric power generation is still mostly under state control.  The government offers incentives to independent power producers to enter the market to generate new power.  Until 2001, significant incentives for alternative energies did not exist in Brazil. At that time the PROEOLICA was enacted, using a price regulation model, in order to accomplish three goals: "(a) install 1,050 MW of electric power from wind energy resources by December 2003 (integrated into the national grid system); (b) to promote the use of wind energy resources as an alternative model for economic, social and environmental development and (c) to complement seasonal fluctuations in hydropower."  Under this new law, the national utility company, Electrobrás, is mandated to purchase generated wind energy for a minimum period of 15 years up to a limit of 1,050 MW.  A notable aspect of the 15-year contract, however, is that Electrobrás does not show particular interest in purchasing energy from renewable energy sources. 

The next step in Brazilian energy policy development occurred with a regulation enacted in April 2002.  This policy, Law No. 10438, established a stimulus program named PROINFA and a new energy development foundation CDE.  Both promise, among other things, to cover the difference between the market value of power and the compensation made by Electrobrás to the power producer.  Although there is some uncertainty and concern on the part of the independent power producers about the viability of this system due to number of agents involved and possibility of complications and delays, this system still provides opportunities for power producers to make a profit and for developers to submit bids to the government.

Trends in the Brazilian market concerning wind energy involve the aforementioned legislation to stimulate production by independent power producers, the maturation of the Clean Development Mechanism administrative process, and expanded trade ties with China.

The legislation essentially creates a competition between clean energy producers in the country.  The key competitors for the wind industry are biomass plants, which have the advantage of infrastructural developments and public acceptance from the ethanol program in the 1980s.  This program helped establish a long history of state subsidization and development that served to reduce the initial capital costs of expanding electricity generation from sugar cane waste and other large industries in Brazil. 

A related problem for developing a national wind industry in Brazil is the expansion of agricultural production due to a greater emphasis by the current administration on freer trade.  Exports to China have risen in recent years as the Brazilian and Chinese markets have developed warmer ties.  Soybean exports doubled in the last three years and five million tons of Brazilian beans are expected to be sold in China this year.  According to a New York Times article published April 23, 2003, many exporters of paper and cellulose, orange juice, and sugar are hungrily eyeing China: "Brazil's new foreign policy has defined China as a fundamental partner," said President da Silva recently, and, "This partnership has an economic and, more specifically, a trade dimension." 

Two aspects of this developing relationship bear specifically on wind power production.  The first is that Brazil has seen increased competition in the energy sector as export industries are producing more co-generated power (explain Co-generated power.)  The extent of this increased competition is hard to predict, but the market opening may turn out to be a boon to the wind industry if both Brazil and China ramp up the production of parts of wind turbines.   Further, as the demand for export production increases, so too will the demand for power.   These factors create a unique opportunity to develop and utilize expertise in the wind industry between the two countries.

If WTC's turbine becomes popular in Brazil or in China early on, they could easily become the standard large turbine manufactured in these two developing countries, leading to its potential adoption in the numerous other developing countries with whom China and Brazil do business.  If the Chinese prefer to do business with Brazilians, wind power products and experts from the U.S. and Europe might find themselves on a lower rung of the priority ladder for new projects.  Therefore, it could be advantageous to WTC to get its two-blade turbine leased to production facilities in Brazil and in China as this business trading relationship is forming and strengthening.