Hebei province's Shangyi and Chongli counties will soon be loomed over by the spindly, swooping wind turbines of Airtricity. The Irish company recently signed a memorandum of understanding with a local partner to build and operate a new wind farm that will add to a 50-megawatt farm Airtricity is also building in Xilinguole county, Inner Mongolia.

Renewable energy advocates have calculated China's total wind-power potential at 250 gigawatts on land and 750GW offshore. "It's massive," says Mark Ennis, head of strategy at the Dublin-headquartered company, which is spending €75 million (US$110 million) for each of the two 50MW farms it will launch this year. It wants more: "Three or four developments a year when we get going."

Airtricity's spending is projected at €200-300 million a year in a 10-year investment plan. It wants to build larger 100MW farms, but wind farms above 50MW require approval from the National Development & Reform Commission (NDRC), which has so far chosen local companies offering electricity at the lowest "feed in tariffs" - industry-speak for prices per kilowatt-hour. That explains why Airtricity has little foreign competition. "International wind-farm builders are put off by the low tariffs," says Ennis. Airtricity has joined the fray now "to ensure future competitiveness". A staff of 10 in the company's Beijing office monitors construction of the new farms and seeks out new wind-friendly sites.

Chinese competitors' strategy is one of grabbing grid space now and worrying about profitability later. Longyuan Power Group, a subsidiary of state-owned power company Guodian, was recently awarded the Baotou Bayin concession for a 200MW farm, one of the largest yet in China, by offering to sell its electricity for RMB0.46 per kWh. Its offer was cheap compared to the RMB0.55 rate offered by rival utility giant Datang, one of nine other local bidders.

Backwards bidding

China's bidding system is similar to one Ireland tried in the late 1990s, which resulted in "a large number of low bids with virtually nothing being built," says Ennis, who would like to see China set a fixed tariff of around RMB0.6 per kWh, indexed to inflation and set for at least 15 years. Set tariffs without limitations on the scale of projects have helped ensured that renewables account for 20 percent of the energy mix in Spain.

The pricing system is a big obstacle to the roll-out of wind farms here, but the NDRC has recently made tariff prices matter less in awarding concessions. "The criteria lately are more about the overall quality of the project, the equipment, the overall output," says Ailun Yang, climate and energy campaign manager at Greenpeace China. An NDRC guideline for the provincial level appears to be emerging to ensure tariffs remain attractive enough to draw investors: Six recently built 50MW wind farms in north-easterly Jilin province sell their electricity at RMB0.61 per kWh.

Compared to many developing countries China is proactive on renewable energy. It wants to get 15 percent of its power from renewables by 2020, a steep climb from the 3 percent it generated in 2003. It already doubled earlier targets set for 2010 and 2020, to 10GW and 50GW, respectively. But 50GW is still a small part of an overall power output of 1,200GW.

Greenpeace's target of 120GW in wind capacity by 2020 is achievable, says Ennis, provided government policy changes. One policy he would like to see change is a rule squeezing foreign investors from the Clean Development Mechanism (CDM), which allows companies in rich countries to offset emissions by investing in projects in poor ones. Currently, only majority Chinese-owned companies can benefit from the revenue generated by Certified Emissions Reductions (CERs) under CDM. The rule scares off foreign investors who prefer to manage their own projects.