The wind power is a trend that is part of the Chinese as well
as Inner Mongolia government strategy for both economic and environmental
reasons for the country’s energy policy. Our country faces
high energy prices and the possibility of rolling blackouts, thus
the demand for alternative energy is on the rise. In Feb, 2005,
China’s parliament passed a renewable energy law, which will
take effect next Jan and set tariffs in favor of non-fossil energy
such as water, wind, and solar power. The Chinese government is
realizing that onshore wind power might be the cheapest energy
sources of all the options for Europe in the year 2020. The same
economics are going to be true for China.
Is the wind
power the answer for the alternative electricity and is it profitable? The
answer is YES.
The following
financial analysis will prove it.
1. Based on a 50MW project，the
primary financial indexes include:
1.1. Unit cost:
COE=IC(FCR+OM)/CF×8760
- COE: unit cost of wind power
- IC: item capital investment (standstill, no operation) divided by install capability
IC=400000000/50000=8000 RMB(yuan)/kilowatt (kw).
- FCR=6.67%+3.7%=10.37%
depreciation rate of the capital assets: 6.67%
average rate of loan: 3.37%
OM=2.13%
OM—operating and maintaining costs.
CF=27%，capacity ‘s coefficient of the wind farm
hours of the year: 8760
COE=8000×0.125/0.27×8760=0.42279 yuan/kilowatt-hour
(kwh)
1.2. Calculation of the simulating price for the generated electricity
Now the wind power project of Beifang Longyuan Wind Power Company
of Inner Mongolia continues to provide the electricity at 0.671
yuan/ kwh, which is based on the policy approved by Chinese government
in 1995. In 2004, new projects have been proved to provide the
electricity at 0.55 yuan/kwh. According to the Department of price,
this price will be lowered appropriately in the near future. The
truth is that the State Development and Reform Committee is proceeding
the monographic study about the renewable energy grid power capacity
and its appropriate price, which will set tariffs in favor of the
electricity generated by wind power. Based on the above information
as well as the following facts, our company has estimated a reasonable
1.2.1. According to the existing projects of the wind power, the
cost rate for the electricity is 81%. Thus the COE should be divided
by 81% which is 0.42279/ 0.81=0.522yuan/kwh.
1.2.2. In addition, the reasonable price for the electricity equals
the thermal power generation electricity plus the quality value
of wind power social effect which is 0.28+0.25= 0.53yuan/kwh. in
Based on above information, our company estimates the price will
be 0.522～0.53yuan/kwh. Therefore, we choose the mean price 0.525yuan/kwh
as a reasonable simulating price.
1.2.3. Furthermore, the favorable treatment for the income tax
of the wind generated electricity has showed that the simulating
price mentioned above is very close to the reality. In 2002 the
Ministry of the Finance of China and the Tax Bureau promulgated
the preferential treatment for the power grid that generated from
wind power. The preferential treatments include: decreasing half
of the valued added tax and tax for 8.5 %, decreasing the income
tax from 33% to 15 % according to the high and new technology policy.
Using the simulating price 0.525 yuan/kwh (will be paid by the
Inner Mongolia Electricity Company) as the base price and based
on the long-term purchase and sale agreement which
is about annual 118 million kwh , the possible investment return
can be calculated.
Economic factors:
Value added tax：8.5%
Income tax：15%
Favorable treatment
from the local government:
- The wind power project will be exempted for the first three years income tax.
- In the fourth and fifth year, the income tax will be the half of the regular.
Register capital: 20% of the total investment.
Financing rate (the cost of financing): 6.27% (Chinese banks, foreign
government mix long term loans)
CF=0.26～0.28
Capacity coefficient (CF) of the wind farm: collected data for
the past ten years from the neighbor wind farm in Huitengxile and
from three turNordex, Vesetas, NEGNicon machines.
Estimated operation hours/year：0.27×8760=2365.2h
Operating and maintenance
cost rate：2.13% of total investment
2. Financial indexes
2.1. annual sale:
annual
generated electricity×electricity price=50000×0.27×8760×0.525=118260000×0.525=62086500
yuan(RMB).
2.2. tax：
value added tax:
62086500×0.085=5277353 yuan( RMB)
average
income tax/year ( in 15years)：
（62086500-5277353-11826000×0.42279）×0.15×（15-4）/15=（56809147-49999145）×0.15×11/15
=44309998×0.11 =487410 yuan(RMB)
15 year total tax：5277353+487410=5764763
yuan
tax rate /kwh =5764763/118260000=0.04875yuan
/kwh
2.3. annual profit：
income – costs - tax =62086500-49999145-5764763=6322592 yuan
profit/kwh =6322592/118260000=0.05346
yuan/kwh
2.4. term of the investment return：
Total investment/annual profit + annual depreciation
=400000000/(6322592+26680000)
=400000000/33002592=12.12 years
2.5. return of the total investment：1/12.12=8.251%
2.6. capital return rate：
(8.251%-6.27%)×4+8.251%=16.175%
3. Estimating the finance:
According to all the evaluation mentioned above, the estimated
period for the total investment return on this project is close
to the existing wind power projects in China. This estimation
is very reasonable economically and practically possible to reach
the total investment above 8.2% and the capital return close
to 16.2 %.
