China is on track to install as much as 18 GWs of wind-power capacity this year as the world's second-biggest economy continues to diversify its energy resources, according to officials at Chinese Renewable Energy Industry Association

"We hope that that much capacity will come online this year," says Ma Lingjuan, the trade body's vice secretary general.

Though ambitious, the build up will be significantly smaller than the 25 GWs that went online last year.

If all goes well, the country will end 2011 with a total of 58 GWs of installed capacity, moving ahead with plans to install as much as 150-230 GWs over the next decade. China already has the world's largest installed wind capacity.

The new capacity will be state built and financed, like much else in China. According to observers, five national power companies - China Power Investment Group, Guodian, Datant, Huanent and Huadian will build the largest wind farms. So far, the largest of them is Datant's 400 MW farm in the Jiling province.

Overall, the country will invest 5000 RMB per kW (US $764) or about US $764,000 per MW of wind turbine capacity.  Ma says the price is declining fast, with some turbines selling for as little as 4000 RMB (US $611) per kW. State banks will fund the developers behind the projects but some international banks and the World Bank will also provide financing, she adds.

The bulk of the new capacity will be onshore with just 100 MW earmarked for offshore capacity in the Guangzhou province in Eastern China.

The Northeast provinces of Inner Mongolia, Hebei and Gansu will likely host most of the new projects, deepening their geographical lead in the industry. The three provinces account for 80% of installed capacity with Inner Mongolia taking up as much as one third.

When asked why China is putting so much money behind wind, Lingjuan says the technology is cheaper to develop than solar or biomass, where the collection of raw material is very challenging in China.

"Wind power is the most economically feasible technology that can be developed at a large scale," she adds.

Wind is likely to lead China's renewables agenda.  The country hopes to derive 15% of its power generation from clean energy by 2020.

Underscoring just how lucrative the industry has become, largest wind developer Longyuan Power Group last month announced that its profits had more than doubled over last year to 2bn Yuan (US $305 million) from just under 900m Yuan (US $137 million) the year before. The company said it hopes to install 2 GW of capacity this year, bringing the total it operates to 9 GW.

In addition, the cash-rich firm is expanding abroad, making no secret of its plans to "proactively" expand in South Africa, North America and Eastern Europe.

Connection, Pricing Challenges

But wind power development in China is not without difficulties. The industry faces several growth challenges including a still limited interconnection capacity and an escalating price war between manufacturers.

Lingjuan says around 10% of last year's installed capacity cannot be connected to the network due to grid barriers. While the government has pledged to resolve the matter, Ma says more innovation and investment is needed to ensure these and the upcoming wind farms can be successfully plugged to the domestic power network.

According to observers, the state has promised to invest 500bn RMB (US $76 billion) to expand the country's power network to accommodate the growing wind industry's requirements.

Linda Chen, director of strategy and business development at Spanish wind-power firm Gamesa, says pricing competition is also fierce, making it hard for foreign turbine manufacturers to penetrate the Chinese market.

"Apart from transmission challenges, there are very competitive pricing issues. The domestic manufacturers can sell at very low prices," Chen says, adding that she hopes new market regulations will even the playing field.

That has not stopped Gamesa from growing in China, however, taking on other leading local turbine manufacturers such as Sinovel and Goldwind. Sinovel is currently in second place in terms of market share in the global wind turbine manufacturing space with Goldwind ranking number four.  Gamesa is currently the sixth largest wind turbine manufacturer.

Gamesa has invested €90 million (US $128 million) to build five manufacturing plants in the country since 2000. It hopes to open a sixth one — which will make nacelles — by the end of the year.

Overall, Gamesa has 2,200 MW of installed turbine capacity and over 2,700 MW of installed capacity in its own wind farms.

According to Lingjuan, turbine manufacturers are also set to pour millions to improve their anti-disaster technology in light of Japan's recent earthquake and tsunami. Though Japan's wind industry reportedly survived the tragedy unscathed – due to its robust anti-quake design - China is said to lag behind Japan in this regard, observers say.

Lingjuan says manufacturers are keenly aware of China's vulnerability to earthquakes and tsunamis and acknowledges designs "need improvement," especially for offshore wind facilities.