"The main reason to continue the auction system is to lower the wind-power cost and protect domestic equipment producers and investors," said Shi Lishan, director of the Renewable Energy Division, Energy Bureau of the NDRC.

But this approach has drawn criticism from industry players who fear that the practice will lead to low prices that deny investors a reasonable profit. In fact, during bidding, some shockingly low bids have been made.

In 2004, bidding opened for the Huitengxile Wind Farm in Inner Mongolia. The bid of 0.38 yuan (4.8 US cents) per kilowatt-hour, made by Beijing International Power New Energy Co Ltd and Beijing International Power Development Co Ltd, shocked all the bidders because the basic cost of wind power seems to hover around 0.6 yuan (7.6 US cents) per kilowatt-hour, whereas the coal-fired power generation cost is 0.3 yuan (3.8 US cents) per kilowatt-hour.

"The bidding system is sensible in line with the market rule," said Li Junfeng, Chinese Renewable Energy Industries Association (CREIA) secretary-general. "But many wind power industry players did not make good use of the market rule."

Until September of this year, the NDRC organized four rounds of bidding for 11 wind-source power projects, each designed to have an installed capacity of more than 100 megawatts.

Most of the projects were awarded at bids of 0.4 yuan (5.1 US cents) to 0.5 yuan (6.4 US cents) per kilowatt-hour to the country's big five power companies, such as China Huaneng Group, China Guodian Corporation.

"The big five power companies are using the profit they made from coal-fired power generation to make up for losses in wind-power projects," Li said.

In addition, the big five power companies, which are registered as joint ventures, benefited from some preferential tax policies, thus helping them get refunds of 0.1 yuan (1.2 US cents) per kilowatt-hour, Li said.

From that perspective, the de facto price of their wind-power project is very reasonable. "But it is not fair to other investors, especially small, private ones," Li said.

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