Government policy continues to play a crucial role in the development of wind power industry in China. The 2005 "Renewable Energy Law" and related policies have driven the rapid increase in wind power installed capacity in China over the past half-decade, with capacity doubling annually since 2005. However, a large number of wind farms generate electricity well below their installed capacity, resulting in considerable wastage of resources. Non-grid-connected wind power theory proposes that large-scale wind power output does not necessarily have to be fed into the grid, but can be used directly in industrial production. Thus, the use of the theory can promote the sustainable development of the wind power industry by obviating the need for power grid. In this paper we analyze the influence of government policy on wind power industry from the perspective of institutional change, by employing the basic theories of new institutional economics. A development model for non-grid-connected wind power is proposed in order to implement institutional change in accordance with the specific characteristics of wind power industry in China. This model requires the government to play an active role in institutional development by increasing economic efficiency in order to promote the sustainable development of wind power. (C) 2012 Elsevier Ltd. All rights reserved.