IHS Global Insight Perspective | |
Significance | China's government is trying to advance offshore wind farms, given estimated offshore wind resources in excess of 750GW, and exploitable at a height of over 10 metres, compared to 253GW for the onshore wind sector. |
Implications | Additional advantages of offshore wind projects are higher and more consistent wind speeds which can boost generation, and the ability to locate projects near high electricity-consuming provinces on China's seaboard, lowering power-transmission costs. |
Outlook | China will look mainly to domestic companies as bidders for the four projects, given new interim regulations stating that foreign companies can only enter the sector through joint ventures with Chinese firms in which they must hold a minority stake. Looking ahead, a broadening of the assessment criteria should give the government a better idea of the ability of bidders to implement wind farm projects. |
Offshore Wind Round
China is set to launch its first bidding round for offshore wind power projects in an attempt to move China's electricity-generation sector onto a cleaner footing. Companies are set to submit their bids for four wind projects located off the coast of Jiangsu province and with a combined capacity of over 1,000MW on 10 September. Two of the projects will have an installed capacity of 300MW each, and will be constructed in Shenyang, while two other projects will be located in Dafeng and Dongtai in the Binhai area, according to the China Daily. The government hopes that the bidding round will attract investment of 20.8 billion yuan (US$3.065 billion).
China's move towards offshore wind projects follows the launch of the first pilot project, called Shanghai East Sea Bridge Offshore Wind Farm, in 2008, which had a capacity of 100MW deriving from 34 turbines supplied by Sinovel, the largest turbine producer in China. The project was designed to help Shanghai reach its target of boosting wind power to account for 1.5% of the city's total installed generating capacity, which it is also pursuing through construction of the Wind Bridge Farm in Yangshan, the Fengxian Bay wind farm and the Changxing Island wind power project. The success of the trial project has encouraged development of more offshore wind farms, given that China has estimated offshore wind resources in excess of 750GW, exploitable at a height of over 10 metres, according to the China Meteorological Association. This is significantly higher than China's land-based wind power potential, which is estimated at 253GW. Wind speeds offshore China—although slowed by currents travelling across Asia—are generally higher and more consistent than onshore, promising increased power-generation potential. Offshore projects can also be located near China's high energy consuming areas, reducing power transmission costs for consumers as well as the need for coastal provinces to import electricity from surrounding areas.
Despite these advantages, foreign investors trying to enter China's offshore wind sector do encounter some barriers as a result of the recently announced "Interim Measure on the Management of Offshore Wind Farm Development". The new measures stipulate that foreign companies are required to enter into joint ventures with Chinese companies if they want to invest in offshore wind farms, in which they are not allowed to hold an equity stake of more than 50%. According to the National Energy Administration (NEA), the regulation is in place to prevent foreign companies gaining access to sensitive oceanic data. However, the regulation may also reflect the government's own aim of developing indigenous technical expertise on offshore wind, which could potentially be used to win overseas contracts in future. As a result, the round is set to be dominated by Chinese companies, with media reports suggesting that China Huaneng Group, China Huadian Corp, China Power Investment Corp, and China Datang Corp—among others—are likely to participate.
Outlook and Implications
There are some indications that China may change the way it assesses public tenders for offshore wind farms in the forthcoming licensing round, given previous difficulties with onshore wind farm projects where some companies made extremely low bids on tariffs to win tenders and then encountered problems in making projects economically viable. This time around, the government may broaden the assessment criteria, looking at construction design, wind power prices, and technological expertise, which are important for offshore wind farms, being technically more complex than their onshore equivalents. Focusing on other elements apart from the generation price is a positive move, allowing the government to gain a better idea of the bidder's capability to complete the project.
The higher capital costs of constructing offshore wind farms compared to their onshore equivalents will probably force out smaller companies from the bidding round, which looks to be dominated by China's larger state-owned electricity generating companies.