China's offshore tender receives slow start

CHINA: China's first round of public tenders for offshore wind farms, initiated in May this year, comprise four projects that are based in east China's Jiangsu Province.

Two are offshore wind farms, located in Binhai and Sheyang respectively, with an installed capacity of 300MW each. Two other wind farms, inter-tidal projects, are located in Dongtai and Dafeng, sizing 200MW each. These four concession projects attracted 17, 19, 19 and 15 bidders respectively.

The lowest price was offered by CPIC for the Dongtai and Dafeng projects, which were CHY0.6101/kw. CPIC also offered low prices for the Binhai and Sheyang projects, 0.6119 yuan/kw and CHY0.6559/kw respectively. CPIC received ‘catcalls’ when its bid was announced.

In this public tender, bidders offered CHY0.6-1.2/kw for the four projects. Following the pattern of CPIC, other state-owned power companies, such as Guodian, Datang, Huadian and China Guangdong Nuclear Power, also offered low prices ranging from CHY0.6-0.7/kw.

Shi Lishan, deputy director of the New Energy and Renewable Energy Department under National Energy Bureau (NEB), said the prices offered at this public tender for concession offshore wind farms were a little low.

Shi said: "Today, we made a record low price, though unexpectedly. This will serve as a milestone for the development of China’s offshore power industry."

A wind power expert, refusing to be identified, said that the bidders offered too low prices at the public tender. The reasonable prices should be 0.8-0.9 yuan/kw, considering the costs of constructing offshore wind farms and the existing technologies.

China’s first pilot offshore wind farm, Shanghai East Sea Bridge Offshore Wind Farm, sizing 100MW, had a post-tax grid-access price of 0.978 yuan/kw. The project was constructed with an investment of CHY2.365 billion. It went into operation and was integrated to the grid in July this year.

In recent years, China’s wind power projects have been almost exclusively won by state-owned enterprises, particularly the top five electric companies. Industry insiders say that these state-owned enterprises will offer low prices for new energy projects, because of land enclosure expectations.

As a result, China had over 25GW installed capacity in land-based wind farms at the end of 2009, the second largest in the world, after the United States.

China implements four benchmark prices for land-based wind farms, which are CHY0.51/kw, CHY0.54/kw, CHY0.58/kw and CHY0.61/kw, at different regions of diversified wind power resources.

Since offshore wind farms operate in more complex environments, which require higher technologies and greater skills in installation, Chinese development of offshore is in its early developmental stages. Industry experts say that under normal conditions, offshore wind farms should have higher prices than inland wind farms to integrate power grids.

The present public tender for the first concession offshore wind farms are launched for the purpose of accumulating technologies and management expertise for larger-scale offshore wind power projects in the future, NEB officials said.

NEB said that it would organize experts to spend one week to evaluate the public tenders for the concession offshore wind farms. The final result will come out at the end of this month.

Previousy, Wang Jun, director of the New Energy and Renewable Energy Department under NEB, said: "In this public tender, offered power prices will account for only 60 percent of the weight. The other 40% weight will be decided by whether the management and operation programs of the bidding enterprises are scientific and reasonable."

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