Analysis: China approves first commercial offshore projects

CHINA: Three of China's first four offshore wind power concession projects finally won approvals in the third quarter of 2013, three years after the tender was held.

A Goldwind nacelle being installed at Rudong near-shore wind farm
A Goldwind nacelle being installed at Rudong near-shore wind farm

Despite the delay, there are hopes that China is accelerating offshore sector development after years of stagnation.

The four flagship projects totalling 1GW in east China's Jiangsu province are the country's first batch of offshore concessions, announced in September 2010 by the National Energy Administration (NEA) after a public tender. The projects were held up by conflicts between the NEA and the State Oceanic Administration (SOA) on the use of the sea areas.

As offshore wind power is still an emerging business in China, the SOA failed to consider offshore wind power development when it created its "marine functional zones" in 2002. While for its part, the NEA did not involve the SOA in 2010 when it organised the tender for the first four offshore concession projects. An impasse developed, leading to a stalemate on the projects.

With the approvals from the Jiangsu Development and Reform Commission, projects 700MW in Dongtai, Dafeng and Binhai finally got off the drawing board. The remainder is the 300MW development in Sheyang which is still stuck in the approval system. The go-ahead came several months after NEA deputy minister Liu Qi said earlier in 2013 that China needs to accelerate the construction of the approved projects and promote offshore wind power development.

However, the obstacles that have hampered the sector remain unsolved. For a start, there is no clear pricing mechanism for offshore wind. The winning bids, including from Longyuan, Datang New Energy and China Power Investment, had surprisingly low prices, ranging from CNY 0.61 to CNY 0.73 per kWh.

The prices were the other reason for the delay, with concerns that they would fail to meet the higher offshore construction and maintenance costs, let alone make a profit.

To resolve this the NEA commissioned the China Renewable Energy Engineering Institute (CREEI) in July 2012 to look at the pricing of offshore wind power. Setting the benchmark feed-in tariffs for offshore wind projects has been proposed, but nothing has been issued officially.

"A clear pricing system is urgent for offshore wind power development," said Yi Yuechun, deputy chief engineer at CREEI, an institution commissioned by the NEA to map China's offshore wind power development. "Otherwise the developers will not invest more into the projects without clear prospective earnings."

Along with the delayed approvals of the first batch of offshore concessions, the long-planned second offshore tender of 1.5-2GW — which was originally set to be announced in the first half of 2012 — had also been postponed.

Despite this, the third quarter of 2013 not only saw progress for the three commercial projects, but also more approvals from local governments after the approval right was devolved down to the lower level from the National Development and Reform Commission (NDRC).

China's southern-most province, Hainan, approved the 350MW offshore project in Dongfang in August; northern Hebei said yes to a 200MW offshore project in October. According to Yi, 28 projects are waiting for approval for preparation work, a total capacity of 8.5GW.

No curtailment

There is evidently a need for offshore wind power in China, despite the curtailments that have hampered onshore development to the tune of 21.8 billion kilowatt hours last year. Offshore is not included in the severe curtailments. Nine coastal provinces, including Jiangsu, Shandong and Hebei have completed their planning of offshore wind power; and Guangxi is about to finish, according to China Renewable Energy Industries Association.

If all goes to plan, the changes to the market should help China's manufacturers, which have been busy throughout the curtailments developing bigger offshore turbines.

Goldwind finished the test of its 6MW offshore prototype in Dafeng in early December and will install it soon; Ming Yang launched a 6.5MW prototype designed for the typhoon environment in offshore areas in July. These two companies, together with Sinovel and Guodian United Power, are all working on 10MW-plus machines.

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