For drivers crossing the Donghai Bridge off the coast of Shanghai, it is hard to miss the cluster of towering turbines spinning out at sea. Most notable for powering the 2010 World Expo in the city, China’s first offshore wind farm transmits 267 million kilowatt-hours (kWh) of energy to the national grid every year.
Late last month China Energy Investment Corporation, a state-owned mining and energy firm, joined EDF Group, the French utility giant to announce the construction of two more offshore wind farms in the eastern province of Jiangsu. The pact, worth Rmb7.9billion ($140 million), is the first Sino-foreign joint-venture of its type in offshore wind energy.
Located close to the city of Dongtai in the Yellow Sea, the two sites will have combined installed capacity of 502 megawatts (MW), making them the largest offshore wind farms in China. Each year they will generate 1.39 billion kWh of electricity, or something similar to 441,900 tonnes of standard coal, and enough power to meet annual demand from about 2 million people.
China Energy, formed by the merger of China Guodian Corporation and Shenhua Group in 2017, will have a 62.5% stake in the undertaking, with EDF taking the remaining share. The deal comes at a time when investment in other forms of renewable energy has dropped off, with the Covid-19 outbreak dampening demand. Spending on hydropower and nuclear plants slid 40% (on the year) in the first two months, and investment in thermal power projects fell 22%.
Investment in wind power bucked the trend, jumping almost 141% to Rmb8 billion in the same period. Much of that surge was prompted by policy changes that will scale back subsidies for new projects, creating a scramble for approvals before the preferential treatment expires. According to a joint statement by the Ministry of Finance, the National Development and Reform Commission (NDRC), and the National Energy Administration (NEA) in January, only farms that are connected to the state grid by 2022 will continue to enjoy financial backing from the central government.
The coronavirus pandemic has delayed construction at some existing projects but only by a couple of months in most cases. Industry insiders put this down to the fact that the farms are being built away from centres of population.
In 2016 the NEA set a goal to increase the installed capacity of wind power by over 60% between 2015 and 2020 – intending that it would account for 6% of the country’s total power generation.
Apart from reducing reliance on fossil fuels, the initiative is viewed as improving energy security by cutting some of the reliance on imports. Last year China depended on foreign supplies for almost three quarters of its crude oil consumption, for instance.
But the financial burden that comes with wind power plan is taking a toll, Shi Jingli, a professor at a research institute under the NDRC, told Caixin. Due to some of the complexities in turbine construction and wind farm maintenance, wind energy is already one of the most expensive kinds of non-carbon emitting power generation. Farms constructed offshore are more expensive to develop and pre-existing projects have saddled the state with payments of over Rmb100 billion in subsidies, reports China Daily.
To improve efficiency, there’s merit in tapping foreign expertise. Over the past decade Chinese firms have focused on ‘shallow’ projects offshore, which are less technically demanding. Now they are exploring opportunities at more challenging sites – meaning water deeper than 10 metres and more than 10 kilometres from the coastline, noted the South China Morning Post.
More competitive bidding for the prices charged for power has also spurred local players to think differently. China’s cost of generating offshore wind power stood between Rmb14,000-19,000 per kilowatt in 2019. The plan is to reduce that cost by 40% in the next five years.
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