China Clean Energy Syndicate – [03-09. Feb. 2020]

Dear

Below is the update of China’s renewable and cleantech market last week, with the following highlights:

  • WIND: Offshore wind installation (cumulative) by the end of 2019 is estimated at 7.8GW
  • SOLAR: Domestic PV installation (incremental) is projected at 40-50GW, despite the current coronavirus outbreak 
  • HYDROGEN: Hyundai and Toyota are making inroads in the Chinese market
  • Energy: The LNG market saw the first Force Majeure Claim due to the public health emergency

Warm Regards,

Yuki

For those who received this issue for the first time, this is Energy Iceberg’s “China News Syndicate”–a weekly updates of major news about Chinese clean energy market. As a subscriber to Energy Iceberg, you will receive the “Syndicate” besides our weekly analytical article. We curated the following updates and commentaries upon screening +300 local, diversified, and insightful sources that we trust. Make sure to reply to let us know how you think.


Wind

DATA: China's Installed Offshore Wind Capacity is Likely at 7.8GW, with 10GW Under Construction

By the end of 2019, China’s cumulative approved offshore wind projects reached 54GW, of which +10GW is under construction.

The industry estimated that the installed offshore wind capacity is at 7.8GW by the end of 2019.

Energy Iceberg Note: the data lead to two obvious conclusions: Firstly, a majority of China’s current offshore wind pipeline projects will lose national subsidy due to incapability to grid-connect in two years (by 2021). Secondly: new projects to be approved in 2020 and 2021, in practices, are already zero-subsidy projects because the majority of them will not be able to complete in two years, too. 

Simple math will explain. There are roughly 46.2GW projects in the pipeline (54GW – 7.8GW = 46.2 GW ), including 10GW projects now under construction and 36.2GW waiting to kick off. 

Meanwhile, China in 2018 installed 1.65GW new offshore wind turbines, in 2019 installed approximately 3.4GW [7.8GW- 4.45GW], double of 2018’s incremental installation. That means, at best, 21GW can complete in 2020 and 2021.

January 2020 Turbine Tender Volume (Public): 3GW

In January, 40 wind projects (onshore and offshore) kicked off turbine procurement tenders in China, according to public releases (excluding tenders that are not made public):

  • Total capacity volume: 3039.4MW
  • OEMs winning in the tenders: 10 OEMs, including Vestas, who won 200MW order from Zhangbei Zhanhai onshore project)
  • Of the 3GW tender, 800MW or three tenders are offshore wind projects, with Goldwind winning 600MW and Shanghai Electric taking 200MW.

POLICY: New Policy Regarding Renewable Renewable Subsidy Looks to Solve Susbdiy Delay Issue and Improve Project Cashflow

Ministry of Finance (MoF), National Development and Reform Commission (NDRC) and National Energy Administration (NEA) last week released a new policy that aims to solve the issue of unfulfilled payment of renewable subsidy, a threatening issue problem for many renewable companies. The policy came on heels of the January decision to axe offshore wind and biomass subsidy, while promised to recognize all projects for national subsidy. Three new measures to note of the policy:

  1. It promised that all existing and eligible renewable projects would be included for the national subsidy cash-pool. Previously, a majority of the solar and wind projects were not yet “recognized” for the subsidy, as the MoF only announce seven batches of renewable projects under the subsidy scheme. The policy now promised a change in future practices.
  2. Grid companies will review all the renewable projects and include them in the subsidy scheme promptly. Incremental projects shall begin to receive subsidy ten days after the final review.
  3. The grids will determine the sequence for distributing/allocating the subsidy. If the subsidy pool is insufficient, distributed projects (private rooftop solar, solar poverty alleviation projects) would be prioritized.

Energy Iceberg Note: this is the second government documents for introducing the new renewable subsidy allocation measures. If carried out properly, it will have a positive impact on the business cases of Chinese renewable companies and help to reduce the financial cost for the industry. Right now, the delay (or unfulfilled) subsidy payment is one of the key risk factors to invest in Chinese solar and wind market, in which cashflow forecast is the challenging and financial cost. To understand more of the overall picture of the subsidy and price scheme, please check our analysis. https://energyiceberg.com/china-renewable-power-price

Solar

Projection: Domestic Photovoltaic Installations 2020 Will be at 40-50GW

State-owned brokerage Industrial Securities Co believes that incremental photovoltaic solar installations in the country will be 40-50GW in 2020, up 33% to 60% year-on-year.

The judgement is made based on the new measured announced for the renewable subsidy allocation, mentioned above.

Canadian Solar Signs 1.2 GW PV Supply Agreement with Lightsource BP

Canadian Solar announced on Feb. 6 to have sealed a deal to supply 1.2 GW photovoltaic modules to Lightsource BP, one of the biggest solar developers in Europe. The “multi-year” arrangement involves  Canadian Solar’s half-cell, multi-crystalline technology in bifacial and single-sided formats.

Hydrogen Storage & Fuel Cells

COMPANY: Hyundai Secured 100% of Sichuan Hyundai, Eying on the Fuel Cell Vehicles (FCVs) Market in China

Korean automotive manufacturer Hyundai has obtained 100% equity of Sichuan Hyundai Motor Co., formerly a joint venture where Hyundai and local partner Nanjun each owned 50%. The move marks Sichuan Hyundai to become the first foreign wholly-owned enterprise (FWOE) automotive company in China–since Beijing lifts a restriction for foreign capital investing in the Chinese automotive industry.

The move, in part, reflects Hyundai’s hydrogen and FCV strategy, as the FWOE will be tasked for FCV development. Founded in 2012, Sichuan Hyundai is with registered capital of ¥3.7bn. The new sales target this year is 30,000.

Energy Iceberg Note: Hyundai previously revealed to establish fuel-cell stake production plants in China this year. The fuel cell stakes will be deployed in the FCVs produced in Sichuan, he then said. It is unclear whether the Coronavirus outbreak may hurt Hyundai’s plan. 

SUMMARY: Toyota Expands Hydrogen Footprint in China

Toyota has been deepening its cooperation with Chinese fuel cell and FCV suppliers. Most recently, Suzhou Higer Bus Co delivered to Changshu city, of Jiangsu, the first 20 fuel-cell buses which deploy Toyota fuel-cell technology. The bus takes 3-5 min for hydrogen fueling, with a driving range of 300km.

Three key cooperation between the Japanese firm and the Chinese players last year were:

  1. On April, Toyota signed a cooperation deal with Beiqi Foton and Beijing Yihuatong to jointly develop a hydrogen fuel cell with a 60kW fuel cell engine. Commercial production of the FCVs is expected in 2021. The FCVs will serve the Beijing-Zhangjiakou Winter Olympics in 2022.
  2. In July 2019, Toyota and FAW, Higer Bus, and Shanghai Re-Fire reached an agreement to develop FCVs. The buses produced by Higer and FAW will embark Re-Fire’s fuel cell stakes with Toyota technology and parts.
  3. On Sep. 26, Toyota signed two separate framework agreements with China FAW and GAC Group to explore cooperation in hybrid vehicles, plug-ins as well as to push forward cost-efficient electric vehicles and FCVs.

EV & Battery

COMPANY: China's Tianqi Lithium Registered Loss of ¥3.8bn in 2019, Deep in Insolvency Issue

China’s largest lithium producer is struggling to repay debt that helped finance an aggressive overseas expansion, the latest Chinese company to hit setbacks going global. Tianqi Lithium is facing mounting pressure to repay part of a $3.5bn loan from state-owned Citic Bank this year, which it used to buy a 24% stake in Chilean lithium producer SQM in May 2018. The global lithium market has been hit by rising supply from new mines and a cut in subsidies to buyers of electric cars in China, the world’s largest market. Prices for lithium carbonate have fallen more than 30 per cent over the past year, leading to mounting losses for the industry.

The firm last week revised its profit estimation of 2019FY and expects now a net loss of ¥2.6bn-¥3.8bn.

Clean Energy Related

China's CNOOC Declares Force Majeure on LNG Contracts Amid Coronavirus Outbreak
China's CNOOC Declares Force Majeure on LNG Contracts Amid Coronavirus Outbreakwww.spglobal.com

China’s state-owned CNOOC has declared force majeure on LNG contracts, a source close to company said Thursday, as the country’s largest LNG importer tackles disruptions in downstream markets in the wake of the coronavirus outbreak. The coronavirus has sparked fears of a major economic slowdown in China, the world’s second-largest LNG importer behind Japan, where quarantines and travel restrictions have caused a demand contraction.

Energy Iceberg Note: the claim is historical in the Chinese natural gas sector, suggesting energy demand harmed by the outbreak. We have mentioned in our analysis that similar claims of “force majeure” will appear in the wind and solar supply chain, imposing risks to the global renewable market. Check out our full analysis of Coronavirus’ impact on China’s renewable industry. https://energyiceberg.com/coronavirus-impacts-renewable-in-china/

State Grid Suspended Grid Investment Due to Coronavirus Outbreak, Affecting +60 Projects

Amid Coronavirus outbreak, State Grid (SGCC) postpones the procurements for more than 60 projects. Affected tenders involve provincial grid construction, as well as energy storage, electric vehicles, and smart grid services.

However, CITIC Securities analyst believes that the delay would have a limited impact on SGCC’s whole year investment plan if there is no further delay. In the past decade, SGCC’s first quarter and first half investments on average account for 13.32% and 38.3% of its whole year capital expenditure.

COMPANY: State Grid's Profit in 2019 Hits a Six-Year-Low. The Firm Announced Historical CapEx Cut

SGCC’s2020 capital expenditure is set at ¥408bn, down 8.8% compared to its 2019 budget. In 2019, SGCC completed ¥447.3bn investment, down 11% compared to that in 2018.

The firm’s profit hits six-year-low, at ¥77bn.

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