China Clean Energy Syndicate [17-23. Feb. 2020]

Good morning!

Below are the updates of China’s clean energy and power sector during last week, with these highlights:

  • WIND: several OEMs in China announced to resume works, despite challenges remain; XEMC revealed its decision to sell wind unit
  • SOLAR: JA Solar unleashed a 20GW capacity expansion plan, following the 30GW bold footstep of Tongwei
  • HYDROGEN: Sinoenergy will buy 200,000 units from Ballard
  • EV&BATTERY: Tesla’s choice to use cobalt-free battery triggered industry debates; Beijing signals to provide further EV subsidy
  • ENERGY: grid companies are committed to providing electricity cost exemption for the industries–as we expected

Have a Great Week Ahead.

Warm Regards,

Yuki


Wind

Several Chinese Wind OEMs and Suppliers Said to Soon Resume Work, But Questions and Challenges Remain
Several Chinese Wind OEMs and Suppliers Said to Soon Resume Work, But Questions and Challenges Remain mp.weixin.qq.com

Goldwind, DEC, and Sinohydro said their team in Fujian offshore wind park, whereas CRRC and LM said to be “actively preparing” for a soon restart.

Energy Iceberg Note: Ming Yang and CSIC Haizhuang already announced to resume work, while SGRE and Vestas revealed similar resumption of part of the workforce. However, none of these is able to resume in full capacity. Transportation of equipment and risk facing the returning workforce remain two critical challenges.

XEMC Seeks to Sell Wind Turbine Manufacturing Unit Amid Economic Downturn

Xiangtan Electric Manufacturing Co (XEMC) announced to sell 100% equity of XEMC Windpower in the regional equity exchange market in Hunan province, of China.

XEMC Wind is one of the top-10 wind OEMs in China, while the 1936-born mother company is specialist in electric generators and equipment. XEMC Wind used to surge to the 5th player among domestic wind OEMs, but its ranking dropped quickly in the past two years to 9th (2019). The sale highlights series issues facing the firm including a $600mn debt due to the quality issue of its blade supplier, $500mn losses from credit fraud, and lower gross margin amid drastic competition among Chinese OEMs.

Energy Iceberg Note: the sale underlines the consolidation of Chinese domestic wind market, where the top-3 market share increased from 57.43% to 62% from 2008 to 2019; that of top-10 rose from 73.27% to 93%. 

As the market is an installation dash in the coming 2-3 years, competition may be alleviated. But it is widely expected to see further consolidation after the current installation dash cycle, as the demand slump after 2022 would quickly squeeze out part of the production capacity. Moreover, the coronavirus outbreak may already threaten the livelihood of some companies that were developing upon high leverage. XEMC’s sale heralds that market direction. We will look into the matter in this week’s Energy Iceberg Analysis. 

Guangdong Province Announced Development Schedule of its 26 Offshore Wind Power Projects

Guangdong Development and Reform Commission (DRC) released a timetable for the construction of 26 offshore wind power projects. By the end of 2021, the province will add 8432.5MW offshore projects to the grid. Of the 8.4GW or 26 projects:

  • 3 projects would be completed by 2020
  • 22 projects would kick off construction by the end of 2020
  • 19 projects would be grid-connected by the end of 2121
  • 4 projects without a specified time schedule

The four without specified time schedule are:

  • Three Gorges Corp (CTG) Nanao Yangdong 300MW,
  • CTG Shantou Haimen (zone 1) 700MW project
  • China General Nuclear (CEG) Huizhou Port 1 400MW project
  • CGN Huizhou Port 2 PA, PB600MW project
courtesy of Beijixing

China Energy Investment Corp Announced a Wind-Solar-Hydrogen Storage Plan at Inner Mongolia

CEIC signed off an investment deal with the local government of Inner Mongolia to build a 1-2GW renewable project that combines wind power, solar power and BES storage facilities.

Energy Iceberg Note: this is the 13th large wind complex plans announced in the province since the beginning of 2019, most of which are larger than 1GW in capacity. The construction rush is alerting with a potential of worsening wind curtailment issue soon. 

Solar

JA Solar Expands High-Efficiency Solar Cell Capacity, with ¥11 bn Investment Plan

JA Solar unleashed an investment plan of ¥11bn in total to build a new manufacturing complex and to ramp up capacity in an existing plant. The new complex, to be built at Yiwu Information Optoelectronic High-tech Industrial Park, will be of 10GW solar cell production and 10GW solar modules capacity up from an initial plan to develop 5GW solar cell and 10GW modules, instead. The new facility will cost ¥10.2bn.

 Meanwhile, the firm plans to spend ¥1.13 bn to upgrade the production facility at Ningjin (the 34 plant), which will be of 3.6GW.

Energy Iceberg: major solar cell producers are launching a race for capacity expansion. Last week, Tongwei announced an even more ambitious plan to invest ¥20bn for adding 30GW solar cell production capacity.

Coronavirus on Solar: Industry Association Dropped 2020 Incremental Capacity Projection by 10%

China Photovoltaic Industry Association (CPIA) downgraded the 2020 solar installation figure by roughly 10% from the previous projection made in Jan. CPIA now expects between 35-45GW solar capacity to be installed in 2020, amid coronavirus outbreak. The forecast is, notably, lower than a previous estimation of 40-50GW built.

CPIA said that the public health crisis brings challenges in all fronts from inefficient logistics, higher cost burdens, supply shortage of raw and auxiliary materials, delayed resumption, inadequate labour forces, foreign trade uncertainties, and so on. The outbreak has made a significant impact on both PV manufacturing and power construction due to the delay of work resumption.

Energy Iceberg Note: The association’s recent investigation suggests that the production rate of the supply chain has declined significantly. The operation rate of raw and auxiliary materials production lines is estimated to be as low as 30%, those of silicon wafers and polysilicon production facilities are between 70% -100%, while battery slices, modules, and inverters between 40% -80%.

Hydrogen, Fuel Cells & FCVs

Sinosynergy to Purchase 200,000 Fuel Cells Membrane Electrode Assemblies (MEAs) from Ballard in 2020

Sinosynergy last week held an investor call, which revealed the following information regarding two of its subsidiaries Sinosynergy and Foshan FeiChi Bus:

  • Feichi plans to build 1,500 vehicles, of which majority will be FCVs
  • Sinosynergy will work closely with Ballard this year to improve the performance of 9SSL
  • Sinosynergy will work on R&D aiming to develop products of indigenous design & IP
  • 2020, Sinosynergy will purchase 200,000 MEAs from Ballard, which will embark in the 1,600-1,700 fuel cell stake production and 1/3 of Sinosynergy’s total sales plan in 2020

18 FCVs and161 EVs are Listed for Tax Reduction, Announced by Ministry Of Industry and Information Technology (MIIT)

MIIT released the new 14th batch of energy-efficient & new energy vehicles that are entitled to tax reduction and exemption. A total of 205 new energy vehicle models were included in the list, including:

  • 21 passenger vehicles, 184 models are commercial vehicles
  • 161 pure electric vehicles; 26 are electric hybrid(including 21 passenger vehicles and 6 commercial vehicles)
  • 18 fuel cell vehicles

Products of BYD, SAIC Group, Great Wall Motors, Geely Automobile and others are among the list.

Dongfang Electric Corp (DEC) Delivered 100 Commercial Hydrogen Fuel Cell Stake Systems for 90 FCVs

DEC’s hydrogen fuel cell subsidy, Dongfang Hydrogen Fuel Cell Technology, announced to achieve a critical milestone of commercializing its fuel cell technology. The Chengdu-based firm revealed last week that it has successfully delivered the second batch of hydrogen fuel cell systems for 90 buses of Chengdu, following a previous supplier to 25 buses. The milestone means that the firm has more than 100 fuel cell systems have been put into operation, one of the Chinese manufacturers with such a record, it said. The first 25 FCV buses have run for a total mileage of more than 1.2 million kilometres.

Dongfang Hydrogen is advancing fuel cell R&D. The firm claims that its product of indigenous design is of 75 kW power output and in-total 12,000 hours life cycle. The design has been undergoing testing for more than ten thousand hours and is leading in China.

Electric Cell & EVs

China Considers Extending Electric-Car Subsidies

Anonymous sources told Bloomberg recently that Beijing is considering to “extending the EV subsidy to after 2020.” It is said that the National Development and Reform Commission has submitted a suggestion (for EV subsidy extension) to the Ministry of Finance. Still, the Ministry of Finance has not yet responded.

In 2019, the production and sales of new energy vehicles were 1.242 mn and 1.206 mn, dropped 2.3% and 4% compared to those of 2018. The production and sales of EV were 1.02 million and 0.972 mn, which was up 3.4% YoY and down 1.2%, respectively. MIIT and MOF’s intention to reduce subsidy is one of the factors behind the unsatisfactory result. And 2020Q1 sale of new energy vehicles has slumped amid coronavirus outbreak.

Energy Iceberg: MIIT show clear sign to revisit its previous decision to reduce EV subsidy and appears to prefer to further supporting the sector with “slow subsidy reduction”. But a critical decision-maker is MoF, which is under pressure to limit the spending of national subsidy. The industry, however, is hoping to see further financial support for EVs.

Tesla in Talks to Use CATL's Cobalt-Free Batteries in China-Made Cars
Tesla in Talks to Use CATL's Cobalt-Free Batteries in China-Made Carswww.reuters.com

Tesla is in advanced stages of talks to use batteries from Contemporary Amperex Technology (CATL) that contain no cobalt – one of the most expensive metals in electric vehicle (EV) batteries – in cars made at its China plant, people familiar with the matter said.

Energy Iceberg Note: this is shocking news to the market and led to the plummeting stock prices of cobalt-relative firms in the past week. However, the industry remains in debates for the implication of Tesla’s move. 

Value of China's Electric Charging Market Would Rise up to ¥18bn By the End of 2020

According to data of China’s Electric Vehicle Charging Infrastructure Promotion Alliance (EVCIPA), public charging piles in China has reached 1.219 mn, with a year-on-year growth of 50.8%. EVCIPA expects to see “an explosive growth” in the market:

  • 372,000 incremental AC charging poles to be added in 2020
  • 1.076 mn cumulative AC charging piles by the end of 2020
  • 156,000 new public charging piles to be built in 2020
  • 12,000 new public charging stations to be commerced in 2020 

China’s EV charging market value was nearly ¥6 bn, which is likely to reach nearly ¥18 bn by 2020 and exceed ¥58 bn by 2023, EVCIPA said. The growth means opportunity for tech companies with smart grid applications.

Chinese Power Policy & Companies

As Expected: The Two Grids Announced to Exempt ¥59.5 Bn Electricity Cost for Consumers to Boost Economics Amid Coronavirus Attack

State Grid and China Southern Power Grid each announced series of discounts and exemptions for the electricity costs of industrial or commercial users who are affected by the Coronavirus outbreak.

Energy Iceberg Note: as we mentioned, these measures are good news to the SMEs but not so much to power projects or the grids. As we mentioned in our analysis, Chinese government will utilize energy-cost-reduction measures to boost economy revival during and after the coronavirus outbreak. Local governments may seek further lower power tariff, and it is more difficult now for the local governments to support renewable subsidy.

China Datang Said to Eye Loan After Share Pledge Clause Breach
A unit of a Chinese state-owned power company is seeking a HK$5 billion ($644 million) one-year loan that will refinance an earlier 2018 deal after the company breached a default clause, according to people familiar with the matter.

The 2018 financing, borrowed by China Datang Corp.’s unit China Datang Overseas Hong Kong Co., was secured by about 3.3 billion of shares in Hong Kong-listed Datang International Power Generation Co. The breach came after the value of the pledged shares fell below the outstanding loan amount for more than 10 straight trading days, said the people, who are not authorized to speak publicly and asked not to be identified.

State Power Investment Corp (SPIC) Sets 2020 Profit Target of ¥12 bn

One of the five biggest power generation utilities, SPIC sets an ambitious financial target in 2020, including :

  • a net profit of ¥12 bn
  • debt to asset ratio (leverage) lower than 75%;
  • capital investment in 2020 will be ¥104.5 bn;
  • 171 GW installed power capacity by the end of 2020
  • 54% of power capacity contributed by clean power units

More information about the five biggest power generation utilities: https://energyiceberg.com/state-owned-power-utilities/

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