China Clean Energy Syndicate [2020 Apr. 06]

As Chinese energy companies collectively released their 2019 annual report and Beijing issued several stimulus policies, last week was busy in terms of policy and market updates.

A few highlights of news in the past week [31 March – 05 April]:

  • WIND: DEC launched 7MW new product, while the industry association urged Beijing to push back the subsidy sunset deadline
  • BATTERY: major news–Beijing agreed to extend the subsidy for new energy vehicles for two more years; BYD officially launched its LFP blade battery
  • SOLAR: supporting policy of Beijing for solar investment and subsidy send positive signals to the struggling industry
  • HYDROGEN: SPIC announced to set up new energy affiliate specialized in hydrogen development and other new energy technology
  • POWER: Chinese listed power utilities set off a wave of asset write-off

Scroll down for our translation of 17 news update. I hope the news could bring you some inspiration for the coming week.

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Dongfang Electric Completes Assembling the 7 MW Offshore Typhoon-Proof Turbine
Dongfang Electric Completes Assembling the 7 MW Offshore Typhoon-Proof Turbine

DEC launched a new DEW-D7000-186 offshore typhoon-proof turbine prototype, with the assembly completed at its Fujian factory last week. The firm said the new product was designed to address some of the challenges unique in the Chinese offshore market: low average wind speed, strong salt spray corrosion, and strong typhoon in most sea areas of China. It claimed that the DEW-D7000-186 as the largest turbine (and with the longest rotor diameter, 186 m) among Chinese typhoon-proof turbines adopted in the medium-to-low wind speed area.

Energy Iceberg Note: last year DEC released China’s first double-digit turbine of 10MW capacity. The move provides the Sichuan-based manufacturer–so far having little market existence–a fighting chance in China’s offshore wind market and a possibility to take over strong competitors such as Goldwind and Ming Yang. At that point, DEC has revealed that 10MW and 7MW (then just a design) would be the firm’s main products to offer in the future. However, as the offshore developers are under tremendous pressure to complete OW projects on time, the market reality leaves little room for DEC’s new products. 

I guess what I tried to say is, technically, DEC is well-positioned to be the main player in the Chinese OW market, but the market reality may hinder their path to the top.  For more info, please check out our summary & review on China’s turbine R&D updates: 

China Longyuan Power 2019 FY: Still Global No.1 But Faces Growing Competition

The world’s biggest wind operator, China Longyuan Power Group (Longyuan), revealed 2019 FY. Three key capacity figures from the FY report:

  • cumulative installed capacity surpassed 20GW (20.3GW)–globally No.1
  • cumulative offshore wind capacity reached 1.55 GW– largest in China
  • additional installed wind projects last year: 14 projects of 1113 MW, of which 152 MW were offshore.

Longyuan Power’s overseas projects:

  • Yuzhny Wind Farm, Ukraine: completed the equity transaction last year
  • Develin Wind Power Project, Canada: of 286 GWh production last year
  • Dea Wind Farm, South Africa: of 783 GWh production last year

Energy Iceberg Note: as the data suggests, Longyuan accounts for just 4.3% and 7.6% of China’s incremental wind and offshore wind capacity. For more info of Chinese power utilities, check out our recent updates on 5 major utilities’ power portfolio and financials break-downs.

China Resources Power (Huarun) 2019 FY: Net Profit Increased by 66.8% Mostly Due to Wind

China Resources Power presented last week that the company achieved a net profit of HK $6.59 bn in 2019, with a significant increase of 66.8% from that in 2018. The increase in net profit is mainly attributed to the newly commissioned wind power projects and lower fuel costs. 

Wind capacity of CRP: 1,871 MW incremental; cumulative 8687 MW; capacity under construction 3809 MW

So far thermal power still accounts the majority (76.7%) of CRP’s power portfolio which reached 40.4GW by the end of 2019.

Energy Iceberg Note: it is worth to notice that, Tang Yong, the new president of CRP, revealed that offshore wind would be the company’s priority for the years to come. So far, the firm has no offshore wind projects in China. For more info of Chinese power utilities, check out our recent updates on five major utilities’ power portfolio and financials break-downs.

OPINION: Pushing Bak the Grid-Connection (Subsidy) Deadline is Necessary for the Wind Sector to Survive Amid COVID-10, CWEA

Chinese Wind Energy Association (CWEA) secretary-general Qin Haiyan recently published a policy advisory piece with some critical information to notice:

  • China’s turbine and turbine-part production capacities have fallen sharply due to COVID-19
  • Total production of the turbine is expected to drop 30% compared to 2019
  • Onshore wind project construction window is estimated to at least delay for six months
  • Offshore wind projects could delay for 8-12 months
  • the global economic standstill and transportation crunches triggered by coronavirus crisis means a series of crucial turbine parts delayed for shipment, including balsa wood, polyvinyl chloride, main bearings, gearbox bearings, and IGBT chips

Qin of CWEA, thus, asks for energy regulator to provide at least six months for both project developers to secure their national subsidy.

Energy Iceberg Note: Check our report explaining China’s subsidy set-up for renewable projects from now to 2022:

NEA Fully Lifted Investment Bans for New Wind Projects All over China

The National Energy Administration (NEA) last week released the annual wind power investment monitoring report for 2020. The results indicated that the wind curtailment (wind power waste) rate across the country had been decreased. The bans for new wind investment are, thusly, fully lifted, which is good news to the wind sector. Beijing has lifted the “red-alert” bans on Gansu and Xinjiang and labelled the duo are “orange” areas, which mean the two regions could carry out new construction of wind projects previously approved.


NEA Lifted Investment Bans on New Solar Construction Across the Country, with Tibet the Only Exception Now

The National Energy Administration (NEA) released last week the 2019 solar curtailment result:

  • New solar projects (excluding planned projects, inter-provincial and inter-regional transmission and consumption projects are) are banned in Tibet due to high solar waste rate
  • The orange area (where solar construction is possible, but new investment still requires government reviews) are Tianjin, Hebei, Sichuan, Yunnan, Shaanxi Class II resource area, Gansu Class I resource area, Qinghai, Ningxia, and Xinjiang
  • The rest is label as “green areas”, meaning that new investment is allowed and encouraged

Beijing Sets Solar PV Directory Prices in 2020

National Development and Reform Commission (NDRC) last week finally set down the PV feed-in tariff directory price for 2020. According to the new policy:

directory price rates for mounted PV power plants in I-III resource regions are set at ¥0.35, ¥0.4, and ¥0.49 per kWh.

Energy Iceberg Note: the price set-up is favourable to the solar PV developers. More on RE pricing mechanism in China, please check out our review:

Panda Green Warns of $500m Annual Loss

The bailed-out Hong Kong-listed PV developer has warned its remaining independent shareholders of a thumping net loss for 2019 as it prepares to reveal its final results at the end of the month. Panda Green hemorrhaged more than $500 million last year. The full-year 2019 results on March 30, will be digesting an expected net loss of ¥3.6bn (US$506 mn) from the year, up from an already shocking ¥454 mn a year earlier. The company cited reduced feed-in tariff payments for its Chinese solar and hydropower facilities, specifying PV payments had fallen to ¥0.4/kWh (US$0.056) in the Zone 1 which covers northern China and Inner Mongolia, RMB0.45 in the west and central China Zone 2 and RMB0.55 in the Zone 3 which covers the rest of the nation. Panda Green, which held a 2 GW Chinese solar portfolio at the end of the year, is more than 74% owned by Chinese state entities after Beijing Energy Holding Co Ltd completed a twice-delayed HK$1.79 bn (US$231 mn) acquisition of a 32% stake in the business last month.

PV Producer LONGI Joined RE100
LONGI Green Energy Tech, China’s leading PV producer, announced to join RE100. Before 2015 the firm relied on conventional energy sources for its PV production; since 2016 the hydropower in Yunnan, China, and in Malaysia become the main power source. The firm claimed that the next step is solar for solar.

Hydrogen Storage & Fuel Cells

SPIC Set up New Energy Subsidiary to Lead Development in Hydrogen, Storage, and Nuclear

State Power Investment Corporation (SPIC) established an “integrated new energy” subsidiary last week, joining the footsteps of other Chines stated-owned power enterprises like State Grid, China Southern Power Grid, Datang, and China Resources.

The affiliate will focus on technology integration among nuclear energy, new energy, power grid, thermal power, hydrogen energy, energy storage and other energy sources.

Energy Iceberg Note: the intention of setting up such subsidiary is to have a specific affiliate to lead the internal energy transition. However, how successful the previous cases are under question. What SPIC stands out though is its technology background in nuclear, PV solar, offshore wind, and now hydrogen production. Whether the newly formed affiliate could successfully combine these unique capabilities is worth to check.

Hydrogen Will Fuel Beijing's Daxing Airport Transportation System
Hydrogen Will Fuel Beijing's Daxing Airport Transportation

Recently, Foton Moto, Sinopec Sales Co., Sinopec Beijing Petroleum Branch, Beijing Civil Aviation Airport Bus Co., and Sinohytech Co. reached a cooperation intention to embark hydrogen fuel cell vehicle for Beijing’s new Daxing airport’s transportation. The cooperation would set an example in adopting FCVs in commercial applications, a statement of these companies said. 

Shenzhen Center Power Profited From Fuel Cell Sales

Shenzhen Center Power issued the company’s first quarter performance forecast last week, which stated a profit of ¥26.5-30 mn and some 11-26% YoY profit growth. The firm attributes part of the profit to its hydrogen fuel cells stakes orders.

Haima Automobile Set to Launch 2000 FCVs in China's Hainan Island

Haima Automobile Co (Haima) last week revealed that the firm had bounced back with a profit of ¥85.2 mn in 2019 from a net loss of ¥1.6 bn years earlier.

However, the firm warned investors that 2020 would be a challenging year ahead, given the economy slow down. Though the firm seems to gain substantial support from the local Hainan provincial government, which already announced to ban conventional fuel cars from 2030 entirely. Haima said it plans to launch 2000 FCVs in the island province this year.

Hebei Province Set to Develop 43 Hydrogen Projects Involving ¥8.7bn Investment This Year

Hebei Province, China’s industrial hub, green-lighted 43 hydrogen projects that include hydrogen production, equipment manufacturing, fueling station and fuel cell making, as well as FCV production. The total investment involved is said to be ¥8.75 bn, according to a statement from its provincial planner.

Among these projects, Zhangjiakou city will host 21. The city aims to forge itself to be a “hydrogen capital” in China, with an ambition to develop H2 production capacity of 21,000 tonnes by 2021 and 50,000 tonnes by 2035.

EV & Battery

BYD Officially Launched its Hyped ‘Blade Battery,’ with Great Ambition to Challenge NCM Battery But Questions Remain

The Chinese EV giant, BYD, unveiled a “safety-focused” blade battery last week. The firm boosted that the LFP battery to have a higher energy density and a significantly improved safety. BYD Chairman Wang Chuanfu claimed that the battery could redefine EV industry.

 Energy Iceberg: Since 2016, the NCM lithium battery has been a key focus (game changer?) in the electric vehicle market. NCM is more costly but considered more efficient and with higher capacity. But Wang and BYD–the LFP supporter–argued that the industry has been moving in a wrong path. 

Right now, Contemporary Amperex Technology (CATL) and BYD are the two major competitors in China’s EV battery market. The market would tell whether Wang’s judgement/ambition could turn out to be true. 

MAJOR: Beijing Agree to Extend Subsidy for New Energy Vehicles for 2 More Years

Premier Li Keqiang announced in an executive meeting that China would extend the new energy vehicle purchase subsidy and purchase tax exemption policy for two years to promote automobile consumption. The financial support for new energy vehicles was supposed to expire by the end of 2020.

The policy provides some leverage for the EV sector that wrestles both with the COVID-19 pandemic and the oil price slump. However, experts warn that the subsidy will sunset, indeed, after this one-time extension.

Energy Iceberg Note: it is a critical policy decision for the EV and FCV sectors that face uncertainty amid demand slump caused by COVID-19 and growing competition raised by the oil price slump. 

Clean Energy Related

Chinese Power Utilities Collectively Wrote off Asset Values to Prep for the Upcoming Sunset of Fixed Feed-in Tariff for Coal-Fired Power

Energy Iceberg Note: China is set to sunset the fixed feed-in tariff pricing for coal-fired power plant next year (2021) and replace it with a “fixed plus fluctuation” pricing. The new pricing mechanism is, in theory, a floor + ceiling pricing, but so far Beijing said it would only allow coal-fired power price to decline (instead of increasing) for the coming few years. That means coal-fired power prices will drop, for sure. Thus, we are now witnessing a wave of listed power utilities writing off their coal units’ value. 

Last week, Huaneng Power International, the HK listed subsidiary of China Huaneng Group, disclosed in its 2019 annual report inclusive of “the largest asset impairment in history.” The company sets off an asset devaluation of ¥5.812 bn. The devaluation amount was fivefold of that in 2018. These asset written off are mainly thermal power plants.

Similarly, Huadian Power International (Huadian) and Datang Intl Power Generational Co.(Datang), both listed companies of the five major power generation groups, have previously disclosed devaluation plans. Huadian wrote off ¥782 mn, while Datang wrote off ¥2 bn.

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