Several boom-shell policies arrived in China’s energy industry last week, signaling major reform ahead. Meanwhile, several industry heavyweights have either announced IPOs or joint venture plans, adding excitement to the industry last week.
Facing COVID-19’s lasting impact and the uncertainty of oil price slump, however, the renewable and clean-tech sectors are in a critical moment. Its life and death may be up to Beijing’s policy decision. Thus, Energy Iceberg expects Beijing to unravel more policy measures in the coming weeks, which would redefine several industries’ trajectories. More than ever–let’s stay tuned.
A few highlights of news in the past week [06 April- 12 April]:
- POWER: Bombshell, as Beijing sets to unleash the long-awaited Energy Law soon
- Battery: CATL has teamed up both with State Grid and East Group, with two JV plans announced last week. The joining force of China’s top battery storage players signal a major power shift ahead
- WIND: Ching Three Gorges launched the largest wind power IPO; Ming Yang plans to raise money, again, gambling hard on offshore wind and eyeing on floating offshore technology
- SOLAR: a bloody price battle awaits the PV industry
Scroll down for our translation of the news updates. I hope some of the information could bring you inspiration for your works in the coming week.
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The wind and solar affiliate of China Three Gorges(CTG) will soon complete the initial public offering (IPO) in China stock exchange to raise a total ¥25 bn. More than three-quarters of the capital, ¥20bn, is for the construction of seven offshore wind projects:
- Yangxi Shapa 300 MW Offshore Wind Farm
- Changyi Aquaculture Farm Demonstration Project 300MW
- Yangxi Shapa Phase II 400 MW Offshore Wind Farm
- Zhangpu Liu’ao Offshore Wind Farm Zone D Project
- Changle Waihai Offshore Wind Farm Area A Project
- Jiangsu Rudong H6 (400 MW) Offshore Wind Farm
- Jiangsu Rudong H10 (400 MW) Offshore Wind Farm
The firm is poised to be one of the global leading offshore wind developers with currently 1.47GW installed and under construction and some 8GW in the pipeline (already approved). Installed offshore wind capacity of the firm is expected to reach 6GW by the end of this year.
China Securities Regulatory Commission (CSRC) said this IPO is like to be the most significant case in 2020 and could rank as the 16th largest (in terms of the total amount of funding raised in A-share history.
Wind turbine OEM Ming Yang Smart Energy Group (Ming Yang Smart) said it plans to raise ¥6 bn via a private placement for the development of 8 projects, inclusive of a 10MW floating offshore wind turbine R&D. Total investment for the floating turbine design is estimated will roughly take up 10.2% of the total capital raised.
Notably, the firm plans to allocation almost a quarter of the capital raised for loan payback. As of the end of the third quarter of 2019, the total amount of borrowings within one year was ¥2.164 bn, and the company’s cash balance was ¥5.915 bn.
Ming Yang ranked the third in China for its turbine installed in the past several years, putting up 4.5GW in 2019.
Energy Iceberg: a veteran in China’s wind turbine “red-ocean-like” market, Ming Yang has bounced back in the past years, in large part thanks to its technical background, the support of Guangdong government (the largest offshore wind market to-be in China), as well as its focus on offshore wind segment. Notably, although a turbine OEM, the firm also owns the development rights of several offshore wind projects in Guangdong, making it a potential cooperation partner for OW project development in China.
However, its investment and focusing on offshore (as well as on new tech like 10GW, floating..etc.) is not without risk. The seemingly booming Chinese offshore wind market, in fact, faces many challenges. The nascent sector hopes (unrealistically) to install some 40GW before the end of 2021–a mission impossible and those who fail will lose their national subsidy. As a result, many “approved” projects may not go on at all. And investing in cutting edge technology is risky in several dimension.
In the first quarter of 2020, a total of 80 wind power projects have been publicly tendered in China, of 6946.3MW combined.
Of these projects, ten are offshore wind projects, involving 2684MW installation.
Following ZPMC’s official launch of a hydraulic hammer boost as the “first-of-its-kind in the country with an intellectual property right,” China’s offshore wind engineer Longyuan Zhenhua has embarked the hammer for the first time. The hammer had also secured the third-party authentication from DNV GL last week. The progress seems to mark that China has finally obtained the manufacturing capability of this tool that is key to offshore wind.
The hydraulic pile hammer is a tool for offshore pile foundation construction. It works by striking the pile with hydraulic driving force, featuring high impact frequency, large impact force and complicated structures. It is widely used for offshore wind power development and oil and gas exploitation.
The ZPMC hammer is the first largest dual-operation hydraulic pile hammer in China with the total weight of 355t, largest single pile flange diameter of 5.7m and maximum hitting capacity of 2,500KJ. It mainly embarks on building the monopile foundation for offshore wind turbines.
Energy Iceberg: Previously, the Royal IHC of the Netherlands and MENCK of Germany are the two primary suppliers of the tool in the Chinese offshore energy scenes, and both enjoyed business success. ZPMC announced to kick off an R&D of the hammer since 2018 and now claimed the cost of the Chinese alternative is only half of those of its international equivalents…
Longji announced the price of silicon wafers of this month. The prices of 166mm and 158.75mm silicon wafers had lowered by ¥0.15 /piece. This price reduction demonstrates the trend of Longji continuously reducing the rate of silicon wafers.
Notably, the recent price announcement breaks Longji’s former practice of announcing price changes only in the second half of each month. The firm said that the new measure was caused by the rapidly changing downstream demand. The global COVID-19 pandemic has placed a more substantial impact on the market since Mar., leading to the tumble of photovoltaic demand and these a higher pressure to cut cost, the firm claims.
Earlier this year, IHS Markit predicted a 142GW of new photovoltaic installation in 2020. But since the COVID-19 outbreak, the firm adjusted down the figure to 105GW, which would be a 16% YoY reduction. BloombergNEF also downgraded its projection of global incremental PV installation figure to 108GW-137GW.
Hydrogen Storage & FCVs
Last week, National Energy Administration unleashed China’s first Energy Law draft (feedback-inviting version). The draft includes hydrogen an energy source, on an equal footing with coal, petroleum, natural gas, nuclear energy, wind energy, solar energy. The move marks the first time that hydrogen is officially included in China’s energy legal document.
Hydrogen has been deemed as a high-risk chemical product in China for a long time, which places many restrictions on the hydrogen energy-related industries during the application and construction process. The industry thus has high hopes of supporting measures to be released.
Korea Automobile Manufacturers Association (KAMA) lately published a report on the development status and impact of China’s hydrogen energy vehicles. The report reached the following conclusions on Chinese FCVs:
- The number of hydrogen fuel cell vehicles in China is expected to exceed 1 million by 2030.
- By 2025, the price of fuel cell passenger vehicle (FCEV) in China will be about ¥200,000
- By 2030, the price of FCEVs will be reduced to ¥180,000. Compared with the same type of FCEV in South Korea, the price advantage is distinct.
Marn-ki JEONG, chairman and CEO of KAMA, said that China is expected to become the largest hydrogen vehicle market. Korean companies must actively work with China to increase research, development and market promotion in China, it concludes.
Meijin told A-share investors last week that the firm is studying the possibility of the initial public offer of Foshan Feichi Automotive Manufacturing Firm, the Yunfu-based FCV subsidiary of Meijin.
Meijin is one of the few hydrogen players in China that have built business units along the whole value chain from MEA manufacturing, fuel cell making, FCV assembly, FCV R&D and manufacturing, refueling station’s O&M.
Currently, Fechi is developing and “testing” two prototype fuel cell commercial vehicles (trucks), Meijing revealed.
Shenzhen Hynovation Technologies Co. (Hynovation) has delivered the first batch of 26 bus fuel cell systems to Nanjing Golden Dragon Bus (Golden Dragon). These 50KW fuel cell systems will be applied to Golden Dragon’s 8-meter hydrogen fuel cell city bus (NJL6859FCEV7).
Vancouver-based Loop Energy, a mobile-power company providing hydrogen fuel cell based solutions for the medium-to-heavy duty vehicle market, announced today that it has received a purchase order from a leading bus manufacturer in China to support the Nanjing municipal government’s objective of replacing its existing 7000-unit battery-electric bus fleet with an improved battery-hydrogen hybrid alternative that offers all-season, long-range, and higher passenger-capacity operation.
Battery Storage & EVs
Market speculation suggests that CATL, China’s prime battery manufacturing player, is setting up another joint venture with state-owned utility State Grid, in a bit to develop a JV with fully integrated battery storage value chain. This JV, referred to as Contemporary State Grid, will be based in Ningde of Fujian, following a previous joint-force between the duo in their Xinjiang-based storage developing company.
CATL appears to be leading and majority shareholder of the Ningde-based JV. It and State Grid each directly owns 40% of the affiliate, with two institutional investors each taking 10%. But in one of the investment fund, CATL appears to be a 1.587% investor.
East Group and CATL have inked a deal to develop a joint venture in Jiangsu province to manufacture and sale CATL’s battery energy storage (BES) product “PACK.” East is the controlling partner of the JV, in which the EV charging network operator takes 90% of the equity, and CATL takes the rest 10%.
China’s Ministry of Industry and Information Technology (MIIT) last week said that the industry (and the regulators) have recently reached consensus over clauses of New Energy Vehicle Industry Development Plan (2021-2035). The ministry said the official release of the policy is soon.
When introduced the proposed plan, Wan Gang, Vice Chairmen of the planning advisory committee meeting, said the plan sets to boost the industry in the four following aspects:
- Enlarge the portion of (new energy vehicles) in the total (automotive) market mix the scale and proportion of the industry in the market structure;
- Improve product performance and quality by innovations in assembly building;
- Reduce costs and increase efficiency by encouraging competition;
- Especially to promote rural market growth.
Energy Iceberg: Official of MIIT said that China’s new energy vehicle industry is in a critical moment, facing a double whammy by the COVID-19 pandemic and the impacts of the oil price slump. The challenges have pushed Beijing to speed up policymaking to provide industry stimulus.
Last week, China’s State Council announced that China would extend the new energy vehicle purchase subsidy and purchase tax exemption policy by two more years to promote automobile consumption. The financial support for new energy vehicles was supposed to expire by the end of 2020.
One day after that announcement, Zhejiang province became the first among peer to announce its provincial supporting policy for new energy vehicle, including:
- By the end of 2020, new energy vehicles should be embarked and cover 80% of the public vehicles for commuting buses, public groundskeeping, post, and airport transportation.
- By the end of 2022, all of the city buses (except for those for emergence security purposes) should be EV or other clean energy source based vehicle
- Encouraging local governments to design local subsidy for charging and hydrogen refueling infrastructure projects
Subsidiaries of China Resources Power (China Resources) and China Datang (China Datang) have agreed to cooperate on “integrated energy services, energy hybrid, energy storage, hydrogen, and smart grid” business units.
Since last year, China’s major power generation companies have all set up affiliates dedicated to developing “integrated energy services,” a term loosely defining non-traditional energy (EV, hydrogen, storage power retail, carbon trading, and other ) sectors.
These affiliates usually serve to provide new energy services to their parent firm. For instance, the integrated new energy affiliate of China Resources Power have installed storage units for the firm’s four thermal power plants in Guangdong (Liyujiang, Qiaokou, Haifeng and Nansha).
Clean Energy Related
After three years of discussion and revision, the feedback-inviting draft of China’s Energy Law has been finally released. Last week, the National Energy Administration issued a public announcement of the draft, heralding the promulgation of the law soon.
The following key messages in China’s Energy Law are related to renewable and new energy sectors:
- Setting down in legal format the national priority to develop renewable energy and improve the country’s energy structure
- Promising administrative measures/policies in terms of mandatory renewable quota mechanism (Energy Iceberg Note: currently the mandatory quota is not strictly enforced)
- Setting clear to “adjust” new energy subsidization according to market condition, but also promising measures to solve the subsidy deficit issue
- Setting clear, again, the dispatch priority and sales priority of renewable power in the physical grid and the power market (Energy Iceberg Note: currently not strictly enforced due to both lacking market mechanism and technology bottleneck)
- Promoting the concept to compensate for “energy services providers” (Note: here it means energy storage), paving the way for storage/capacity market
- Emphasizing the agenda/target again to build an “independent market trading institution” to promote energy trading
- Extending the scope of (energy sectors) in energy security strategy. Energy safety storage capacity (Note: oil/gas storage) and peak/off-peak facilities are now included in the security strategy
- Emphasizing on developing facilities to improve renewable power penetration: smart grids and energy storage technologies are likely to be included in the law
- Emphasizing the principle of China’s energy pricing–a combined model of regulatory pricing and liberated pricing