China’s renewable energy market has been slowly heading towards “business-as-usual,” indicted by the surge of business deals and policy announced in recent weeks.
Below are a few highlights of news in the past week [13 April- 19 April]:
- POWER: the energy regulator announced to begin the drafting of 14th Five-Year Plan, a week after a draft of Energy Law released
- BATTERY STORAGE: two provincial governments (Hunan, Shandong) unleashed new policies that could provide solid business models for the development of battery storage sector–Hunan suggested a leasing model, Shandong unleashed an AGC Frequency-Control Pricing
- WIND: China General Nuclear (CGN) set off a research project to combine floating offshore wind and aquaculture technologies
- HYDROGEN: China Tower completed a small-scale test run to use H2 as UPS sources
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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Shanghai Electric revealed the financial data of its wind turbine subsidy Shanghai Electric Wind Corp (SEWC) in 2019 FY, a preparation step for the affiliate’s initial public offering soon. The business figures in the report show strong momentum of the wind OEM thanks to China’s offshore wind project rush, especially the offshore wind dash:
- SEWC registered ¥22.38 bn worth of new order during 2019, up 72.2% YoY;
- Existing orders by the end of 2019 is at ¥29.81bn, increased by 49.8%
- New offshore wind turbine orders combined is estimated to value at ¥12.25 bn
- The affiliate currently owns orders under execution phase worth of ¥16.99 bn
- Offshore wind order under execution accounts more than 56% of the firm’s total turbine orders
- 2019 the wind affiliate registered a profit of ¥251m, bouncing from a net loss of ¥52.3m in 2018
Energy Iceberg Note: SEWC aims to quickly launch an IPO in the STAR market (China’s bluechip market). In 2018 the firm accounted for more than half of China’s offshore turbine installation.
China General Nuclear Power (CGN) Research Institute secured funding from Guangdong provincial government for its research project “Floating Offshore Wind Power and Aquaculture Integration.” Led by CGN, the research is participated by Dalian University of Technology, Tsinghua University and Huizhou Yichen Network Technology Co. This research project aims to look into floating foundation design suitable for aquaculture and explore potential smart operation.
The project aims at developing a “prototype”, conducting a pilot test, and establishing a commercial plan, with an undefined timeline.
Energy Iceberg: currently Shandong province is the only region in China pushing forward offshore wind + aquaculture. But the update suggests similar interest of Guangdong government–likely to be China’s largest offshore wind market soon. But the research appears to be an early-stage development.
The firm’s share trading is to halt from 14 Apr., after shares has been closed below face value for over 20 days.
Energy Iceberg Note: stock market regulator will decide in 15 days (from 14 Apr.) whether to terminate its listing status. But the end is clear.
Earlier this year Sinovel has made several startling last efforts to save its listing status, trying to broker a deal to see equity and controlling right to Sino-Russia Silkroad Investment Corp and Sino-Russia Development Corp, two funds with sovereignty fund background and partially invested by SPIC and China National Nuclear Corp. But soon stock exchange regulators suspended the potential acquisition due to ill practices of the deal’s information disclosure. As the deal is off the table, Sinovel is soon to leave Shanghai stock exchange. The journey of Sinovel from the “most successful” IPO in 2012 till this ending is a story from boom to burst.
Fujian Putian Pinghai Bay (Zone F) has completed foundation construction, offshore engineer CCCC recently announced. The Pinghai Bay offshore wind project was an offshore wind complex with seven separated sub-projects, of which the Zone F was owned and developed by San Chuan Offshore Wind Co (owned by Fujian local government and China Three Gorges.)
Zone F project plans to put up ten 7MW turbines supplied by Shanghai Electric.
Energy Iceberg Note: once completed, it will be China’s first offshore wind project that put up 7MW in bulk. Although Chinese turbine OEMs have quickly pushed for R&D of 10MW turbine, whether or how could the industry put up the larger offshore turbines under a strict timeline (by the end of 2021) remain a big question.
Datong City in Shanxi Province plans to unleash three pilot projects that combine mounted PV solar and battery energy storage system in 2020. The total capacities of the projects will 100 MW of solar PV plus 3MW of energy storage.
Hydrogen Storage & Fuel Cells
Loop Energy recently announced it had received a purchase order for its fuel cell range extender from a leading bus manufacturer in China to support the Nanjing municipal government’s objective to replace a fleet of 7,000 EV bus by hydrogen cell buses.
Loop Energy is a Canadian mobile-power company providing hydrogen-fuel-cell-based solutions for the medium-to-heavy duty vehicle market. The order came just three months after Loop Energy set up an energy project company in the city, and it will be the first H2 manufacturing project in Nanjing.
Like its peers, Nanjing city has a growing interest in promoting H2. It is about to release a basket of post-epidemic stimulus measures to encourage development and consumption for 5G terminals, automobile, and green home appliances.
Energy Iceberg：Nanjin’s policy is in line with Beijing’s decision to deploy “new infrastructure” investments to stimulate economic revival. New energy sectors such as FCVs, hydrogen refuelling, EVs, and battery charging are most likely to benefit from the new investment trend. We expect to see similar policies announced from other local rulers. Our previous analysis on the “new infrastructure investment policy”: https://energyiceberg.com/china-new-infrastructure-investment-on-energy/
Last week a Zhejiang-based hydrogen firm Nekson Power Technology Co. announced to have successfully tested its hydrogen-based UPS system in a 5G base station owned by China Tower at Xiamen, Fujian province.
The test run perhaps marks the first of this kind in China, which looks to kick off a 5G network infrastructure investment and construction from this year on.
Energy Iceberg Note: we have previously analyzed that the 5G network investment provides new market demand for storage battery suppliers, but it may also provide funding for frontier technology application of H2. It is estimated that the total capital expenditure of the three major Chinese telecommunication operators would reach ¥350bn, with 5~15% YoY growth.
Doosan Heavy Leads Construction of Plant to Liquefy Hydrogen
Doosan Heavy Industries & Construction will lead a project to build South Korea’s first demonstration plant to liquefy hydrogen. Liquid hydrogen is essential in a government campaign to expand the use of fuel cells for automobiles and the production of electricity.
Two H2 manufacturing projects in Beijing’s hydrogen valley have resumed construction, which includes SPIC’s fuel cell stake production line.
The production line is expected to start initial operation at 2021 when the firm would be able to produce 1,000 fuel cell stakes per year. The production capacity would then expend to 20,000 by the end of 2025. Currently, the production line is at “interim testing” phase, SPIC revealed.
The chairmen of SPIC and SGCC, Qian Zhimin and Mao Weiming, met last week. The two firms agreed to set up cooperation in integrated smart energy (management), hydrogen R&D, energy storage demonstration, and other aspects.
Energy Iceberg Note: it is too early to conclude anything from such cooperation intents. But both companies are worthy of paying attention to. SPIC is currently one of the critical power utility companies with keen interests in investing in the hydrogen supply chain. The power generation company also owns the highest portion of renewable power in China (>50% of its power portfolio is renewable.) While SGCC, as China’s largest grid, has a decisive role in promoting renewable-to-H2, renewable-plus-BES projects, which are the hybrid solutions critical SPIC’s future development of wind and solar.
Shenyang Gas Cylinder Safety Technology Co (CLD) is developing a 70MPa aluminium and carbon-fibre cylinders/containers (III type). Last week, the prototype officially passed the gas cycle test, marking China’s first 70MPa H2 tanks reaching that milestone.
Energy Iceberg Note: China’s H2 value chain is still largely lagging in terms of technology and key equipment manufacturing. The country has yet to have a local producer capable of supplying the 70MPa tanks, which is a norm in the European market. But this may set to change quickly. Our previous comparison of the Chinese value chain to global leading practices: https://energyiceberg.com/china-hydrogen-industry-comparison/
Battery Storage & EVs
In March 2020, 50,000 new energy vehicles were produced, and 53,000 were sold, down 56.9% and 53.2% YoY, China Association of Automobile Manufacturers (CAAM) data shows.
- EVs: production and sales were 38,000 and 40,000 vehicles, respectively, down 58.5% and 55.6% YoY
- PHEVs: 11,000 and 13,000 respectively, down 50.2% and 44.1% YoY
- FCVs: 38 and 36 respectively– the production volume increased by 5.6%, and the sales volume stayed the same as 2019/03
In the first quarter, China produced 105,000 new energy vehicles and sold 114,000 units were sold, down 60.2% and 56.4% YoY, respectively.
- EVs: 77,000 and 85,000, dropped by 61.8% and 58.6% YoY
- PHEVs: 28,000 and 29,000, fell 55.0% and 48.5%
- FCVs: 183 and 207, down 19.7% and 7.2% YoY
Hunan province has previously unleashed a policy to require all new wind projects to be equipped with supporting energy storage facilities. These energy storage facilities are required to cover 20% of the capacities of the wind farms.
Now the provincial government followed up with that requirement and set clear the business model. The local grid operator, an affiliate of State Grid, will provide and lease the storage facilities to the wind farm developers.
Energy Iceberg Note: it is a new experiment of BES (or other energy storage sectors) to explore potential business models. Last year, the burgeoning BES sector was walloped by Beijing’s policy to disallow grid to incorporate investment cost for energy storage facilities in the overall transmission cost auditing, which immediately cooled down the grid’s investment intention in BES facilities.
The new model, in that sense, perhaps provide a potential solution. For more information, please visit our previous report about SGCC’s halting BES investment (https://energyiceberg.com/chinese-energy-companies-executive-changes/) and the analysis of BES’ potential business models and opportunity in China under the “New Infrastructure Investment” strategy. https://energyiceberg.com/renewable-suspension-battery-storage/
The Shandong local Development and Reform Commission (DRC) released a policy (feedback inviting round) that set to introduced a peak and off-peak power pricing pilot as the first step to move towards an automatic generation control (AGC load-frequency control) auxiliary service market.
The policies stipulated that electricity consumers who participate in the pilot would enjoy a reduced electricity price, 3 Chinese cent/kWh lower than current off-peak price. The consumers eligible to join the pilot are shopping complex or commercial buildings that have set up AGC systems.
Shandong province’s power system is known for a lower-grade of flexibility, with just 1% of flexible AGC systems (peakers) compared to an average 6% nationwide. The pilot could provide some experience of the country’s development of an auxiliary market. And the province is likely to follow the footstep of Guangdong or Jiangsu and become a potential battery market hotspot. Currently, battery energy storage plants planned to kick off in the province include:
- Heze 150MW / 300MWh
- Weifang 100MW / 200MWh
- Shiheng 100MW / 200MWh
- Haiyang 100MW / 400MWh
- Taierzhuang 100MW / 200MWh
- Dongming 100MW / 200MWh
- Qingzhou 100MW / 200MWh
Battery manufacturing giant Contemporary Amperex Technology (CATL) has partnered with Shenzhen KSTAR Science & Technology (KSTAR) to construct a new lithium-ion battery manufacturing facility Fujian, China. CATL and KSTAR own 51% and 49% of the equity shares, respectively.
The manufacturing complex will cost ¥1bn investment, which will build up two production line for PCS (power charging system) products and one production line for CATL’s PACK battery. The initial production capacity of PACK will be at 1GWh, and that of the two PCS lines will be 12,000 systems per year.
Clean Energy Related
China National Energy Administration (NEA) announced last week to set off research and development for the 14th Five-Year Plan (2021-2025) for the renewable sector. The announcement identified seven critical tasks for the policymaking:
- to develop a renewable energy top-level strategy that emphasized on low-cost and efficiency
- to systemically evaluate the resource conditions of different renewable sources
- to set up 14th Five-Year Plan targets for relevant sub-sectors
- to identify the ground-breaking renewable projects needed for 2021-2025
- to optimize local renewable consumption and inter-provincial transportation
- to accelerating critical equipment manufacturing key to the sector
- to bring up a long-term development plan for renewable
Energy Iceberg: it sounds like more of some political rhetoric, but the tasks indicate some of the major challenges facing the industry:
- all renewable power will be required to achieve zero-subsidy before the end of 14th FYP (perhaps even before 2023), as cost reduction a main priority. Achieving “zero-subsidy” would not be the end game for renewable. Instead, wind and solar power may soon be required to cut prices further and participate in electricity trading
- re-evaluation of renewable resources has been long over-due
- rumours circled that China may not set up specific targets for wind, solar in the 14th FYP. It would, instead, focused on the portion of a renewable portion (in the total power mix) as the main horizon and target, as the priority now is to address an overcapacity issue. Our previous analysis on the matter: https://energyiceberg.com/14th-five-year-plan-for-hydro/